Assessment Of Construction Equipment Management Practice And Causes Of Problem In Road Contractors (Grade I-III). In Addis Ababa Region Of Ethiopia

Assessment of construction equipment management practice and causes of problem in road contractors (Grade I-III). In
Addis Ababa region of Ethiopia.
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CHAPTER 1
1.1. INTRODUCTION
The construction industry is the major sector in the economies of both the developed and
developing countries. In many countries such as USA and UK the portion of construction
sector accounts for more than 10% of the growth of domestic product. [3]
In different part of the world, the need to construct huge and complex construction projects
has required equipment. Large amounts of construction companies' capital are invested in
equipment, and a variety of construction equipment has been used in construction [4]. Also in
Africa the development of construction sector has led to considerable raise of the high
demand for construction machinery. The construction industry in Africa is undergoing a
steady transformation by moving from low volume to high volume and specific use of
equipment. [7]
As part of Africa this great move on construction sector has also includes Ethiopia. Ethiopia
is currently engaged on construction of various major civil engineering projects which
require use of construction equipment. Contractors in Ethiopia are required to have
equipment for the registration of license to execute construction based on the grade leveled
by ministry of works and urban development. [13] Thus utilization of construction equipment
is becoming common and its demand is increasing since the country has given attention to
construction industry.
Road construction is one of the extensive equipment demanding in construction sector; it
relies primarily on high utilization of machinery. Thus, for road contractor equipment is one
of the key factors for improving their capability in performing the work more effectively and
efficiently [5].

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By utilizing machinery, an extensive volume of work can be completed in a shorter period of
time and within the project schedule.
However, in managing construction equipment, contractors are invariably plagued with
several difficulties such as huge capital investment in the acquisition phase, which usually
constitutes a major financial burden.
Procurement of major construction equipment not only costs as high as 36 percent of the total
construction project cost, but also causes a high delivery time uncertainty, which may disrupt
the construction schedule [1].
In the operational phase, contractors are often faced with problems relating to high rate of
equipment breakdown and accident resulting from unskilled operator abuse [2]. Poor training
of equipment operators is often claimed as a major cause of equipment-related accidents. In
the maintenance phase, proper maintenance management of construction equipment has not
been given due attention since the cost and time that exceed the designated budget or
schedule on projects are often result from poor machine maintenance practices. In the
disposal phase, determining equipment economic life and timing for replacement is often
problematic because such decision is influenced by various factors such as machine
obsolescence and efficiency (2).
According to ―Report on the Ethiopian economy, the current status of the construction
industry‖. In Ethiopia there were about 6,032 construction machinery and equipment
including machinery and equipment of Ethiopian Road Authority (ERA) and Oromia Rural
Road Authorities (ORRAs). However, most of this equipment were not providing expected
service and they have been experiencing frequent failures while rendering services. [8]
This, in turn, has given rise to delays in the completion time of construction projects and
claimed additional budget. Besides, these old machineries embody backward technology,
demand spare parts, consume more intermediate inputs (fuel and other inputs), and hence are
less efficient.

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This complicated environment in the area of construction management calls for proper
management practice of these assets to increase production time and equipment availability.
Effective equipment management practices not only increase production time and equipment
availability, but also maximize the company profit by reducing several costs such as those
from costly downtime [2].
Construction equipment management is thus concerned with the purchase, retirement,
replacement, operations, logistics, and maintenance of equipment. The objective is to
minimize operation, maintenance, and repair costs, while achieving high utilization. [42]
The findings of this research will contribute to have an insight on the general equipment
management practice of contractors (Grade 1-3) who are involved in road construction sector
and also contribute towards identifying the significant causes of management problems of
equipment which contractor are facing and forward recommendation on the bases of the
result obtained from the paper work.
The basic aspects of construction equipment management which are covered in this research
work include; equipment selection, acquisition, operation, maintenance, replacement and
disposal, standardization of equipment, Inventory, record keeping, Safety and security.

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1.2. STATEMENT of PROBLEM
The increased utilization of equipment in construction industry of different countries and its
effect on the output of construction especially on time, cost and quality has drawn the
attention of scholars to do research on various aspects of equipment, especially equipment
management in relation to contractors. The findings of this kind of research have pointed out
some good practices of contractors and causes of problem in line of management of
construction equipment.
In Ethiopia, even though various huge construction projects are under execution, research
related to equipment management practice are limited. In the absence of organized studies on
the area it would be difficult to find out the clear image on practices followed by contractors
regarding equipment management. In addition to this, frequent downtime, less productivity
of construction equipment and accident related to usage of construction equipment are
increasing in construction industry of the country. To alleviate these kinds of problems which
are related to equipment management practice, studying the general practice of equipment
management and identification of the cause of problem is significant.
This research is thus an attempt to investigate the general management practice of equipment
followed by contractors working on road construction and to identify causes of problems in
management of construction equipment.

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1.3. RESEARCH QUESTIONS
This research attempts to address the following important questions:
1. What are the practices followed by contractors working on road construction on management
of equipment regarding; equipment acquisition, operation, maintenance, disposal,
standardization, inventory, record keeping and safety?
2. To what extent do contractors have written and documented equipment management
practices ?
3. What is the implication of the current equipment management practice followed by the
contractors under the study?
4. What are the significant causes of equipment management problems which are responsible
for the downtime or less productivity of construction equipment?
5. What good practices are employed in management of construction equipment?

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1.4. OBJECTIVES OF THE STUDY.
1.4.1. General Objectives
 To assess current construction equipment management practices and causes of problems in
road contractors (Grade 1-3) in Addis Ababa region. Ethiopia.
1.4.2. Specific Objectives
 To investigate equipment management practice of contractors.
 To identify good equipment management practices among contractors.
 To identify causes of problems in equipment management
 To recommend best practice obtained from the research.

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1.5. SIGNIFICANCE OF THE STUDY
It is important to investigate/study equipment management practice of contractors due to the
following reasons
A study of the practice followed by various contractors‘ shows how the construction
equipment is managed. This kind of study also reveals the management practice followed by
each category of contractors to point if there is significant difference in any area of
equipment management. In addition to these it helps to identify good practices which are
being followed by contractor in any area of equipment management that can be used to
formulate exemplary common equipment management practice. Moreover, currently frequent
down time, high equipment operation and maintenance cost but low productivity, non-
availability of spare parts easily and accident related to operation of equipment are becoming
problem to contractors. This study thus, will review the management practice and
identifications of the cause of the problems. If the causes of managerial problems are
identified rectification of managerial practice would be implemented, and will help
contractors to save the extra cost incurred by the problems associated with downtime and
other.
Studies in the area of equipment management of contractors in Ethiopia are few and limited.
Thus, this study will also help to establish a good base for equipment management practice in
country; it will also be of abundant use to further research on the topic.

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1.6. SCOPE AND LIMITATION OF THE STUDY
 In this research the word ―equipment‖ is referred as construction equipment including
heavy earth moving, cranes, asphalt paving, pilling and concreting construction
equipment. The word ―construction machinery‖ is also used interchangeably to referee
the same idea.
 The scope of the study includes aspects of equipment management. These are selection,
acquisition, operation, maintenance, disposal, standardization, inventory, record keeping,
and safety of equipment
 The study considers and concentrates on only management related issues of construction
equipment.
 Only contractors who are registered for general contractor (GC) having experience on
road construction or specialized road contractors (RC) from grade (1-3) and whose head
office is located in Addis Ababa are selected for the study. This is because the above
contractors are considered to be engaged on construction of equipment intense projects,
and Addis Ababa is the seat of main offices of most of high grade level contractors in
Ethiopia.
 Contractors under the study are government enterprise or private company working on
road construction.

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1.7. STRUCTURE OF THE THESIS
This thesis is structured in five chapters, chapter one explains introduction and background of
the research and describes what the research is intended to achieve.
Chapter two includes literature review on different aspects of construction equipment
management and previous studies related to research area. Chapter three discuses methods
that are used for the research and it highlights type of the research on, study area, data
collection and sample selection. Chapter four deals with the analysis and discussion of the
results obtained from the study. The last chapter draws conclusion of the research work and
forward recommendation based on the result obtained from the result and analysis. The
following schematic diagram shows the organization and structure of this paper.

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Figure 1.1 Flow chart of the thesis.

