1) Selecting equipment for a construction project requires determining if the equipment will earn back its costs. Unless it is profitable, equipment should not be used. 2) Estimators must determine what equipment is needed at each phase of work and for how long to accurately estimate costs. Operating costs, depreciation, interest, and ownership costs all factor into the total cost of using equipment. 3) Depreciation is the primary method discussed for determining the current value of equipment or a building based on its original cost and age. The value decreases over time as a percentage of the original cost.

1. CONSTRUCTION EQUIPMENT
CE-216
Engr M Zeeshan Ahad
INU, CED

2. EQUIPMENT

3. INTRODUCTION
One problem an estimator faces is the
selection of equipment suitable to use for a
given project. The equipment must pay for
itself. Unless a piece of equipment will earn
money for the contractor, it should not be
used.

4. INTRODUCTION
It is impossible for contractors to own all types and sizes of
equipment, the selection of equipment will be primarily
from that which they own. However, new equipment can be
purchased if the cost can be justified
For example, if a piece of equipment costing $15,000 will
save $20,000 on a project, it should be purchased regardless
of whether it will be used on future projects or whether it
can be sold at the end of the current project.

5. INTRODUCTION
If the equipment is to be used for a time and then will not be needed again for a few weeks,
the estimator should ask the following:
What will be done with it?
Will it be returned to the
main yard?
Is there room to store it on
the project?
If rented, will it be returned
so that the rental charge
will be saved?
Figuring the cost of equipment required for a project presents the same problems to
estimators as figuring labour. It is necessary for the estimator to decide what equipment is
required for each phase of the work and for what length of time it will have to be used.

6. OPERATING COSTS
The costs of operating the construction equipment should be calculated on the basis
of the working hour since the ownership or rental cost is also a cost per hour.
Included are items such as fuel, grease, oil, electricity, miscellaneous supplies, and
repairs.
Operators’ wages and mobilization costs are not included in equipment operation
costs.

7. OPERATING COSTS
• Costs for power equipment are usually based on the horsepower of the
equipment. Generally, a gasoline engine will use between 0.06 and 0.07
gallons of gasoline per horsepower per hour when operating at full
capacity
• Fuel costs are calculated using Formula

8. OPERATING COSTS
When operating, the engine will probably operate at 55 to 80 percent of full capacity, or 55 to 80
percent of its available power will be utilized.
This is known as power utilization and reduces fuel consumption. In addition, it will not be operated for
the full hour.
Typically, equipment is operated between 30 and 50 minutes per hour. This is known as the system
efficiency or use factor and is expressed as a percentage of the hour that the equipment is operating.
For example, 45 minutes per hour would be 75 percent (0.75) and 50 minutes per hour would be 83
percent (0.83).

9. FUEL COST
What is the estimated fuel cost of a 120-
horsepower pay loader? A job condition
analysis indicates that the unit will operate
about 45 minutes per hour (75 percent) at
about 70 percent of its rated horsepower.

10. SOLUTION

11. LUBRICATION
The amount of oil and grease required by any given piece of
equipment varies with the type of equipment and job conditions.
A piece of equipment usually has its oil changed and is greased
every 100 to 150 hours.
Under severe conditions, the equipment may need much more
frequent servicing.
Any oil and grease consumed between oil changes must also be
included in the cost.

13. TIRES
The cost of tires can be quite high on an hourly basis.
Because the cost of tires is part of the original cost, it is left in when figuring the
cost of interest, but taken out for the cost of repairs and salvage values.
The cost of tires, replacement, repair, and depreciation should be figured
separately.
The cost of the tires is depreciated over the useful life of the tires, and the cost of
repairs is taken as a percentage of the depreciation, based on past experience.

15. DEPRECIATION
As soon as a piece of equipment is purchased, it begins to decrease
(depreciate) in value.
As the equipment is used on the projects, it begins to wear out, and in a given
amount of time it will have become completely worn out or obsolete.
If an allowance for depreciation is not included in the estimate, there will be no
money set aside to purchase new equipment when the equipment is worn out.
This is not profit, and the money for equipment should not be taken from
profit.

16. DEPRECIATION
On a yearly basis, for tax purposes, depreciation can be figured in a
number of ways.
But for practical purposes, the total depreciation for any piece of
equipment will be 100 percent of the capital investment minus the
scrap or salvage value, divided by the number of years it will be used.
For estimating depreciation costs, assign the equipment a useful life
expressed in years, hours, or units of production, whichever is the
most appropriate for a given piece of equipment.

18. INTEREST
Interest rates must be checked by the estimator.
The interest should be charged against the entire cost of the equipment, even
though the contractor paid part of the cost in cash.
Contractors should figure that the least they should get for the use of their money
is the current rate of interest.
Interest is paid on the unpaid balance. On this basis, the balance due begins at the
cost price and decreases to virtually nothing when the last payment is made.
Since the balance on which interest is being charged ranges from 100 to 0 percent,
the average amount on which the interest is paid is 50 percent of the cost.

20. OWNERSHIP COSTS
To estimate the cost of using a piece of equipment owned by the
contractor, the estimator must consider depreciation, major repairs,
and overhaul as well as interest, insurance, taxes, and storage.
These items are most often taken as a percentage of the initial cost to
the owner.
Also to be added later is the cost for fuel, oil, and tires. The cost to the
owner should include all freight costs, sales taxes, and preparation
charges

27. DEPRECIATION METHOD
• In this method of finding the value of the building, the method of depreciation is
used to find the value of the building.
• This value is the value of the building at a particular life of a building based on the
percentage of depreciation at that age.
• The total cost of the property is found when the cost of the land is included in the
value.
• The formula for acquiring the value of the building through the method of
depreciation is as follow:
D = p (100 – rd/100)^n
27Engr. Muhammad Zeeshan Ahad

28. DEPRECIATION METHOD
where
D = The Depreciated value of the building structure after n years
P = cost of new building
rd= fixed percentage of the depreciation
n = Present age of the building
28Engr. Muhammad Zeeshan Ahad

29. DEPRECIATION METHOD
• The value of the fixed percentage of depreciation (rd) for different duration of life
of a building is as under
Life of Building Value of rd
100 1.00
75 1.25
50 2.00
25 4.00
20 5.00
29Engr. Muhammad Zeeshan Ahad

30. DEPRECIATION METHOD
• Example : Determine the present value of a property having a land area of 250
sq.m. life of the building is 20 years. Plinth area 175 sq.m @ Rs.2000/sq.m
• Solution
Plinth area = 175 sq.m
Rate of construction= Rs. 2000/sq.m
cost of new Building= P = 175 * 2000 Rs.3,50,000
life of building = n = 20 years
Percentage of Depreciation = rd = 5.00
30Engr. Muhammad Zeeshan Ahad

31. DEPRECIATION METHOD
depreciated value of building = D = p (100 – rd/100)^n
=D = 350000 (100 – 5.00/100)^20
=Rs. 1,25,470/-
31Engr. Muhammad Zeeshan Ahad

32. End of Lecture