Mechanization in construction_Advanced Construction Technology (Semester-6), Civil Engineering

Prepared by
Prof. Ashish Makwana
Civil Engineering Dept. - MEFGI
1Prof. Ashish Makwana

PRESENTATION
OUTLINE…
• Importance of Machineries for Construction
• Classification of Construction Equipment
• Plants and Equipment Used in Construction
• Factors Affecting Selection of Construction
Equipment
• Financial Aspects Related to Construction
Equipment
• Discounted Present Worth Analysis

PRESENTATION
OUTLINE…
• Depreciation
• Cost of Owning and Operating Construction
Equipment
• Economic Life of Construction Equipment
• Equipment Replacement Policy

IMPORTANCE OF MACHINERIES
FOR CONSTRUCTION
• Success of a construction project  the choice of
mechanical equipment
• Proper equipment  work can be completed in short
time with less cost
• Easy availability of good mechanical equipment 
an asset of any civil engineering project

IMPORTANCE OF MACHINERIES FOR CONSTRUCTION
(CONTINUED..)
 Importance of machineries for construction:
Fast construction work Project cost reduced Less no. of labourers
Rapid excavation work
Useful for
Transportation of
construction material

IMPORTANCE OF MACHINERIES FOR CONSTRUCTION
(CONTINUED..)
 Importance of machineries for construction:
Lifting heavy loads
Better quality in
construction
Finishing and rolling of
bituminous roads
Concreting mixing and
transportation

CLASSIFICATION OF
CONSTRUCTION EQUIPMENT
Intermittent Type:
• Bulldozers
• Scrappers
• Power shovels
• Concrete Mixers
• Drag lines
Continuous Flow type:
• Air Compressors
• Belt conveyers
Mixed Type (1 and 2) e.g. Motor graders:
• Intermittent Type
• Continuous flow type
• Mixed Type 8Prof. Ashish Makwana

CLASSIFICATION OF CONSTRUCTION EQUIPMENT (CONTINUED…)
Bulldozers Scrappers
Power
shovels
Concrete
Mixers
Drag lines
INTERMITTENT TYPE 9Prof. Ashish Makwana

Air Compressors Belt conveyers
CONTINUOUS FLOW TYPE
CLASSIFICATION OF CONSTRUCTION EQUIPMENT (CONTINUED..)

Motor graders:
Mixed Type (1 and 2) Motor graders:
Intermittent Type + Continuous flow type = Mixed Type

[A] Classification of Equipment according to the Nature
of Automation:
• Manually Operated Equipment
• Semi-automatic Equipment
• Fully Automatic Equipment
[B] Classification of Equipment according to
standardization of the Machine:
• Standard Equipment
• Special Equipment

• Commonly used in all type
of projects
• Manufactured commonly
and easily available from
the dealer
• Initial investment: low
• Resale price: High
• Delivery: easy and fast
• Repairs and spare parts:
easy to carry out
• Disposal: easy
• Unit cost of production: less
• Rent: low and reasonable
• For example, canal trimmer
Standard Equipment Special Equipment
• Used only in special cases
• Manufactured as per
requirements
• Initial investment: high
• Resale price: low
• Delivery: difficult and
delayed
• Repairs and spare parts:
difficult to carry out
• Disposal: not easy
• Unit cost of production: high
• Rent: high and
unreasonable
• For example. Belt conveyer

Equipment
Purchase cost
(Approx.)
Hire cost per
month (Approx.)
Back hoe loader 25,00,000 85,000 to 1,00,000
Loader 8080X 18,50,000 70,000
Transit Mixer 36,00,000 1,10,000
TFC 280 Crawler crane 1,00,00,000 7,00,000
Piling hydraulic rig 2,50,00,000 15,00,000
Hydra (IST) 17,00,000 60,000
Diesel Generator 125 kVA 6,00,000 30,000
Welding rectifier 400 Amp 50,000 2,500
Excavator EX-100 35,00,000 1,20,000
Roller (IOT) 30,00,000 9,00,000
Boom placer 1,20,00,000 5,00,000
Dumper 30,00,000 1,05,000
Total station 5,50,000 45,000
Different construction equipments &
their cost of purchase & Hire