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CHAPTER 2
LITERATURE REVIEW
2.1. CONSTRUCTION EQUIPMENT AND CONSTRUCTION
INDUSTRY.
Development of tools started with humans. Hands and animal teeth were the first tools. They
were used to pick, dig, break, scrape, and shape. They were used to make other tools and
shelter. Simple tools were eventually used to create a better living environment. As the tools
improved, the amount and speed with which construction work could be done increased, so
that the scale and complexity of construction projects increased. This same development
cycle continues today.[9]
Historians point to the late 19th century as the era of turning-point developments in
construction equipment, when industry was responding to America‘s growing needs. At that
time, three main elements to construction equipment emerged—the power system, the
carriage system and the onboard operating system. These systems were developed essentially
in response to the needs of the railroad industry [10].
Construction equipment today is specifically designed by the manufacturer to perform certain
mechanical operations that accomplish a work activity. [12] There is a piece of equipment for
practically any work activity, large or small. The dependency and need for heavy
construction equipment have grown with the size and complexity of construction projects.
The construction industry is separated in to two distinct groups, civil engineering and
building engineering. Civil engineering is concerned with the establishment of infrastructure

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such as; roads, bridged, dams, sewers, power supplies, etc., while building engineering
concentrates up on the housing factories and offices.
Civil engineering utilizes heavy construction equipment like earthmoving equipment, while
building engineering mainly utilizes crane, concrete mixer, pumps, compressors etc. [11]
The evolution of modern construction industry in Ethiopia is not a recent phenomenon, can
be generally summarized in to four distinct periods. The first period covers the period to the
year 1968 when most civil works including road were carried out by foreign contractors
through international competitive bids. Relevant skilled manpower and equipment for
construction were largely brought from abroad. [8]
The second era in the development of construction industry in Ethiopia is that ranges from
1968-1982. This period covers partly the Emperor and Derge regime. The existing
governments at the specified period took initiative to help small domestic contractors to build
their capacity and allowed them to participate in construction of feeder road projects. Few
construction equipment were utilized for construction by these domestic contractors. [8]
In the third period during Derge regime in 1982 the small domestic private construction
companies were brought under in full state control. Over this period government increased
the building capacity of Ethiopian Road Authority (ERA) and monopolized the road
construction activities. In this period equipment for construction were used in large scale and
the ownership was in full control of government construction sectors. [8]
The fourth period begins from the time EPRDF-led transitional government of Ethiopia took
power in 1991. During this regime private domestic construction companies started to
emerge. Basically, domestic construction capacity refers to the potential construction
volume/value that could be undertaken by domestic construction companies in a given period
of time.
This, in turn, depends on number and quality of machinery and equipment that is available,
and skilled manpower, ranging from design to supervision. [8]

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Currently, contractors in Ethiopia are graded in to ten different categories: General
contractors (GC 1-10) to work any civil construction works except water works; Building
contractors (BC 1-10) to work construction of buildings; Road construction (RC 1-10) to
participate in road construction; and Special contractors (SC 1-4) specialized in single area of
construction like foundation drilling.
For foreign investor only GC-1, BC-1, RC-1, or SC-1 registration allowed. The ministry of
construction has also set the allowable construction cost for each grade of contractors. [13]
Table 2.1 Contractors of categories "GC", "BC" and "RC" based on the construction costs of
project.
(Source: from MoWUD. Directives for the registration of contractors, Directive No 19. Addis Ababa,
2013)

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2.2. THE NEED FOR CONSTRUCTION EQUIPMENT.
The need for construction equipment is directly related to human need and its requirement for
mechanization. Pervious way of construction which had been mainly dependent on human
labor was time taking and prone to irregularities. Nowadays it is becoming common to
execute construction work especially, civil engineering constructions with utilization of
construction equipment. Equipment is needed to achieve the following objectives: [12]
 To perform tough works efficiently and speedily which are beyond the scope of
manual labor.
 To handle tasks of repetitive nature, involving large material movement, use of
equipment reduces the overall cost and completion period of the project.
 To improve operating safety in construction areas.
 To perform major civil engineering construction in remote areas to mobilize human
labor for the execution of the project.
2.3. TYPES OF CONSTRUCTION EQUIPMENT
Almost all civil engineering projects involve the use of equipment. The type of equipment to
be used in a project depends upon the types of works, scope of work and type of equipment
available and other details regarding the material to be handled and specification of
equipment, etc. Road, irrigation, hydropower, mining projects, in particular, are equipment
intensive and various equipment types are involved from the beginning to the end of the
construction of the project.

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The major types of construction plant and equipment are categorized under the following
groups. [25]
Earth Moving Equipment: Concreting Equipment:
Dozer Batching Plants
Wheel Loader Mixers
Hydraulic Excavator Concrete Pumps
Road Paver Transit Mixers
Asphalt concrete plants Dumpers
Scrapers Lifting & Handling Equipment:
Vibratory Compactor Cranes
Shovels Tower Cranes
Grader Hoists/Winches & etc
Trucks
Roller etc.
Quarry Equipment: Equipment for Piling
Crushers Piling Rigs
Screening Plants Rotary, Piling Rigs/Crane Mounted
Pneumatic & etc. Pile Hammer etc.
All the above equipment are important and necessary for execution of construction activities,
however for the case of this study only management practice of equipment which are utilized for
the construction of road, basically earth moving are taken under consideration.

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2.4. CONSTRUCTION MACHINERY AND EQUIPMENT IN
ETHIOPIA
Construction equipment and machinery are one of the most important indicators of the
capacity of the construction sector which are used for the execution of construction activities
locally.
In construction sector of Ethiopia according to the privatization and public enterprises
supervising agency, there were seven public construction enterprises which are engaged in
construction activities. Currently government is privatizing some of these public construction
enterprises. The machineries and equipment of the seven public construction enterprises are
depicted on the following chart. As shown in the chart (Figure 2.1), the majority of the
machineries they own, 42 percent are dump trucks, followed by dozers, loaders and rollers
with 14 percent each. [8] In general, the enterprises have a very small number of
machineries and equipment that are needed for construction activities.
Figure 2.1 Machinery and equipment of public construction enterprise (PCE)
Source: Privatization and Public Enterprises Supervising Agency 2008.

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The report on Ethiopian economy 2006/2007 Gregorian calendar (G.C) indicated from the
total machinery and equipment available in the country as of 2007(G.C); 18 percent (%), 27
percent (%) and the balance percent belong to the rental companies, contractors and
government (Including ERA‘s 2856 and Oromia 217) respectively. [8]
It is also indicated in report the total number of machinery and equipment available for
construction activities is very low with the comparison to the intensive nature of the industry
and the rising demand for machinery. Beside this significant number of stock machinery 45.8
percent (%) is 11 or more years old and requires frequent maintenance. Hence, this limited
the capacity of the industry interims of available operational machines and equipment. Of the
total machines and equipment registered at ministry of works and urban development
(MoWUD), only 54.8 percent (%) are 10 years and less, and the remaining portion are aged
11 to 50 years. The implication of the above numerical value is that 45.8 percent (%) of these
machines are experiencing frequent failures while rendering service. [8].This results in the
decrease of productivity and increased cost of maintenance and fuel since they are old
designed technology requires much fuel and other input to operate.
According to the report from fortune journal (2014) which refers the data from Ethiopian
Investment Agency (EIA) in 2012 (G.C), there are 6,032 construction machineries in
Ethiopia. From these 5,151 machineries are in Addis Ababa, 332 in Oromia and 302 in
Amhara, and the balance in other regional states. These include excavators, cranes, bulldozer,
loaders, graders and trucks. [18]

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2.5. TRENDS IN IMPORT OF CONSTRUCTION EQUIPMENT IN
ETHIOPIA
Heavy construction equipment in Ethiopia are not being manufactured domestically and they
are imported from abroad. The government has also allowed such machinery owners to
import spare parts duty-free for the first five years after the import of the machinery [18]
According to the information from customs Authority much of the imports are second hand
machine and equipment from Dubai.
Imports of earth moving machineries have been increasing from time to time, especially
since 2004/05(G.C). The total amount of money spent on importing of earth moving
machineries and equipment in 2002/03 (G.C) was estimated to be Birr 220.3 million. In
2006/07 (G.C), however, the amount rose to over Birr 2 billion depicting a dramatic increase
in the amount of money that goes to import these machineries showing the increased
construction activities in the country. [8]
Table 2.2 Import of earth moving machineries and equipment
Source: Computed based on data obtained from Customs Authority (CA) 2008.

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According the Ethiopian Revenues & Customs Authority (ERCA), in the year 2011/2012(G.C)
the country has imported 421 excavators and bulldozers worth 50.1 million dollars, 671 loaders
and backhoes at a cost of 80.1 million dollars. The government has also allowed machinery
owners to import spare parts duty-free for the first five years after the import of the machinery.
[8]
2.6. EQUIPMENT REQUIREMENT OF CONTRACTORS IN
ETHIOPIA
Before contractors undertake any construction work, they need to be licensed and registered.
The requirement for licensing and registration may vary from country or from one legal
system to other.[13]
The present rational for licensing of contractors in Ethiopia is to ensure that applicants for a
project have the necessary capacity and capability. For contract works in other countries and
for multilateral donor projects, this requirement is meet through the prequalification process
for each tender. This requires information on the current status and past performance of
contractors. The current procedure of registration and issuance of grade licenses rely on
ownership of relevant equipment and number of staff.
All contractors desiring to carry out construction work are required to register with ministry
of works and urban development (MoWUD) in accordance with guidelines for the
registration of construction professionals and contractors. Part three of this guideline also
states that the contractors are required to register first with the ministry of trade in
accordance with commercial code of Ethiopia and related directives of MoWUD. [13]
Depending on the category and grade of construction, ministry of construction set the
minimum amount of construction equipment requirement based on their grade. Therefore the
contractors must meet the following requirements to register as contractor and execute the
construction work based on their grade.

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Table 2.3: Equipment (number or per cent) which could be replaced by Equivalent or Higher
Equipment
(Source: from MoWUD. Directives for the registration of contractors, Directive No 19. Addis Ababa,
2013)
To give refer heavy, intermediate and light equipment categories see the table below.
Table 2.4: Detail reference of the heavy, intermediate and light equipment.
(Source: from MoWUD. Directives for the registration of contractors, Directive No 19. Addis
Ababa, 2013)
According to the directives, contractors are not necessarily required to provide all the stated
equipment, exemption is allowed for two years. According to these exemptions For General
Contractors (GC) except Crane the following exemption is made. [13]
Table 2.5: Temporary Exemption of Equipment Requirement for Contractors of Grades I to III
(GC) (except crane)
(Source: from MoWUD. Directives for the registration of contractors, Directive No 19.
Addis Ababa, 2013)

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2.7. CONSTRUCTION EQUIPMENT MANAGEMENT
PROBLEMS
Surveys in construction equipment management practice of contractors have been done in the
past on different countries. The American survey on equipment management practice was
done by Hinze and Ashton [15] .Schexnayder and Hancher [16] . A survey in equipment
policy of top 400 contractors of United States of America (USA) has been carried out by
Tavakoli et al. [14]. These studies were intended to provide contractors and other interested
parties, public, private, and academic, with the present status of the equipment policy and
practice of contractors at the time of study.
However, a similar study on equipment management practice was done by Gunawarden in
Sri Lanka. [17] Indicated the problem in equipment management practice of contractors in
Sri Lanka, These are:
 The use of and dependency on old experience rather than scientific or quantitative
techniques in making most of the important management decisions such as selection and
replacement of equipment.
 Use of preventive maintenance was not practiced by contractors; lack of skilled
maintenance force was also problem and attributed to downtime.
 Inadequacy of stock of spare parts resulted in frequent downtime at construction sites.
 The result also revealed that record keeping was not given attention. One reason for these
situations may be the hassle involved with manual maintenance of detail equipment
records.
In a study of the Thai highway contractors, Prasertrungruang & Handikusumo, [6], observed
the problem of equipment management which are caused by unskilled operators, poor
training on equipment use and problem on maintenance and determining the economic life of
the equipment before their disposal.

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The study also noted that, due to the initial investment required to acquire equipment,
contractors are facing difficulties in getting all the equipment they need.
The study conducted in 1960 by the American society of civil engineers (ASCE) construction
equipment committee and the construction institute at Stanford University found the major
equipment management problems challenging the construction industry at the time of study.
These are:
 Programing preventive maintenance
 Training and motivating operating and maintenance personnel
 Influencing standardization and improvement
 Controlling spare part inventories.
The study by Magesa Bairi et al. [35] discussed causes of maintenance management
problems of Tanzanian local contractors. These are:
1. Spare Parts non Availability. This has brought great problem to plan for and effectively
implement equipment maintenance and repair schedule. Furthermore, those spare parts which
happen to be available were extremely expensive as a result of related importation taxes. This
caused equipment unserviceable for long periods awaiting spare parts which is the major and
increased cost of equipment downtime.
2. Financial constraint. Low financial capacity of contractors in Tanzania resulted difficulties
to maintain even the equipment they own. This in turn leaves the local contractors with the
same old equipment with insufficient funds to cater for their maintenance.
3. Training of maintenance personnel. Lack or absence of qualified maintenance personnel
with specialized technical skills in construction equipment is another cause of poor
management of maintenance activities. This in most cases has led to improper operation and
maintenance of equipment, which shortens equipment economic life, efficiency and increases
downtime.
4. Maintenance record. Lack of proper record and documentation of equipment maintenance
was one of the problem Tanzanian contractors facing on their maintenance management of
equipment.

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5. The study also observed the problem in properly indicating the actual cost of owning and
operating construction equipment which was the result due to poor record keeping.
6. Maintenance Culture. Lack of maintenance culture on maintenance management of
construction equipment by contractors has in many ways resulted in wasted revenues, poor
performance, late delivery of projects, premature breakdown of equipment, high cost of
repair, equipment related accidents etc.
7. Workshop facilities. From the study it is observed that very few local contractors have well-
established workshops with proper tools for specific tasks in repairing of construction
equipment. Furthermore, lack of private workshops either owned by individuals firms or
equipment dealers aggravate the problem of poor maintenance of construction equipment.
Most of the studies indicate that major problems in equipment management were due to lack
of general understanding of management of equipment and the tendency to relay up on
traditional methods and intuition. In additional to this, financial constraints especially for the
developing countries is the source of problem in managing construction equipment.
In Ethiopia such kind of study on the management of equipment practice of contractor
haven‘t been done yet, but on different magazine different equipment owners and rental
companies described the problem they are facing regarding construction equipment they
own.
As reported by the fortune magazine (2014) interviewing certain equipment rentals in Addis
Ababa, the problems indicated are; [18]
 Escalated cost to obtain and the delay in importing of spare part to replace during the
time of equipment breakdown,
 Failure of mechanics to maintain the existing equipment and cope up with the new
technology,

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 The obsolescence of some of the existing equipment which currently requires much
amount of fuel to operate and unavailability to find convenient spare part for them
resulted much idle time.
It is also reported from the side of mechanics that equipment owners prefer independent
mechanic rather than taking their equipment to well-equipped garage and importing
companies in order to avoid paying tax.
The report obtained from the magazine in general indicates that there is irregularity and
missing standard in the area of construction equipment management practice.
2.8. ASPECTS OF CONSTRUCTION EQUIPMENT
MANAGEMENT
Construction management encompasses application of management techniques and systems
in construction to complete projects on budget, on schedule, safety, and according to plan
and specification. Equipment management is one of the parts of construction management. It
has its own role and crucial impact on the profitable utilization of equipment on construction
industry. Contractors who are engaged on equipment intense project are required to have well
organized equipment management practice to obtain the desired profit from the equipment
they have acquired by considerable amount of price.
Equipment management includes various aspects where management techniques are applied
on selection, acquisition, operation, maintenance, disposal, standardization, inventory, record
keeping, and safety of equipment. The detail review of literature on the aspects of equipment
management is presented in the following section.
2.8.1. SELECTION OF CONSTRUCTION EQUIPMENT
Proper selection of equipment for a construction project is of a vital importance for its speedy
and economical completion. Problem of equipment selection has become more complicated,
because large varieties of equipment are being manufactured now-a-days.

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For proper selection of equipment, a considerable experience in the operation and
maintenance in the field is essential. Records kept for operation, maintenance and actual
output obtained under comparable conditions of previous projects will greatly help in taking
decision for equipment selection
2.8.1.1. BASIC CONSIDERATIONS FOR SELECTING OF
EQUIPMENT
Equipment costs rank second to labor costs in terms of uncertainty and in their effect on the
outcome of anticipated profit for a construction project. Selection of the right piece of
equipment, like the right man for the job, affects field productivity. Productivity directly
influences profitability. [9] According to Sharma. SC(2010) .[12]. The following are the
main points which should be considered in the process of equipment selection.
1. Suitability for the job conditions. The equipment must meet the requirements of the work,
climate and working condition. The type and condition of the working surface and the
distance to be traveled affect the choice of tires or tracks. Tracked equipment is designed for
work activities requiring high tractive effort (drawbar) or the ability to move and remain
stable on uneven or unstable surfaces. [12]
2. Tasks such as pushing over trees, removing tree stumps, or removing broken concrete
flatwork require a very high pushing force. Tire mounted equipment is more mobile and
maneuverable than tracked equipment. Machines can achieve greater speed and therefore are
better for hauling. However, pulling ability is reduced to reach a higher speed. Tire mounted
equipment is more efficient than tracked equipment when the distance is greater than 150
meter.[12]
3. Productivity: Desired productivity is also a major influence on earthmoving, excavating, and
lifting equipment selection. Meeting the schedule for the quantity of work to be
accomplished is the goal. The required hourly production of a piece of machinery is
primarily determined by the amount of work to be done and how fast it has to be done.

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4. The amount of time the contractor wants to spend or has to spend on excavation or
earthmoving will greatly influence the size of machinery chosen for the work. If there is a
large volume of dirt that needs to be moved quickly, a large piece of machinery will probably
be most efficient. If there is a small amount of dirt to be excavated, a smaller piece of
machinery makes more sense.[12]
5. Size of the equipment. Size of equipment should be such that it must be used with other
matching units. Using a machine that does not have enough capacity will slow down
productivity. Using a machine with too large capacity might increase productivity to some
extent, but will ultimately negatively affect profitability, because of the cost of operation of
the oversized machine. Pairing machines with mismatched capacities are not efficient and
will not yield the optimum unit price for the work.
6. Standardization. It is better to have same type and size of equipment in the project. It means
lesser spare parts reserve, more interchangeability of parts if required, easy for operator to
understand it, mechanics will be able to maintain and repair better as they become expert by
handling similar types of equipment. [12]
7. Availability of equipment. The equipment which is easily available in the market should be
purchased. It should also be ensured that the equipment is of repute and is likely to be
continued to be manufactured in future also. [12]
8. Availability of spare parts. While selecting a particular type or make of equipment it should
be ensured that the spare parts will be available at a reasonable price throughout the working
life of the equipment. It should also be ensured that the downtime of the equipment for
search of spare part may not take much time.[12]
9. Multipurpose equipment (Versatility). There are certain types of equipment which are not
utilized fully. Therefore if possible, they must capable of performing more than one function
for example, excavator with wheel loader bucket arrangement or with rock breaker
attachments.[12]

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According to Douglas (2006) [9] the following basic relationships exist for equipment selection:
 As equipment productivity increases so does the initial purchase price, operating, and
maintenance costs.
 As equipment capacity increases, so does the hourly production.
 As equipment productivity increases, the unit cost ($/cubic meter, $/square mater, $/ton,
$/load) for the work decreases.
In addition to the above relationship Douglas. [9] suggested Selection of equipment is
typically made by matching equipment in a fleet with tasks. Such matching accounts for
equipment productivity, equipment capacity, and cost. It usually involves the selection of the
best option among many alternatives based on criteria and method that can be used for the
decision making process.
Gates and Scarpa (1980) [37] stated that when a contractor selects earth moving equipment,
he should look into these four categories:
1. Spatial relationship
2. Soil characteristic
3. Contract provision
4. Logical consideration
According to them, the spatial relationships were further classified in to different factors
mainly belonging to geographic information of the construction site. Soil characteristic,
refers the ability of soil to support earth moving operations.
In contract provision the consideration in selecting depends on mode of payment, legal
limitation, weight and size of equipment, working constraints such as hours, noise and traffic.
The legal consideration covers the cost, availability of equipment and experience of operator.

28
In survey done by Hinze and Ashton (1979) [15] shows that one or many of the following
criteria are used by contractors to make the decision as to which piece of equipment to select.
These are:
1. Always buy the same brand
2. Take the lowest purchase price
3. Service record and reputation of the dealers.
4. The particular needs of the job.
There are also other criteria different to those mentioned above which are used to select
equipment. For example, some companies may look for the dealers back up service and good
machine performance in addition to the price of equipment. [32]. other may prefer to buy the
equipment with the longest free warranty period offered by the manufactures.
Shapira and Goldenberg (2005) [38] in their study identified a list of tangible (hard) and
intangible (soft) factors. The tangible factors included technical specifications, site conditions
and cost consideration. Whereas, intangible factors are qualitative and include safety
consideration, company policies regarding equipment acquisition, market conditions and
environmental constraints. From the literatures it is clear to understand different research are
have been done on selection of equipment which indicates selection of equipment is the
important and prime aspect in the management of equipment because it would be difficult to
manage equipment which is acquired with poor selection approaches.
The following table summarizes different criteria that affect the equipment selection in
construction projects.

29
Table 2.6 Summary of precedent research defining the equipment selection aspects.
Source: criteria for selection of sustainable on site construction equipment. Waris et al., 2014
The above summary on the table shows that researchers are more focused on the cost and
technical aspects of equipment selection. Thus, by ignoring the environmental and social
concerns in the equipment selection, it has also been revealed from an industrial survey that
health safety and environmental issues are being kept at average and low priority respectively
during equipment selection process [26].
However in contrast to this, the agenda of sustainable or green construction emphasize that
the appraisal of equipment selection must be in accordance with the technical, socio-
economic and environmental functions. [26]
Gates & Scarpa
(1980)
Chan & Harris
(1989)
Haidar et al
(1999)
Chan et al
(2001)
Bascetin
(2003)
Goldenberg &
Shapira (2007)
Chamlini &
Yakhchchali
(2012)
Technical
criteria
Techinical
criteria Production rate
Performance
meather Cost criteria Cost estimates Cost criteria
Cost criteria Ownership cost
Technical
aspects
Operational
requirement
Technical
specification
Technical
performance
criteria
Obligations Operating cost
Economical
aspects
Technical
requirement Site Condition
Logistics
Equipment
characteristic
strategic
aspects Safety
Company policy
Market
condition
Environmental
constraint

30
2.8.2. CONSTRUCTION EQUIPMENT ACQUISITION.
In the current construction marketplace, equipment manufacturers, used equipment brokers,
and rental companies provide a means for a user with proper credentials and competence to
acquire just about any heavy construction machine available on a temporary or permanent
basis.
There are numerous options to consider when deciding on construction equipment
acquisition and financing. Traditionally, the equipment purchase process was complete when
the contractor selected a specific make and model of machine from a dealer. [9] This section
deals with the methods of acquisition, the advantages and comparison of these methods.
2.8.2.1. METHODS OF ACQUISITION OF CONSTRUCTION
EQUIPMENT.
Contractors and other users of construction equipment are concerned with a decision as to
whether to purchase, rent or lease equipment. There are conditions to decide purchase, lease
or rent depending on the financial status of the firm, working condition and other important
factor. Under certain condition it is financially advantageous to purchase, whereas under
other condition it is more economical and satisfactory to rent. [11]
There are different methods under which a contractor may secure the use of construction
equipment. [4]
1. Purchase
2. Lease
3. Hiring/rent
Sometimes, on labor based public work programs there is the arrangement of equipment
acquisition method to local contractors like Pre-payment of equipment by the project. [24]
In any ways the method of acquisition of equipment should be that provide the use of
equipment at the lowest total cost, consistent with the use that the contractor will make of
equipment.

31
1. PURCHASE
Purchases of equipment involves owning equipment by the construction company
immediately after paying the total purchase cost of equipment or in future after paying some
fixed amount of installment first and own the equipment finally paying the residual amount.
So the contracting firms depending on its financial status may choose; outright purchase, hire
purchase or credit sale.
Outright purchase uses founds from retained profit, or a bank loan which may be either on a
short term basis (bank overdraft) or on a long term basis. Under this type of financing, the
purchaser acquires the title of ownership immediately and also the tax benefits. [4]. For
instance, the contractor is entitled to deduct depreciation on the equipment as expense of
doing business. Also, the owner could deduct interest on his equipment loan if he had taken
such a loan. [17].
If funds are available from working capital this kind of acquisition method is the list cost.
Service fees, finance charges and interest expenses are eliminated for the buyer. Although
outright purchase may provide the lowest total cost, other factors should also be considered.
The reason most contractors choose to finance their equipment purchases is that outright
purchasing is not necessarily a good decision. There is a financial impact of increasing the
assets on the contractor‘s balance sheet. Outright purchase converts a liquid asset (cash) into
a fixed asset (equipment). Large ‗‗out-of-pocket‘‘ purchases can be detrimental to cash flow,
dramatically reduce working capital. [9]
In the case of hire purchase, the finance company owns the equipment item, although the
user retains control over the way the machine is operated. At some predetermined point after
paying a proportion of agreed hire charges the acquiring company buys the equipment for the
nominal sum.[32]
A credit sale is a sale in which the purchaser acquires the ownership on the title of the
equipment item, but the purchase price is paid in installments [3]. This installment usually
includes the purchasing price plus the interest or financial charges on the capital.

32
According to Cud worth (1989), the following features may make purchasing an attractive
alternative [23]:
1. Use and possession: The owner has absolute control of the use and disposition of the
equipment.
2. Flexibility: The owner can sell the equipment, trade it, or use it until it is not economical to
repair without having to respond to any creditor. Ownership gives the user complete
flexibility regarding servicing, maintaining, and insuring the equipment.
3. Price: The buyer with cash is usually able to get better discounts due to a stronger financial
position in the deal.
4. Tax benefits: The owner can take advantage of depreciation and interest tax benefits
associated with equipment ownership.
5. Pride of ownership: Ownership can lead to better care and maintenance.
2. LEASE
Leasing is a contractual arrangement that allows one party (the lessee) to use an asset owned
by the leasing company (the lessor) in exchange for specified periodic payments.
In its simplest form, an equipment lease is simply a rental agreement. Rent is paid for the
equipment during the rental period.
Once the agreement is over, the equipment is returned to the owner. In a true lease, the lease
payments are considered an expense of the lessee. The lessee does not own the equipment
and it is not shown as an asset on financial statements. The most significant factor that affects
the decision of renting or leasing is the duration of time the equipment will be required.
Leasing is often considered more favorable when the equipment is needed for more than 6
months. Most leases run from 18 to 24 months. For large expensive equipment, leases can
run as long as 84 months.[9].
There are two types of common equipment leases offered by most equipment dealers.
1. Financial lease
2. Operating Lease.

33
1. Finance lease.
Finance lease is arranged through leasing companies who have no particular interest in the
equipment offers no technical support, but merely arranging the lease. The lessee pays the
lessor payment or rental for the use of the equipment acquired. The equipment is usually
supplied by a third party which is the equipment manufacturer or dealer from whom the
equipment is bought.[11]
2. Operating lease.
In this case the lessee signs contract with a leasing company for specified period of time to
use of a piece of equipment the leasing company has on hand. The lessor recovers the capital
cost of the equipment from multiple, serial rentals and the final sale of the asset. This kind of
lease is arranged by the manufactures who offer such a service as a part of marketing their
product and usually responsible for the operator, maintenance, spare parts etc.[24]
3. RENT/HIRING
Hiring is the lease of equipment for short period of time. When an equipment is hired the
lessor provides the required repair and maintenance, where as in leasing arrangement the
repair and maintenance of equipment is the lessee responsibility.[11] In Construction
Industry Forecast, respondents as in the past, cited limited need for the equipment as the
primary reason for renting [39].
The forecast highlights that as equipment fleets grow older, more contractors are finding it
necessary to use rental equipment to back up the equipment they own. The contract period
for hiring provides complete flexibility, with contract periods as brief as a day or a week or
as long as a month or a year.[9]
On an hourly basis, renting is typically the most expensive of the three acquisition solutions.
However, it is ideal for work activities not performed on a regular basis, because it
minimizes idle time for seldom-used equipment. Renting is the best solution when equipment
will be utilized for a short duration.

34
The American Rental Association (2005) [40] suggests the following advantages for renting
equipment:
1. Minimum equipment for the job. Equipment ownership becomes particularly expensive
when the equipment is idle and not utilized. When ownership of the basic equipment is
combined with rental as needed, idle time is minimized.
2. Right equipment for the job. Ownership encourages inefficiency through use of wrong
size or type of equipment for a given job. Renting can minimize this hidden cost.
3. Warehousing or storage. Warehousing facilities are seldom needed for rental equipment,
thus reducing overhead.
4. Breakdowns. The rental service will typically replace equipment if there is a breakdown,
thus minimizing downtime due to repairs
5. Maintenance. Full maintenance is covered on a day-to-day basis. The user needs no
repair shop, no spare parts supply, no mechanics, and no maintenance records.
6. Equipment obsolescence. The rental service may provide the latest types and models of
equipment that are faster and more productive than the older models.
7. Short-term jobs. Renting is the most economical solution for short-term and specialty
jobs.
8. Taxes and licenses. Personal property taxes and license costs are eliminated on rented
equipment. Leasing cost is 100% deductible.
9. Equipment testing. Allows use of equipment in the field without purchase, leading to a
better understanding of equipment capabilities and suitability for the work.

35
2.8.2.2. RENTAL AND LEASE CONTRACT CONSIDERATIONS
Typically the rental terms are agreed upon, documented, and signed prior to delivery and use of
the machine. The following discussion is based on the general characteristics found in the
construction equipment rental industry. According to Park and Dale (1984) the general
characteristics or clauses that are included in every rental contract are as follows. [21]
1. Time basis of the rate. The basis for rental rates is usually a single shift of 8 h per day, 40
h per week, or 176 h per month for a consecutive 30-day period. Many distributors do not
rent their equipment by the day or the week, particularly for large equipment. If the
equipment will work more than one shift per term, the rate usually increases by 50%for
each additional shift.
2. Rental period. The rental period usually begins when the equipment leaves the equipment
owner‘s warehouse and ends when it is returned to the same location. For out of- town
shipments, the rental period starts on the date of the bill of lading (a list of goods received
for transportation) of shipment and ends on the return date of bill of lading.
3. Payment procedures and insurance. Rental payments may be payable in advance or in
installments depending upon the terms and conditions of the rental agreement. The
contractor‘s credit history and bargaining power can have a considerable impact on the
payment requirements. It is common for the lessee to provide all insurance coverage.
4. Normal wear and tear. Normal wear and tear is defined as the deterioration resulting
from the use of equipment under normal circumstances, provided that the equipment is
properly maintained and serviced. This clause considers who is responsible for repair and
maintenance of the equipment and payment for those services. This issue should be
addressed at the time of rental in order to prevent misunderstanding and problems.
5. Fuel and lubricants. The lessee usually provides all wearable supplies, such as fuel and
lubricants.
6. Operators. Operators and field specialists are generally not included in the rental rate.
Their salaries and expenses are typically extra. If provided by the equipment owner, the
operator should be trained and certified to operate the equipment if necessary.

36
7. Condition of equipment. The equipment is to be returned in the same condition it was in
at the time of delivery except for normal wear and tear. The lessee usually is responsible
to pay clean up charges for excessively dirty equipment.
8. Cancellation and extension of contracts. These clauses outline the user‘s privilege to
cancel the contract, term extensions, and the result of late payment
2.8.3. MAINTENANCE OF CONSTRUCTION EQUIPMENT
Planning and implementation of maintenance tasks which includes the method and timing of
maintenance, storage of equipment, repair measures, parts stocking etc. aims at keeping the
equipment in reliable and maintainable condition. The program targets to lessen equipment
failures shorten downtime due to equipment failure and to repair the equipment at less
cost.[9]
Every machine will require repairs even if it is best designed, hence the repair must be done
at such a time when it may have least disruption which means machine may be repaired when
it is not being used or its use may be postponed without affecting the production of the
project.
2.8.3.1. OBJECTIVES OF MAINTENANCE
Sharma SC. (2010) [12] listed the following main objectives of maintenance.
1. To maximize availability of plant, equipment and machinery for productive purposes.
2. To extend the lifespan of plant, equipment and other facilities by minimizing their wear
and tear.
3. To ensure operational readiness of equipment at all times.
4. To reduce the cost of lost production due to breakdown.
2.8.3.2. TYPES OF MAINTENANCE.
According to Douglas gran.(2006) [9]. Construction equipment maintenance programs generally
consist of three major components: preventive maintenance, routine maintenance, and major
repairs. If the first two programs are both aggressively applied and well managed, the major
repair program is minimized, and even more importantly, the first two programs occur as
scheduled under the owners‘ control whereas major repairs occur randomly and usually at times
when they seem to create the most distress to the project.

37
In the study conducted by subburaj (2006) [43] indicated the percentage of each types of
maintenance performed by Indian contractors.
 67 percent Reactive
 31 percent Preventive
 2 percent Predictive
 Reactive Maintenance
Involves emergency, remedial and unscheduled repairs, is a reactive as opposed to proactive
mode of maintenance. It is based on the policy of ‘operate the equipment until it breaks down
and then repair’. [35].
Even though this type of maintenance has the advantage of lower initial cost and fewer staff, it
has the following disadvantages: [12].
 Increases costs due to unplanned downtime of equipment.
 Increases labor costs, especially if overtime is needed for untimely repairs or
replacement.
 Preventive Maintenance.
Preventive maintenance refers to a series of actions that are performed on either a time-based
schedule or a schedule based on that of machine-run time. These actions are designed to detect,
preclude, or mitigate degradation of a system. This type of maintenance is based on the idea that
―Prevention is better than cure‖. [12]
The axiom holds that regular expenditure of small amount of money for preventive maintenance
abrogates the need to spend a large amount of money to replace major operating components. [9].
In manufacturing industry, preventive maintenance has increased the production level around
10–20 %, by reducing the break-down time of the equipment.[42].
This type of maintenance has the advantage of increasing the life cycle of components, reduced
equipment or process failure and results in estimated 12 – 18 % saving of cost over that found in
a reactive maintenance program. [43].

38
The time interval between inspections on preventive maintenance could be in days, weeks or
even months depending types of checks performed in each inspection. Daily inspection may
include checking of [4]
1. Air pressure in tires (for wheel mounted)
2. Fuel, crank case oil and coolant level.
3. Battery level.
4. Leaks and an obviously broken or defective parts noted by waking around the machine
5. Safety items such as brakes.
Mann [36] proposed an objective method to determining the appropriate maintenance approach
on a piece-by-piece basis for the typical construction project. Essentially, identified three
possible maintenance strategies:
1. First breakdown approach: The equipment is never pulled out of production for
preventive maintenance. Preventive maintenance is conducted after a piece of equipment
breaks down in conjunction with its repair.
2. No alternative approach: The equipment is pulled out of production for preventive
maintenance in accordance with its manufacturer‘s recommended schedule. Production is
incrementally sacrificed to maximize equipment availability throughout the project.
3. Breakdown-cost versus inspection-cost approach: A rational comparison of the cost of
lost production against the cost of maintenance inspection is made and the lower cost
option is selected.
2.8.4. OPERATION OF EQUIPMENT
The correct use and operation of construction equipment are fundamental in improving
productivity and reducing costs. Experience has shown that, however good may be the
performance of construction equipment, or the maintenance management may be, more has to be
done regarding operation of equipment.
Some of them are:[35]
1. Training of equipment operators on how to care for the equipment and operate it properly
in a safe way.
2. Regulating site condition suitable for the operation of equipment, this can be achieved by
maintaining access roads which hauling units transport materials.

39
3. Avoiding overuse and excessive loading of equipment.
4. Balancing the machining units.
Regarding operation of equipment more attention is given on equipment operators. This can be
approached by training of operators, this is because, the operators‘ skill in operating the
equipment greatly governs its working efficiency as well as it holds great cost-saving
potential[17]
Other focus area regarding operators is improvement of operators working environment, living
condition, health human relationship and remuneration package to be suitably taken care of.[35]
2.8.5. REPLACEMENT OF CONSTRUCTION EQUIPMENT.
Once a piece of equipment is purchased and used, it eventually begins to wear out and suffers
mechanical problems. At some point, it reaches the end of its useful life and must be replaced.
Thus, a major element of profitable equipment fleet management is the process of making the
equipment replacement decision. This decision essentially involves determining when it is no
longer economically feasible to repair a broken piece of machinery. [9].
2.8.5.1. LIFE OF EQUIPMENT
In order to determine the replacement time of equipment it is important to know about the
life of equipment. Basically, a machine has three distinct life times: a physical life, profit life
and an economic life [4].
o Physical Life
The physical life of equipment is the lifetime over which it is physically able to produce, but
not necessarily at a profit. Beyond the physical life the machine become exhausted and can
no longer produce, and it will usually be abandoned or scrapped because of total wear and
tear.

40
o Profit Life
Profit life is the life over which the equipment can earn a profit. The retention beyond that
point will create an operating loss [4]. This essentially is the point where the machine
seemingly spends more time in the repair shop than it does on the project site. The profit life
is larger than the economic life and lower than the physical life.
o Economic Life
Economic life equates to the time period that maximizes profits over the equipment‘s life.
Thus, selecting economic life span as the metric to make the equipment replacement decision
is in fact optimizing production with respect to profit.
The economic life of equipment is shorter than the physical life and ends when the profit
margin associated with a given machine reaches its highest point. Therefore, the proper
timing of equipment replacement prevents an erosion of profitability by the increased cost of
maintenance and operation as the equipment ages beyond its economic life.
Figure 2.3 Equipment life definitions
(Source from J. Douglas. Construction Equipment Policy, New York: McGraw-Hill, 1975.)

41
Keeping equipment beyond economic life would result in increase of operation cost and decline
of resale value. This means the equipment spends most of its time in maintenance. Hence the
owner of the equipment has to replace before the equipment Finnish its economic life to obtain
reasonable resale value. [9]
2.8.5.2. DETERMINATION OF REPLACEMENT TIME OF EQUIPMENT.
According to Harris (1988) [3], the factors that determine the economic replacement time of
equipment are the purchase price, the operating costs and resale value. Douglas (1975) [4]
included ownership costs as a factor of determining economic replacement time. Revenue is also
considered as important factor for replacement of equipment, this factor is more relevant to plant
hire companies which operate as profit centers. It is of less importance to contractors with no
direct income from their equipment, this is because it is not often easy to separate annual
equipment profit from entire project or equipment fleet profit. [17]
To determine the replacement time of equipment, the economics of ownership of the present
equipment are compared with the economics of ownership of the future machine which could
replace it. Theoretical and Practical methods are used for determination of equipment
replacement time [9].
1. Theoretical Methods.
Douglas (1975) posted four different theoretical approaches to establishing an equipment
replacement policy based on a rigorous and rational analysis of cost, time, and production. These
are: [4]
 Intuitive Method
 Minimum cost
 Maximum profit
 Mathematical modeling.

42
The intuitive method acts as a baseline against which other methods can be compared. It is
simply the application of common sense to decision making. This method mainly depends on
professional judgment or an apparent feeling of correctness to make replacement decisions.
These are like, equipment is often replaced when it requires a major overhaul or at times at the
beginning of a new equipment-intensive job
The minimum cost method fits very nicely into a public construction agency‘s equipment
management policy as the focus on replacing equipment at a point in time where the overall cost
of operating and maintaining a given piece of equipment is minimized.
The maximum profit method is more suitable for construction equipment hiring companies who
obtain profit from renting or leasing their equipment. The economic life of equipment is the year
in which the average annual cumulative profit is maximized.
Mathematical modeling method fulfills a need for a rigorous analytical approach to this decision
for those who will eventually utilize computer-based simulations to assist in optimizing
equipment fleet size and composition for large equipment-intensive projects.
2. Practical Methods.
Public and private equipment owners have developed their own policies for making equipment
management decisions. They are typically based on empirical data as well as past experience.
These methods represent a wealth of knowledge built from decades of equipment management
experience.[9] The next part discuss the practical method followed by three department of
transport in the USA.
 Texas Department of Transportation ( TxDOT)
The Texas Department of Transportation (TxDOT) has equipment replacement criteria that are
based on age, usage (hours), and estimated repair costs. The evaluation of the existing equipment
is done using input from equipment, maintenance and field personnel. This input is then
combined with objective equipment performance data that includes age, (or hours) of operation,
downtime, as well as operating and maintenance costs, to arrive at the final decision on which
units to keep and which ones need to be replaced.

43
For making decision they have put criteria to be checked. These are equipment age, life usage
expressed in hours and repair cost. The replacement decision is made one year before a given
piece of equipment hits its target age, usage, and repair cost level to allow sufficient time for the
procurement of the replacement model.[9]
 Montana Department of Transportation (MDT).
It uses the expected annual costs of new equipment as the metric against which current equipment
is measured. The decision criterion for equipment replacement is that the equivalent annual
ownership cost of the new equipment must be less than the annual cost of the current
equipment.[9]
 Louisiana Department of Transportation and Development (LaDOTD)
The practice of LaDOTD is based on the research conducted at Louisiana State University as a
means of determining optimal equipment replacement policy. The research specified the
following decision criteria: [9]
Disallow the application of maintenance funds for major repairs to equipment that has reached
80 percent of its economic life or if the repair cost will exceed 50 percent of the book value of the
equipment.
The decision results in identifying as ‗‗uneconomical‘‘ the equipment that needs critical repairs
and exceeds the limit set by the criteria.
2.8.6. INVENTORY MANAGEMENT OF CONSTRUCTION
EQUIPMENT.
Inventory management means registration (establishment of a numbering system), keeping
inventory records and making periodic inventory of all eligible equipment, maintaining proper
storage of equipment, guaranteeing security and assigning custody. [11]

44
It is the responsibility of top management to accomplish the following regard to the management
of the equipment inventory. [4]
1. Establish a classification code for the identification of equipment.
2. Establish registration system and number all construction equipment
3. Delineate storage policy and establish procedure for both short and long term storage.
4. Provide adequate security for the equipment at all the time to protect it.
5. Ensure that all the equipment is assigned to the custody of responsible employee.
6. Ensure that an annual inventory of all registered equipment is conducted.
2.8.7. RECORD KEEPING OF CONSTRUCTION
EQUIPMENT.
Record keeping of construction equipment cost, time and production is very important practice.
Such kinds of report will give clear image on what have been done on the equipment so far and
as well as it will help to make decision either to replace or retain. Douglas (1975) [4] listed
reasons of keeping records of construction equipment cost, time and production.
1. For the cost control of job in progress
2. To assess the financial condition of the firm.
3. To assess the progress on the job.
4. To set standards of cost, time and production.
5. To be used as a basis of litigation.
6. To establish tax liability.
7. To collect data for economic analysis.

45
2.8.8. STANDARDIZATION OF CONSTRUCTION
EQUIPMENT.
Standardization is the utilization of like equipment or equipment with identical components.
There are several levels or degree of standardization depending up on the amount of uniformity
between the machines in equipment. Some of these are; [4]
1. All machines of the same type and class are alike
2. All equipment is grouped by engine series in several engine families.
3. All machines of the same type and class are alike and all have the same engine family.
Standardization of equipment components reduces to great extent the number of the spare parts
in stock. This will reduce the cost of spare parts inventory [12]. Standardization also lowers the
cost of maintenance; this is because mechanics become more efficient when working on like
machines. As there are fewer kinds of machine, less training is required to develop efficient
mechanics with the knowledge of repair procedure. [4]
2.8.9. CONSTRUCTION EQUIPMENT SAFETY
The construction industry has long recognized that construction is a high-risk series of activities
requiring active safety measures every day. The accident frequency and severity rates in this
industry are well above the averages of all other industries.[9]
Safe equipment operation involves the totality of a construction job-personnel, equipment and
environment. By job personnel it means all the people involved on the job. This includes
everyone from the top management to the laborers. Equipment includes all the production
equipment auxiliary equipment, service equipment, and any other machine which contribute to
the work. Environment means all the conditions, circumstances and influences surrounding the
job. All these things together constitute the element of safety. [4]
It is reported on studies that More than 100 people each year are killed by mobile heavy
equipment on construction sites. [9]. These accidents might be prevented if the safety with its

46
totality is considered which means job personnel, equipment and environment as discussed
above.
Development and implementation of safety program is one of the most indicated ways to reduce
the rate of occurrence of accident related to construction equipment.
2.8.10. CONSTRUCTION EQUIPMENT SECURITY.
The loss of materials and equipment due to theft and vandalism is currently a massive problem
within the construction industry. It is estimated that industry losses resulting from material and
equipment theft exceed $1 billion annually.[9] A study conducted by Construction Equipment
magazine in the year 2000 found that 73% of the participants within construction industry listed
construction equipment theft as a critical issue. [44]
Theft and vandalism of heavy construction equipment, tools, and materials are extremely
common within the industry, and occur at alarming rates. Studies indicate that since 1996, the
theft value of equipment has increased as much as 20% each year. [45]
Theft is defined as the unauthorized removal of any material or equipment from a job site. The
most common form of theft on a construction site consists of materials and small handheld tools.
Vandalism is the willful or malicious destruction or defacement of property on the job site.
The goal of vandalism on a construction site is to disrupt the flow of normal work. Common
examples of vandalism include destruction of completed work, damage to machines and
equipment, and damage to materials. To reduce the occurrence of theft and vandalism of
construction equipment serious attention is given for the development of security program.
Security program include:[9]
1. Security planning.
2. Security inventory and marking
3. Job-site security
4. Heavy equipment protection.

47
 Insurance
Insurance is the main method that construction equipment owners use to protect themselves from
the risk of construction equipment theft and vandalism and is also a known method of
transferring the risk caused by usage of construction equipment.
Basically there are two main policies of insurance. They differ over the type and nature of
‗‗covered risk.‘‘ An ‗‗all risk‘‘ policy covers against direct loss or damage to the equipment
resulting from any external cause.
The ‗‗named-risk‘‘ policy covers only certain specified risks such as fire, explosion, earthquake,
or overturning of equipment. Some exceptions might be included in the policy. The rate for
‗‗named-risk‘‘ policies is the lowest and is chosen by the construction equipment owner seeking
the lowest cost.[9]

48
CHAPTER 3
METHODOLOGY
3.1. INTRODUCTION
This chapter includes the methodology used in this research. It provides the information about
the research strategy, research design, population, sample size, various approaches to data
collection and data analysis.
3.2. RESEARCH STRATEGY
Research strategy can be defined as the way in which the research objectives can be questioned
[48]. The explanation of mass practice often requires mass attitude data that can only be obtained
by a survey [46]. There are two types of research strategies, namely, .quantitative research and
qualitative research.[48] Data may take the form of narrative information (qualitative data) or
numerical values (quantitative data), [47]. Quantitative research is objective in nature. It is
defined as an inquiry into a social human problem, based on testing a hypothesis or a theory
composed of variables, measured with members, and analysis with statistical procedures [48].
In this study, structured questionnaire is designed to get the factual information about practices
of local contractors in managing construction equipment and causes management problem. This
research basically follows quantitative research strategy.
3.3. RESEARCH DESIGN
The purpose of this research is to explore the current practices of construction equipment
management regarding equipment selection, acquisition, financing, operation, maintenance,
replacement or disposal, standardization, record keeping and inventory, and safety.

49
Based on these to recognize any good practice regarding equipment management among the
contractors, and to identify significant causes of equipment management problems and
recommend possible rectifying ways for these causes of problems.
A structured questionnaire is used together in this research. The structured questionnaire is
probably the most widely used data collection technique for conducting surveys. Questionnaires
have been widely used for descriptive and analytical surveys in order to find out the existing
practice, facts, opinions and views [48]
The questionnaire was built basically using closed questions, and it was divided into three parts
as follows:
 Part One: General information about the contractors.
 Part Two: Elements of equipment management practice.
 Part Three: Causes of equipment management problems.
3.4. STUDY AREA
The study is conducted at Addis Ababa, Ethiopia which is geographically located 9° 2' 0" North,
38° 42' 0" East, average elevation 2405 meters. The total population of the city is 3,384,569
(2008 data). [49] According to fortune journal(2014) which refers the data obtained from
Ethiopian Investment Agency (EIA) in 2012 (G.C), out of 6,032 construction machineries in
Ethiopia 5,151 machineries are in Addis Ababa.[18] The city currently is the seat for major
business companies of the country. As to others business companies most of the major
contractor‘s resident office is located in Addis Ababa.
3.5. LITERATURE
The literature review involves reading and appraising what other people have written about the
subject area [48]. The literature review serves two purposes. First, it seeks systematic reading of
previous information which is related to the area of investigation. Second, the literature review
helps the researcher to improve his research study by giving him some insights into how he can
design his own study [48].

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An extensive literature review from different books, journals and study reports is conducted in
order to obtain the discussion of the previous studies which has been done on the area of
equipment management. These provide the general practice and the problems in the area of
equipment management.
3.6. STUDY POPULATION.
The study population is obtained from the web-site of ministry of urban development, housing
and construction, list of registered contractors for 2005-2006 E.C budget years. The list displays
all Grade 1-10 contractors‘ information such as ID, registration number, category, limit of
capacity in birr, P.O. Box, telephone number and office address. From these list contractors of
grade 1-3 who work on road construction and whose resident office is placed in Addis Ababa are
selected.
The top three contractors (General and Road) initially are selected because they are basically
required to have more equipment in comparison to other grades of contractors to get license of
construction, and also they are believed to engage on high equipment intense projects.
From the list of registered contractors 72 contractors were found to satisfy the above requirement
to collect data for this research work. From this sample size 31 were GC & RC-1, 7 were GC &
RC 2 and 28 were GC & RC-3. Their contact address which is retrieved from the list is used to
contact these contractors.

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Figure 3.1 Total number of population
3.7. SAMPLE SIZE DETERMINATION
The sample size for this research is determined from the populations size described above.
Kish [51] showed that the sample size can be calculated as following equation for
94% confidence level.
n= n'/ [1+ (n'/N)]
Where:
N = total number of population
n= sample size from finite population
n' = sample size from infinite population = S²/V²;
Where S2 is the variance of the population elements and V is a standard error of sampling
population. (Usually S= 0.5 and V = 0.06) [50]
So, for GC &RC1contractor organizations:
n= n'/ [1+ (n'/N)]
n'= S²/V² = (0.5)2/(0.06)2 = 69.44
N = 37
n= 69.44/ [1+ (69.44 / 37)] = 25

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From the total population of 37 grade one general and road contractors the sample size will be 25
and simple random sampling is made from this to keep fair distribution.
For Grade two general and road contractor, as there are only seven contractors. So it is not
required to determine sample size using previous Kish equation and it can be selected all of
seven contractors.
For GC & RC3 contractors:
n= n'/ [1+ (n'/N)]
n'= S²/V² = (0.5)2/(0.06)2 = 69.44
N = 28
n= 69.44/ [1+ (69.44 / 28)] = 20
From the total population of 28 grade three general and road contractors the sample size will be
20 and simple random sampling is made from this to keep fair distribution.
According to previous results of sample sizes, 52 questionnaires were distributed as follows: 25
questionnaires for grade one general and road contractors, 7 questionnaires for grade two general
and road contractor and 20 questionnaires for grade three road and general contractors.
Out of total 52 questionnaires of sample size, 33 questionnaires were received which makes the
total response rate (63%). The distribution on each grade is; 21 (64%) from grade one, 3 (9%)
from grade two and 9 (27%) from grade three contractors.

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These percentages are shown in the Figure below.
Figure 3.2 Percentage of received questionnaires
3.8. DATA MEASUREMENT
Regarding to verify causes of equipment management problems, ordinary scales are used.
Ordinal scale as shown in Table 3.1 is a ranking or a rating data that normally uses integers in
ascending or descending order. The numbers assigned to the important (1,2,3,4,5) do not indicate
that the interval between scales are equal, nor do they indicate absolute quantities. They are
merely numerical labels use to measure the significant level of causes of problem in equipment
management. Based on Likert scale we have the following table 3.1 [52]
Table 3.1 Likert scale of rating data

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The relative importance index is computed as [52]
RI I= W/ (A× N)
Where:
W is the weight given to each factor by the respondents and ranges from 1 to 5
A = the highest weight = 5
N = the total number of respondents
3.9. DATA ANALYSIS
The data gathered from the survey was subjected to statistical analysis to interpret the available
data properly and meaning fully and to present the result in a form useful to draw conclusion and
come up with recommendation to contractor to modify or improve their existing equipment
management practice and also identify and reduce causes of equipment management problems.
The collected data was analyzed by the SPSS 16 statistical package. The data was analyzed such
that it will give light on the current practice of equipment management of contractors existing in
Addis Ababa area of Ethiopia. Some of the statistical techniques that were applied are
descriptive statistic, cross tabulations and relative importance index (RII) is used to identify the
significant level of causes of equipment management problems.

55
CHAPTER 4
RESULTS AND ANALYSIS
4.1. INTRODUCTION
In this chapter, the results and detail analysis of collected data are presented and discussed. The
obtained data were coded and analyzed using SPSS software package producing frequency charts
and cross tabulations. The significant level of causes of management problem were identified
and ranked using relative importance index (RII).
4.2. PART I. GENERAL INFORMATION
The general characteristics of the study population were investigated. These include grade level
of the construction firm, duration of stay of the firm in the construction business, annual work
volume of the firm, approximate value of owned by purchase and approximate value of owned
equipment by rental and lease.
4.2.1. GRADE LEVEL OF THE CONSTRUCTION FIRMS
Figure 4.1 shows that majority (63.6%) of the contractors in the population are grade one, grade
three (27.3%) is the second rank and grade two (9.1%) is the least. Equal opportunity is given to
study the equipment management practice of these three constrictors based on their sample size.
The sample size of grade one and grade two contractors does not differ a lot but the number of
response to the questionnaires differs. This indicates grade one contractor relatively exists in
more organized manner having organized structure and responsible staff regarding equipment
management to answer the questionnaires. Grade two contractors exist in small quantity from the
total population of grade one up to three. All of the participants confirmed that they have
experience on road construction projects.

56
Figure 4.1 Grade levels of contractors.
4.2.2. EXPERIENCE OF THE FIRMS
Figure 4.2 shows that (30.3%) of the contracting companies were established before twenty
years. (24.2%) of companies were established in a range of ten to twenty (10 -20) years, while
the majority (45.5%) of them were established before ten years. This indicates that most of
companies are relatively newly established having less than 11 years of experience.
Figure 4.2 experience of contractors in years.
The cross tabulation of experience in year with their grade shows that a majority of grade
three contractors (88.9%) are below ten years ,and also most of (47.6%) of grade one
contractors are above 20 years.

57
Table 4.1 cross tabulation of experience with grade levels.
4.2.3. ANNUAL WORK VALUE OF THE FIRMS.
Annual work volume of participant is found to be more than birr 50 million. Ministry of works
and urban development classified contractors based on the construction cost of the project. Even
though all of the contractors can execute project cost more than birr 150 million, majority grade
two and three contractors annual work volume is below Birr 150 million.
Figure 4.3 Annual work volume

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However, the cross tabulation on table 4.2 annual work volume with their grade shows that
majority of grade one (66.7%) annual sell is more than 150 million.
Table 4.2 cross tabulation of annual work volume with grade level.
Figure 4.4 Annual work volume with grade level.
4.2.4. FLEET VALUE OF OWNED EQUIPMENT
As table 4.3 indicates that fleet value of owned equipment ranges between birr 5 – 30
million. It‘s found that grade one contractors (66.7%) have owned highest fleet which worth
greater than birr 30 million. Majority of grade two contractors (66.7%) fleet value is found to
be in range of Birr 11-20 million. (88.9%) of grade three contractors fleet value is in between
Birr 5-10 million, which indicates that grade three contractors own least fleet value among
the three grades of contractors.

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Table 4.3 Fleet value of owned equipment.
Table 4.4 cross tabulation fleet value with grade levels

60
Figure 4.5 fleet value of owned equipment.
The cross tabulation result above clearly indicates the increasing value of equipment fleet
among participants according to their grade. The pattern in the cross tabulation table shows
participants of higher grade generally have a fleet of greater value than participants of lower
grade.
4.2.5. ANNUAL RENTAL AND LEASE COSTS
Usually contractors rent equipment when the temporal job requirement exceeds the existing
number capacity of equipment. In the survey it‘s found that most of contractors (60.6%)
annual rental and lease cost is between Birr 1-5 million.
Table 4.5 Rental and lease cost per year.

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The cross tabulation result on table 4.6 which is done on grade one contractor shows that
grade I contractors who have relatively minimum annual work volume (Birr 50-100 million)
and least amount of owned equipment fleet value (Birr 5-10 million), have less tendency to
rent equipment.
However contractors in the same grade and the same amount of owned equipment fleet value
with the previous case, but high work volume (greater than Birr 150 million), have shown
high tendency to use rental equipment with rental and least cost exceeding Birr 10 million
annually.
On the other case, contractors of the same grade (grade I) whose owned equipment fleet
value and annual work value is high, have exhibited high rental and lease cost exceeding Birr
10 million annually. Such particular case demonstrates, even though contractors have enough
amount of owned fleet value, if their work volume keeps growing they demand additional
equipment by renting or lease to compensate the gap between owned equipment fleet value
and the growing annual work volume.

62
Table 4.6 cross tabulation of grade level one, owned fleet value and annual work volume.
The cross tabulation result on table (4.7) which is done on grade two and three contractors
with their respective grade indicates that keeping owned equipment fleet value the same,
contractors who have relatively high annual work volume require more rental equipment
which results in an increase of their annual work volume.

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Table 4.7 cross tabulation of grade level two and three, owned fleet value and annual work volume.
4.3. PART II. ASPECTS OF EQUIPMENT MANAGEMENT
PRACTICE.
Aspects of equipment management practice include various elements where management
principles are applied. These are; selection, acquisition, operation, maintenance, replacement,
standardization, inventory and record keeping, safety and security. The next part discusses the
results of the survey obtained on the practice followed by contractors‘ of grade (I –III) in
Addis Ababa region of Ethiopia on the above aspects of equipment management.

64
4.3.1. EQUIPMENT MANAGEMENT GUIDE LINE.
A well-defined and documented equipment management guide line is a base for good
management practice of equipment. If equipment management practice is not based on well
documented guide line by the firm, the practice will be prone to irregularity and miss
utilization of the equipment.
The result of the survey indicates that only (12.1%) of the participants have well-documented
equipment management guide lines. (6.1%) of the participants respond that they are on the
progress of developing equipment management guide line.
Figure 4.6 well documented equipment guide line.
The cross tabulation result on table 4.8 which is done on experience in year with grade level
and equipment management guide line shows that all contractors who have well documented
equipment management guide line are grade one and their work experience exceed above 20
years. And also contractors who are on progress of developing equipment management guide
line are grade one and their work experience exceed 10 years.

65
Table 4.8 cross tabulation grade levels, well documented guide line and experience
Cross tabulation result on table 4.9 existence of well documented equipment management
guide line with fleet value of owned equipment, experience and grade one contractors
indicates, contractors who have developed well documented equipment management guide
line are those who have long time experience on construction business which exceed 20 year
and those who have high amount of owned equipment fleet value which exceeds Birr 30
million.

66
Figure 4.7 grade levels, experience and guide line.
Table 4.9 cross tabulation of grade one, fleet value and experience.
Contractors who have well documented equipment management guide line are also found to
have relatively high amount of annual work volume which exceeds Birr 150 million.
Table 4.10 cross tabulation work volume, fleet value and experience.

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The above trend shows that as the size of the firm increase both in grade level and annual work
volume, its fleet value also increase. The increase in fleet value demands well developed
equipment management guide line to manage the overall fleet of equipment properly in various
aspects.
4.3.2. EQUIPMENT SELECTION PRACTICE.
Studies have shown that there are many criteria that contractors use to select equipment. In this
survey it‘s found that majority of contractors (51.5%) of the participants select equipment with
relatively lowest purchase price. (45.5%) of the participants select equipment based on the
service record and reputation of the manufacturer. Only (3%) of the participant select equipment
based on machine productivity.

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Figure 4.8 Criterion for the selection of equipment.
The cross tabulation result on table 4.11 criteria to select equipment with grade levels indicates
that majority (88.9%) of grade three contractors select equipment with relatively the lowest
purchase price.
Table 4.11 Cross tabulation of criterion for the selection of equipment with grade level

Assessment Of Construction Equipment Management Practice And Causes Of Problem In Road Contractors (Grade I-III). In Addis Ababa Region Of Ethiopia

Assessment Of Construction Equipment Management Practice And Causes Of Problem In Road Contractors (Grade I-III). In Addis Ababa Region Of Ethiopia

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