These items will differ nee converted to an hourly basis. For project bidding and cost accountmg, we are interested in a machine's ownership and operating cost.
Ownership Cost The expense ot: purchasing a machine and the inflow of mo. Do not. Therefore, using the time value method the hourly depreciation portion of the machine's ownership cost is. Depreciation-Time Value Method The time value method will recognize the timing of the cash flows, i.
E future data. The cost of the tires is deducted from the total purchase price, which includes amounts for all options, shipping, and taxes total cash outflow - cost of tires. A judgment about the expected service life and a corporate investment AAI method.
To determine the machine's purchase price equivalent annual cost the uniform series capital recovery factor formula, Eq. The input parameters where 2n. The input parameters are the estimated future salvage amount F , the expected service life n , and the corporate cost of capital rate i. The straight-line depreciation of the. The estimated salvage value at the end of the ownership depreciation using the AAI method. Calculate the depreciation portion of the ownership cost for this on o.
Using Eq. The resulting new adjusted basis is then used in the depreciation calculated, as For Examples 2. The choice for tax code? Basically, either method is satisfactory, especially considering the impact of the unknowns concerning service life, operating hours age costs, common practice is to simply apply a percentage value to either the machine's book value or its AAI amount.
The expenses incurred for these. There is no single solution to calculating ownership cost. The best approach is to perform several analyses using different assumptions and to be guided by the range of solutions. That value divided by the value of the equipment fleet and multiplied by will provide the percentag : rate to be used.
E Tax Saving from Tax Code Depreciation To calculate the tax saving from depreciation, the government tax code depreciation schedules Table 2. Using the same machine and company information as in Examples 2.
W41,jD En calculate the hourly owning expense associated with taxes, insurance, and stal- age. Assume that under the. Many companies, however, do not keep good equipment operat- Using Eq. A supplier will agree to supply the fuel needs of a project, but the price will not be guaranteed for the duration of the work.
To calculate hourly fuel expense, a consumption rate is multiplied by the Repairs The cost of repairs is normally the largest single component of unit price of fuel. Service records are important for estimating fuel consumption. The lower figures for cranes reflect the work to a min hour. Calculate half of the cost was materials and parts, and half was labor, m the case of mechanical machines.
For hydraulic machines, two-thirds of the cost is for. The repair cost to estabhsh a machme rate for blddtng should be an average rate. A more sophisticated approach is to use a time-value calculation recogmzmg. For extremely dusty con- ditions, it may be desirable to change oil every 50 hr, but this is an unusual nee condition. It is common practice to change oil every or hr. The quan- tity of the oil consumed by an engine per change will include the amount added during the change plus the makeup oil between changes.
Repair rin Depreciation 37 Calculate the oil required, on a per hour basis, for the fwhp dozer in Example 2. The operating factor will be 0. The crankcase capacity is 8 gal and the company has a policy to change oil every hr. Quantity consumed, gph gal per hour is et Calculate the hourly tire cost that should be part of machine operating cost if a set of tires can be expected to last 5, hr.
The fwhp X 0. The company's 7. Not considering the time value of mone. The usual solution is to, refer to manufacturers' 5, hr published tables of average usage or expense. Using the present strong bias in favor of its retention in the equipment mventory.
En calculated: tors involved. A simple example will help to illustrate the concept. A forecast of expected operating hours, salvage values, and maintenance expense is presented in the table. High-Wear Items Because the cost of high-wear items is dependent on job conditions and machine application, the cost of these items is usually accounted for separate from general repairs. Year 5. A replacement analysis might look like this:.
A ripper shank consists of the shank itself, a ripper tip, -and a shank protec- hours 1, 3, 4, 6, 6, tor. The estimated operating life for the ripper tip is 30 hr. The estimated operating. The calculations applicable for detennining the cost of direct ownership have been developed. With a rental, a company can pick the machine that is exactly suited for a Ownership cost the job at hand.
This is particularly advantageous if the job is of short duration b Operating cost or if the company does not foresee a continuing need for the particular type of.
Rentals are very beneficial to a company in such situa- tions, even though the rental charges are higher than normal direct ownership expense. The advantage lies in the fact that direct ownership costing assumes a.
However, if only operating cost is examined, the owner would want to trade the machine after the first year, as operating expenses are continually continuing need and utilization of the machine. If that assumption is not valid, a rental should be considered.
Another important point to consider is the fact that with a rental, the company loses the tax depreciation shield of machine. A correct analysis of the situation requires that total cost be considered. So in the case of Example 2. It must be remembered that rental companies only have a limited number. Furthermore, many specialized or custom machines cannot be rented.
The analysis is based on cumulative hours. This is an important point that Firms many times use rentals as a way to test a machine prior to a purchase is often missed. When the total operating hours are large, the significance of this cumulative effect can become much greater than it would appear by simply decision.
A rental provides the opportunity for a company to operate a specific. The profitability of the machine, based on the company's normal operating procedures, can then be evaluated before a major capital expenditure is approved to purchase the looking at the combined cost per hour values.
The replacement analysis should present all the cost and timing informa- tion affecting a machine or class of machines in a usable format.
The format machine. In the case of should be such that it is easy to perform sensitivity analyses to determine the correctness of the results. As described here, the model is a cost-minimization model. With such a model, the optimum economic life. Cost per hour usually is less for a longer-term rental Le. Responsibility for repair cost is stated in the rental contract. Normally, The cash flows being studied in a replacement analysis take place at dif- on tractor-type equipment, the renter is responsible for all repairs.
If it is a ferent points in time, therefore the model should consider the timing effects by pneumatic-tired machine on rubber , the renting company will measure tread use of present-value techniques.
The company's cost-of-capital rate is the wear and charge the renter for tire wear. In the case of cranes and shovels, the appropriate interest rate to use in the present-value equations. The user must provide servicing of the machine while it is being used. The renter is almost always responsible for fuel and lubrieation expenses. Industry practice is that rentals are payable in advance. There are three basic methods for securing a particular machine to use on a proj- Equipment cost is very sensitive to changes in use hours.
Fluctuations in ect: I buy direct ownership , 2 rent, or 3 lease. Each method has inherent maintenance expenses or purchase price barely affect cost per hour. But a advantages and disadvantages. Ownership guarantees control of machine avail- decrease in use hours per year can make the difference between cost-effective ability and mechanical condition, but it requires a continuing sequence of proj- machine ownership and renting.
The basic cost considerations that need to be. TABLE 2. Sometimes the advantage of a lease is that the lessor. An agreement that is 8 A conventional-true-Iease will have one of three different end-.
Under specific conditions, the actual cost of a leased Checking with the local rental company, the construction firm receives machine can be less than the ownership cost of a purchased machine, This is.
By dividing with the appropriate number of hours, these rates can be expressed as hourly costs. Likewise, by dividing the calculated hourly, caused by the different tax treatments for owning and leasing an asset. An equipment user must make a careful examination of the cash flows associated with each option to determine which results in the lowest total cost. This cash asset is necessary to meet the payroll on Friday, to. When the projected usage is less than 1, hr but more than hr, a weekly gi If the loader will be used for less than 1, hr but more than hr, the.
To be a viable business, working capital assets must be greater than the inflow of. A machine is an asset to the company, but it is not what the electric com- pany will accept as payment for their bill. A commonly cited advantage of leasing is that working capital is not:tied The point is that when a company rents, it pays for the equipment only when project requirements dictate a need.
The company that owns a machine rin up in equipment. This statement is only partly true. It is true that when a com- pany borrows funds to purchase a machine, the lender normally requires that must continue to make the equipment payments even when the machine sits idle.
When investigating a rental the critical question is usually expected hours of usage. Corporate funds are therefore tied. Lease A lease is a long-term agreement for the use of an asset. However, most leases require an advance lease payment.
Some even require security deposits and charge other up-front costs. Leasing is often referred to as off-balance-sheet financ- equipment. The lessor must retain ownership rights for the contract to be con- ing, A lease is considered an operating expense, not a liability, as is the case sidered a true lease by the Internal Revenue Service, The lessor will receive with a bank loan.
With an operating lease. There- have to be uniform across the lease period. The payments can be structured in fore, such assets do not appear on the balance sheet. Standards of accounting, the agreement to best fit the situation of the lessee or the lessor.
In the lessee's however, require disclosure of lease obligations. Lease contracts are binding legal documents, and most will not hurt bonding capacity, which is important to a company's ability to equipment leases are noncancellable by either party. A third-party surety company secures this bond. The surety closely These objectives are the basis for the problems that follow.
Based on the financial strength of the construction company, the surety typically restricts the total volume of worle that the construction company can PROBLEMS have under contract at anyone time. This restriction is known as bonding 2. The bank offers capacity. It is the total dollar value of work under contract that a surety com- a 5-yr loan at an interest rate of 4! If you make pany will guarantee for a construction company.
The cash flows, which should be considered when evaluating the cost of a lease, include and interest, what is the total amount that must be paid back? What is the number of time periods n you should use in solving this problem? Outflow of the periodic lease payments. Inflow initially of the equivalent value of the machine.
Tax shielding provided by the lease payments. This is allowed only if the b. What rate of interest i , per period of time, should be used in solving this problem? Is the present single amount of money P known?
Yes, No. Some "lease" agreements are essentially. Loss of salvage value when the machine is returned to the lessor. Which time value factor should be used to solve this problem?
What is the total amount that must be paid back? How much of the total amount repaid represents interest? These costs all occur at different points in time, so present-value computa- En 2. If you. The total present value of the lease option should be compared to the minimum ownership costs, as make only one payment at the end of the loan period, repaying the principal and interest, what is the total amount that must be paid back?
In most lease agreements, the lessee is responsible for maintenance. If, for the lease in question, mainte- nance expense is the same as for the case of direct ownership, then the main- nee a. A leased machine would exhibit the same aging and resulting reduced availability as a pur- chased machine. Equipment owners must carefully calculate machine ownership and operating cost.
This cost is usually expressed in dollars per operating hour. The most sig- nificant cash flows affecting ownership cost are 1 purchase expense; 2 sal- vage value; 3 tax saving from depreciation; 4 major repairs and overhauls; et f.
What is the number of time periods n you should use in solving this and 5 property taxes, insurance, storage, and miscellaneous expenses. Oper- problem? What rate of interest i , per period of time, should be used in solving machine on a project: 1 fuel; 2 lubricants, filters, and grease; 3 repairs; this problem? Operator wages are some- c.
Yes, No times included under operating costs, but because of wage variance between d. What is the total amount that must be invested today?
Critical learning objectives include: 2. What is the number of time periods n you should use in solving this use. The machine should last 10, hr.
How much should the b. What rate of interest 0, per period of time, should be used in solving owner of the machine charge per hour of use, if it is expected that the this problem?
The company's cost of capital c. Yes, No rate is 7. Fuel, oil, grease, and minor e. A set of 2. A final set of new tires will not be purchased before the sale. How much problem? What rate of interest 0, per period of time, should be used in solving this problem?
The bank offers c. What amount must be paid back each month? What is the total amount that will be paid back over the life of the loan?
For each case, what is the total amount that must be paid back? For each case, how much of the total amount repaid represents 2. If you will be making monthly payments: 2. For each case, how much of the total amount repaid represents. The system should last 6 yr. Fuel, oil, grease, and minor 2.
A major 2. True: False. Tires information, what is the depreciation part of the machine's ownership cost? