The document discusses the importance of construction equipment for major construction projects. It states that construction equipment accounts for 25-40% of total project costs and discusses factors for selecting equipment such as operating costs, availability of spare parts, and suitability for future projects. It also covers types of equipment, methods of financing purchases versus renting, and factors that influence the cost of owning and operating equipment.

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S.S.A.S.I.T, SURAT GTU

2. Importance of Construction
Equipments
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• In Case of major construction projects, the speed of work and the
timely completion of work is very important. Due to the
reason, the mechanization of most of the construction work is
required, in which the construction equipment play the most
important role. The proper use of the appropriate equipment
contribute to economy, quality, safety, speedy and timely
completion of the project.
• The cost of construction is a major factor in all the projects. The
factors that influence construction costs mainly are materials,
labour, construction equipments, overhead and profit.

3. Major Construction
Projects
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4. Importance of Construction
Equipment's
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• The cost of construction equipment for civi
lengineering construction projects ranges from 25 %
to 40 % of the total project.
•The amount which is invested in the purchase of a
construction equipment should be recovered during
the useful period of such equipment.

5. Importance of Construction
Equipments
• If it is found that the purchase price of a particular
construction equipment is far less than the estimated
profit to the contractor due to its use on the project, the
contractor should purchase the same without
considering its further use or salvage value.
• The construction equipment are deployed on the
construction projects for the various reasons, such as
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6. Importance of Construction
Equipment's
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• Cost-effective implementation. For execution of work that is not
feasible by manual efforts or when deployment of construction
equipments may help in doing the work more efficiently.
• Large output can be maintained, even if there is a shortage of skilled
and semi-skilled manpower.
• Precession of implementation is done by using modern
construction equipments equipped with software control.
• The construction equipment and machineries of very high capacities
are available now and very large output are possible due to
mechanization, adhering to the construction schedules.

7. Classification of Equipments
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• The Construction equipment's are classified as below:
• The equipment are classified according to the type of work it
performs,
• Intermittent Type: This type of equipments have the
intermittent cycle of work. They can be operated on series of
work cycles and each cycle completes in itself.
• Continuous flow type: This type of equipments have a continuous
flow of work turned out.
• Belt conveyors, pipelines, air compressor, etc. are the example of
continuous flow type equipments.

8. Concrete Mixers
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9. Belt Conveyors
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10. Classification of Equipments
• Mixed type
• This type of equipments have characteristics of
both, intermittent as well as continuous flow type
equipments.
• They are continuously operated over a defined
surface area. After completion of a particular
sweep, it requires operation cease and
readjustment of its position to resume production on
another area.
• Motor graders, bulldozers, scrapers, etc. are the
examples of mixed type equipments.
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11. Motor graders, Bulldozers,
Scrapers
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12. Classification of Equipments
• The construction machineries or equipments can be broadly
classified into following types:
• Earth Excavating and transportation equipments
• Hoisting Equipments
• Conveying Equipments
• Drilling equipments
• Pumping equipments
• Compacting Equipments
• Pile- Driving Equipments
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13. Earth Excavating and Transportation
Equipment's
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14. Hoisting Equipments
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15. Conveying Equipments
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16. Drilling Equipments
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17. Pumping Equipments
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18. Compacting Equipments
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19. Pile- Driving Equipments
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20. Classification of equipment's
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• Depending upon their availability, commercial
sizes and specifications, the equipment's can be
classified into following types:
• (i) Standard Equipment's
• (ii) Special Equipment's

21. Classification of equipment's
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• Standard
Equipment's:
The standard equipments are commonly manufactured
and are easily available to the prospective purchasers.
• They can be used for variety of construction operations
without any difficulty and they are available in standard
commercial sizes. The initial investment is less as
compared to a special equipment.
• The delivery of standard equipment's is very quick, as it is
readily available in the market.
• The repair parts for standard equipment can be obtained
more quickly in short period.

22. Standard Construction Equipments
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• Standard
Equipment's:

23. Standard Construction Machineries
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• Standard
Equipment's:

24. Classification of equipment's
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• Special
Equipments:
• Th
e
special equipments are those which are
manufactured for a specific project or which does not
have readily accessible spare parts.
•The selection of special equipment's should be made
carefully after proper financial analysis.
•The initial investment in case of special equipment
is very high and there is risk of change in design, it
cannot, be used economically on the other project.

25. Special Construction
Equipments
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• Special
Equipments:

26. Special Equipments
• A special order is to be given to the manufacturer of
special equipment's and a special price is to be given
and therefore the delivery of special equipments can
be obtained after long period.
• Examples of special equipment include tunnel-
boring machines, large hauling units and very large
shovels, such as a 70 to 80 cubic metre shovel used
to strip-mine coal.
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27. Special Construction
Equipments
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• Special
Equipments:

28. S election of equipment's
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• The various factors to be considered, while selecting the
construction equipment are as follows:
• Standard Type of Equipment's:
• The contractor should confine their purchase to standard
equipment unless a project definitely justifies the purchase of special
equipment's.
• Replacement of Parts: Prior to purchasing equipment's, the
buyer should determine where spare parts are obtained.
• If the parts are not obtainable quickly, it may be wise to
purchase other equipment, for which the parts are quickly
available, even though the latter seems less desirable.

29. Selection of Equipments
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30. Selection of Equipments
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• Operating Costs:
• The most efficient and therefore the most economical
equipment is one whose operating cost is the minimum.
This is a full proof measure for selection of the equipment.
• Utilization of Equipment's:
• The maximum utilization of the existing machine should
be done to reduce the cost of production of various items of
the project.

31. Selection of Equipments
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• Availabilit
y
of Equipment: Sometimes the
selection of equipment has to be made from the
available equipment held with the
manufacturers or dealers.
• Source of Equipment: Contractor and other
users of construction equipment frequently are
concerned with a decision as to whether to
purchase or rent (Lease) equipment's.

32. Selection of Equipments
• Country of Origin:
• As far as possible, indigenous equipment's should be used. This
encourages the industry of the country and saves foreign
exchange. When imports have to be resorted to, they should be
preferable restricted to soft currency area.
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• Operating Facility:
• The equipment's chosen for project should be such that the
trained operators for the machine are available.
• Suitability of Equipment for Future:
• While selecting an equipment, the useful life of the
equipment should be compared with the duration of the
project. If the life of the equipment is longer, it should be
possible to use the equipment for other projects.

33. Financial aspects related to construction
equipment's
• 1. How to arrange finance
• 2. Whether to buy or hire Sources of
equipment
Long term
(new or used)
Buy
Down
payment
On loans
mobilized
Payment in
installments
Lease
Time lease
Leasing with
option to buy
later
Short term
(Renting)
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34. A spects R elated to Finance
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• How to Arrange Finance:
• When the contractor place the equipment purchase order to the
manufacturers, the majority of the manufacturers, demand 10 to
30 % advance with orders, without any commitment of delivery
period.
• The arrangement of finance can be done from the advances
given by the project authorities or from the advances given
to the contractor on equipment purchase.

35. Aspect Related to Finance
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• Now a days, the contractors are allowed for
advances on new equipment to be purchased in
case of all major contracts.
• In some cases, even foreign exchange is made
available in contracts for import of
equipment's and spares.
• Th
e
finance can also be arranged from
Industrial Development Banks and leasing
Companies

36. Aspect Related to Finance
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37. Buy or Hire
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• A Piece of Equipment may be employed on a
project, in one of the following two ways:
• 1. Direct Purchase
• 2. Hiring

38. Direct Purchasing
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• If the equipment's are to be used frequently for
many types of jobs for a long duration of time on
a project, it will be economical for the
contractors to purchase the equipment's.

39. Direct purchase
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40. Hiring
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• If the project is small and if the equipment is to
be used for a short duration of time on the
project, it will be economical for
the contractor to get it by hiring or by
renting from other agencies.

41. Hiring (advantages)
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42. Examples- Purchase/ Hire
▪The original cost of power shovel is Rs. 5 lacs & its
salvage value is 10% of the original cost. The power
shovel is used for 1400 hours/year and its life is 5
years. The hiring charges for the power shovel including
maintenance & repairs is Rs. 25000/month. Suggest
whether the power shovel should be purchased or hired on
rent?

43. Discounted Present Worth Analysis
• It involves calculating the present value of all amounts involved in
all the alternatives to determine the present worth of the proposed or
best alternatives.
• Decision problems may be of two types:
a. Revenue dominated cash flow diagram
b. Cost dominated cash flow diagram

44. What is Inflow and Outflow:

45. (a) Revenue Profit dominated cash flow diagram:
• In this type of cash flow diagram, the revenue, profit, salvage value,
etc. (inflows) will be assigned a (+ve) sign while costs (outflows)
will be assigned with (-ve) sign.
• Finally, the alternative having the maximum present worth amount
should be selected as the best alternative.

46. (b) Cost dominated cash flow diagram:
▪ In this type of diagram, the cost(outflows) will be assigned with
(+ve) sign and revenue, profit, salvage value(all inflows) etc. will be
assigned with (-ve) sign.
▪ Finally, the alternative having the minimum present worth amount
should be selected as the best alternative.

47. Depreciation
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48. Depreciation
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• Depreciation can be defined as the loss or decrease in the
value of the property due to the use, life, wear and tear,
decay and obsolescence.
• As the equipment which is purchased today will not work
for ever. This may be due to wear and tear of the equipment
or obsolescence of technology.
• It is dependent on its original condition, quality of
maintenance & mode of use.
• Usually a % of depreciation per annum is allowed, which
gradually increases with time.
• Present value of property= Initial cost - Total amount of
depreciation

49. Depreciation Fund
• The recovery of money from the earnings of an
equipment for its replacement purpose is called
depreciation fund, since we make an assumption that
the value of the equipment's decrease with the
passage of time.
• Thus, the word, depreciation means decrease in
value of physical assets with the passage of time.
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50. Types of depreciation
a) Physical depreciation
1.Wear and tear from operation
2.Action of time and other elements
a) Functional depreciation
1.Inadequacy or suppression
2.Obsolescence

51. Methods of Calculating Depreciation:
1. Straight Line method
2. Constant Percentage method
3. Sinking Fund method
4. Sum of years Digits method
5. Service Output method

52. Straight Line method
Assumption: Property loses its value by the same amount every year.
Therefore, Annual Depreciation= Annual Decrease in property value
where, D= Annual Depreciation
C= Original Cost
Depreciation of property after m years:
S= Scrap Value
n , m= life in years
Therefore, Book value after m years:

53. Constant Percentage method
Assumption: Property will lose its value by a constant percentage of its value at
the beginning of every year.
Where, p= % rate of annual Depreciation
S= Scrap value C= Original cost
n= life in years
If any age of property is m years, the value of property after m years:

54. Sinking Fund method
▪ Assumption: Depreciation of the property = the annual sinking
fund + interest on the sinking fund for that year.
▪ If i is the rate of interest, the annual sinking fund installment(p) to
accumulate 1 Rs in m years:
If i is the rate of interest, and 1 Rs is deposited every year, total sinking
fund accumulated at the end of n years:
▪ Rate of depreciation in n years:

55. Factors affecting Cost of Owning operating Equipment:
▪ Cost of the equipment delivered to the owner
▪ Demand of the equipment at the end of its useful life
▪ Number of hours it is used per year
▪ Number of years it is used
▪ Severity of conditions under which it is used
▪ State of maintenance and repairs

56. ▪ Depreciation Cost
▪ Investment Cost (Average investment = )
• Maintenance and repair Cost
• Operation Cost (Repair charges, Depreciation on tyres and tubes, Labour
Charges, Fuel Charges, Operators and maintenance crew charges,
Miscellaneous Supplies)
• Down time Cost
• Obsolescence Cost
• Replacement Costs
Costs to be considered for owning and operating
equipment

57. Investment cost
Investment (or interest) cost represents the annual cost
(converted into an hourly cost) of capital invested in a machine. if
borrowed funds are utilized for purchasing a piece of equipment,
the investment cost is simply the interest charged on these funds.
if it is purchased with company assets, an interest rate that is equal
to the rate of return on company investment should be charged.

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maIntenance and repaIr
costs
The cost for maintenance and repairs include the expenditures for
replacement parts and the labor required to keep the equipment in
good working condition. Historical cost records of maintaining and
servicing equipment are the most reliable guide in estimating
maintenance and repair cost. The manufacturers of construction
equipment provide information showing recommended costs for
maintenance and repairs for the equipment they manufacture. The
annual cost of maintenance and repairs is often expressed as a
percentage of purchase prices or as a percentage of the straight-line
depreciation costs.

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operatIng cost
Operating cost is incurred only when the equipment is operated. The
operating cost of the equipment is influenced by various parameters
namely number of operating hours, location of job site, operating
conditions, category of equipment etc. The operating cost consists of
the following;
a)Repair and maintenance cost,
b) Fuel cost,
c)Cost of lubricating oil, filter and grease,
d)Tire cost
e) Equipment operator wages,
f) Cost of replacing high-wear items and
g) Cost of mobilization, demobilization and assembly.

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Down time cost
It is a time that a machine is not working ,because it is undergoing
repairs or adjustments.
Obsolescence cost
It may be defined as the loss in the value of an equipment due to
improvement in designs of equipments.
Replacement Cost
Every year the cost of equipment is increasing. In view of these
factors, they are to be included in ownership cost which will allow
the unit of equipment to generate sufficient capital during its
economical life to ensure its replacement at the end of the
depreciation period.

61. Example
For construction Equipment following information is available.
Initial cost of acquisition = Rs 6500000
Cost of tyre sets = Rs 350000, replaced after every 4500 hours Cost of
lubricants, minor
Repairs and maintenance = Rs 1100/hour
Estimated life Estimated
salvage value
= 13500 hours of
operation
= 15% of initial costEstimated usage of equipment= 1500 hours/year
If MARR is 20% per year, Estimate minimum hourly rental charges for equipment

62. Economic life of Construction Equipment's
Equipment should be replaced under following
circumstances:
1.Depreciation
2.Downtime
3.Inadequacy
4.Normal Deterioration

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64. Equipment Replacement Policy
 A firm has to face three type of decisions:
• The replacement of equipment as it wears out
• The equipment required for expansion
• The replacement of old technology by new
 Equipment is replaced before its estimated life to:
▪ Reduce production cost
▪ Reduce fatigue
▪ Raise quality
▪ Increase output
▪ Secure greater convenience, safety and reliability

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Do consider Do not consider
For equipment in use For equipment in use
1. Operating cost
2. Repair and maintence cost
3. Down time cost
4. Salvage value
5. Rebuilding cost
1. Original Cost
2. Money already spent on repairs and
maintenance
3. Unrealistic book value For New
Equipment
For new equipment For new equipment
1. Initial cost
2. Interest on capital investment
3. Salvage value
4. Labour savings
1. Any savings not clearly assessable
2. Overhead charges

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