PLANTS AND EQUIPMENTS
USED IN CONSTRUCTION
Equipment for
Excavation
Earthmoving
equipment
Hauling
equipment
Hoisting
equipment
Conveying
equipment
Pumping
equipment
Compacting
equipment

PLANTS AND EQUIPMENTS USED IN CONSTRUCTION (CONTINUED…)
Pile driving
equipment
Drilling
equipment
Equipment -
production
aggregate
Plants for
grouting and
guniting
Machineries for
bituminous road
Machineries for
concrete works
Dredging
equipment

FACTORS AFFECTING SELECTION
OF CONSTRUCTION EQUIPMENT
Uses of std.
equipment
Size of
equipment
Uniformity
of type
Country of
origin
Initial cost
of
equipment

FACTORS AFFECTING SELECTION OF CONSTRUCTION EQUIPMENT
(continued…)
Unit cost of
production
Availability of
spare parts
Operating
facility
Suitability for
future

FINANCIAL ASPECTS RELATED TO
CONSTRUCTION EQUIPMENTS
How to arrange finance?
• Manufacturers wants :- immediate advance with orders,
varying from 10 % to 30 %
• Arrangement of finance could be from :- advances by the
authorities / contractors on equipment purchase
• Finance can also be arranged – from industrial
development banks and leasing companies

FINANCIAL ASPECTS RELATED TO CONSTRUCTION EQUIPMENTS
(CONTINUED…)
SOURCES OF
EQUIPMENT
Long Term
(New or
Used)
Buy
Down Cash
Payment
On Loans
mobilised
Payment in
Installment
Lease
Time Lease
Leasing with
option to buy
later
Short Term
(Renting)
Various Alternatives for Purchase of Equipment 20Prof. Ashish Makwana

FINANCIAL ASPECTS RELATED TO CONSTRUCTION EQUIPMENTS
(CONTINUED…)
Source of Equipment:
 Direct purchase
• If the equipments is to be used frequently and for a long
duration of time on the project, it proves to be
economical for the contractor to purchase the
equipment.
 Hiring
• If the equipment is to be used occasionally and for a
short duration of time on the project, it proves to be
economical for the contractor to get it by hiring from firms
or persons possessing the same.

Definition
• Salvage value is the estimated resale value of an asset
at the end of its useful life. Salvage value is subtracted
from the cost of a fixed asset to determine the amount of
the asset cost that will be depreciated. Thus, salvage
value is used as a component of the depreciation.
• Depreciation is the gradual loss in the value of the
property due to its use, life, wear, tear and decay.

DISCOUNTED PRESENT WORTH
ANALYSIS
• A discounted present worth analysis involves calculating
the equivalent worth or present value of all amounts
involved in each of the individual alternatives to
determine the present worth of the proposed alternates.
Decision problems – two types:
• Revenue profit dominated cash flow diagram
• Cost dominated cash flow diagram

• Revenue profit dominated cash flow diagram
R1 R2 R3 R4 Rj Rn
S
P
0 1 2 3 4 j n
Revenue profit dominated cash flow diagram

Revenue profit dominated cash flow diagram (continued..)
P = Initial investment
Rj = Net revenue at the end of jth year
i = rate of interest
S = salvage value at the end of nth year
𝐏𝐖(𝐢)
= P + R1
1
1 + i 1
+ R2
1
1 + i 2
+ … + Rj
1
1 + i j
+ Rn
1
1 + i n
+ S
1
1 + i j

• Cost dominated cash flow diagram
n
S
P
0 1 2 3 j
0
C1 C2 C3 Cj Cn
Cost dominated cash flow diagram

Cost dominated cash flow diagram
P = Initial investment
Cj = net cost of operation and maintenance at the end of jth year
S= salvage value at the end of nth year
𝐏𝐖 𝐢
= P + C1
1
1 + i 1
+ C2
1
1 + i 2
+ … + Cj
1
1 + i j
+ Cn
1
1 + i 𝑛
− S
1
1 + i n

DEPRECIATION
• Depreciation is the gradual loss in the value of the
property due to its use, life, wear, tear and decay.
 Present value of property =
Initial cost – total amount of depreciation
Types of depreciation:
(a) Physical depreciation -
• 1. Wear and tear from operation
• 2. Decrepitude i.e. action of time and other elements
(b) Functional depreciation -
• 1. Inadequacy
• 2. Obsolescence

DEPRECIATION (CONTINUED..)
Methods of calculating depreciation:
• Straight line method
• Constant percentage method
• Sinking fund method
• Sum of year digits method
• Service output method

 Straight line method
In this method, it is assumed that the property loses its
value by the same amount every year. A fixed amount of
the original cost is deducted every year, so that at the end
of the utility period only the scrap value is left.
𝐃 =
𝐂 − 𝐒
𝐧
Where,
D = Annual depreciation
C = Original cost
S = Scrap value
n= life in years
Depreciation of the
property after m years
=
C − S
n
∗ m; = m ∗ D
So, Book value after m
years
= C −
C − S
n
∗ m; = C − m ∗ D

 Constant percentage method
In this method it is assumed that the property will lose its
value by a constant percentage of its value at the beginning
of every year.
Percentage rate of annual
depreciation, 𝐩 = 𝟏 −
𝐒
𝐂
𝟏
𝐧
Where,
p = Percentage rate of
annual depreciation
S = Scrap value
C = Original cost
n = life in years
Value of property after m years
after depreciation = 𝐂
𝐒
𝐂
𝐦
𝐧
This formula does not hold
good when scrap value (S)
is equal to zero.

SINKING FUND
• A sinking fund is a fund established by an economic
entity by setting aside revenue over a period of time to
fund a future capital expense, or repayment of a long-
term debt.

 Sinking fund method
𝐃𝐞𝐩𝐫𝐞𝐜𝐢𝐚𝐭𝐢𝐨𝐧
= 𝐀𝐧𝐧𝐮𝐚𝐥 𝐬𝐢𝐧𝐤𝐢𝐧𝐠 𝐟𝐮𝐧𝐝 + 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐨𝐧 𝐭𝐡𝐞 𝐬𝐢𝐧𝐤𝐢𝐧𝐠 𝐟𝐮𝐧𝐝 𝐟𝐨𝐫 𝐭𝐡𝐚𝐭 𝐲𝐞𝐚𝐫
A = Annual sinking fund
b, c, d…etc. = Interest on the sinking fund for the subsequent years.
C = Original cost
Life in
years
Annual
sinking
fund
Interest
on sinking
fund
Depreciation
for that year
Total
depreciation
Book value
1 A - A A C - A
2 A b A + b 2A + b C – (2A + b)
3 A c A + c 3A + b + c C – (3A + b +c)
4 A d A + d 4A + b + c +d C – (4A + b + c + d)
So on… 33Prof. Ashish Makwana

 Sinking fund method
If i is the rate of interest, annual
sinking fund installment (p) to
accumulate 1 Rs. in m years,
𝑝 =
𝑖
(1 + 𝑖) 𝑛−1
If i is the rate of interest, and 1 Rs.
Is deposited every year, total
sinking fund accumulated at the
end of n years is,
𝑞 =
(1 + 𝑖) 𝑛
−1
𝑖
So, Rate of depreciation in n years = 𝑝 ∗ 𝑞 %

 Sum of years Digits method
• In this method, the sum of the arithmetic series of
numbers from 1 to n where n = probable life of
equipment is worked out.
• If the equipment has life of 8 years, the sum of years = 1
+ 2 + 3 + 4 + 5 + 6 + 7 + 8 = 36
𝑺𝒖𝒎 𝒐𝒇 𝒚𝒆𝒂𝒓𝒔 =
𝒏(𝒏+𝟏)
𝟐
, n = 8 years
=
8(8+1)
2
= 36

 Sum of years Digits method (continued..)
• The rate of depreciation for the first year is assumed to
be highest and then it decreased the rate of depreciation
for the years 1 to 8 are
8
36
,
7
36
,
6
36
,
5
36
,
4
36
,
3
36
,
2
36
,
1
36
respectively.
o 𝐷𝑡 = rate of depreciation x (C – S)
o 𝐵𝑡 = 𝐵𝑡 −1 – 𝐷𝑡
Where,
𝐷𝑡 = Depreciation amount at the end of the period t
𝐵𝑡 = Book value at the end of period t

 Service output method
• In certain situations, it may not be realistic to compute
depreciation on the basis of time period. In such cases,
the depreciation is computed on the basis of service
rendered by an equipment.
Depreciation permit of service
=
(𝑪 − 𝑺)
𝑿
Depreciation for x units of service in period
=
(𝑪 − 𝑺)
𝑿
∗ 𝒙
Where, C = Initial cost of an equipment
S = salvage value
X = maximum capacity of service of the property during
its lifetime
x = quantity of service rendered in a period 37Prof. Ashish Makwana

COST OF OWNING AND OPERATING
CONSTRUCTION EQUIPMENT
• The cost of owning and operating construction
equipment should be carefully analysed and determined
so as to decide whether it will be or will not be in the
interest of the person to own and operate such
construction equipment.

COST OF OWNING AND OPERATING CONSTRUCTION EQUIPMEN
(CONTINUED..)
Factors affect the cost of owning and operating
equipment:
• Cost of the equipment
• Demand of equipment
• Number of hours per year
• Number of years
• Severity of the conditions
• State of maintenance and repairs, etc.

COST OF OWNING AND OPERATING CONSTRUCTION EQUIPMEN
(CONTINUED..)
Cost considered for arriving at the total cost of owning
and operating equipment:
• Depreciation cost
• Investment cost
• Maintenance and repair cost
• Operation cost

ECONOMIC LIFE OF
CONSTRUCTION EQUIPMENTS
• It becomes necessary for the owner of a construction
equipments to decide the stage from which onwards the
cost of owning and operating of the equipment for
exceeds the economic advantage obtained from the use
of such equipment.
Equipment should be replaced under the following
circumstances:
• Depreciation
• Downtime
• Inadequacy
• Normal deterioration

A firm has to face three types of replacement
decisions:
• The replacement of capital equipment, as it wears out.
• The capital equipment required for expansion.
• The replacement of old technology by the new. i.e. the
introduction of an improved equipment in the market
which may produce cheaper products.
EQUIPMENT REPLACEMENT
POLICY

Factors responsible to replace the equipment before
the expiry of the estimated life:
• To reduce production cost.
• To reduce fatigue.
• To raise quality.
• To increase output.
• To secure greater convenience, safety and reliability.
EQUIPMENT REPLACEMENT POLICY (CONTINUED…)

EQUIPMENT REPLACEMENT POLICY (CONTINUED..)
“Guidelines in Replacement Analysis”
1. For Equipment in use:
• Do consider:
– Operating cost
– Repairs and Maintenance cost
– Down time cost
– Salvage value
– Rebuilding cost
• Do not Consider:
– Original Cost
– Money already spent on repairs and maintenance
– Unrealistic book value

EQUIPMENT REPLACEMENT POLICY (CONTINUED..)
“Guidelines in Replacement Analysis” (continued..)
2. For New Equipment:
• Do consider:
– Initial cost
– Interest on capital investment
– Salvage value at the end of useful life
– Cost advantage of improved product
– Labour savings
• Do not Consider:
– Any savings not clearly assessable
– Overhead charges

THANK YOU

Mechanization in construction_Advanced Construction Technology (Semester-6), Civil Engineering

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