1. Contractors must estimate construction costs by determining quantities, production rates, and hourly costs of equipment. 2. Accurately estimating equipment ownership and operating costs is important for preparing bids, controlling costs, selecting optimal equipment, and deciding whether to rent, lease, or purchase equipment. 3. There are several methods for calculating equipment ownership and operating costs, such as Caterpillar, AGC, and Peurifoy, which produce different hourly rates for the same equipment.

1. EQUIPMENT ECONOMICS
Construction cost estimate
 A contractor must know
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 quantity of work
 production rate
 hourly costs
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2. IMPORTANCE OF EQUIPMENT COST
ESTIMATE
 To prepare and win bid
 To control costs of work
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 To find the best equipment
 To rent, lease or buy
 To replace equipment
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3. METHODS OF CALCULATING O&O COSTS
1. Caterpillar
2. Assoc. Gen. Contractors of Am.
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3. Equipment Guide Book
4. Dataquest
5. Corps of Engineers
6. Peurifoy
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4. CATERPILLAR METHOD
1. No item prices provided (must obtain locally).
2. Based on complete machine.
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3. Multiplier factors can be used in any currency.
4. Conditions and applications defined in zones.
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OWNERSHIP COSTS

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Operating Costs

7. AGC METHOD
 Rather than dealing with specific models,
equipment is classified according to capacity or
size.
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OWNERSHIP COST

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Operating Cost

10. PEURIFOY METHOD
 Peurifoy set the standard for using rigorous
engineering principles to develop rational cost
estimates based on equipment fleet production
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rates.
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OWNERSHIP COST

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Operating Cost

13. METHODS COMPARISON
1. Different hourly rate for the same equipment
 Because method used is largely a business policy
decision, not technical
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2. Methods are primarily used in negotiations
between client and contractor (whether
contractor’s rates are fair and reasonable)
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14. METHODS COMPARISON (CONT.)
Item Caterpillar AGC Peurifoy
Ownership 107.43/hr 228.61/hr 107.43/hr
Operating 77.64/hr 132.18/hr 48.69/hr
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Operator wage 25.90/hr 25.90/hr 25.90/hr
Total cost 210.97/hr 386.69/hr 182.53/hr
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15. BASIC CONSIDERATIONS FOR EQUIPMENT
SELECTION
 Equipment costs is uncertained just like labour
costs (labour ranked #1).
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 Right or wrong equipment affects field
productivity, thus profit.
 Small machine = slow
 Large machine = expensive
 Mismatched pair = problems
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16. BASIC CONSIDERATIONS FOR EQUIPMENT
SELECTION (CONT.)
 Two types of failure = structural & mechanical
 Lattice boom buckle when lifting too heavy
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 Loader’s motor locked overworked
 Stability failure (balance problem)
 Availability of proper and timely service,
maintenance & repair (parts)
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17. BASIC RELATIONSHIPS FOR EQUIPMENT
SELECTION
Equipment productivity Price, operating &
INCREASE maintenance costs
INCREASE
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Equipment capacity INCREASE Hourly production INCREASE
Hourly production INCREASE Unit cost DECREASE
Unit cost DECREASE Competency INCREASE
Competency INCREASE Profitability INCREASE
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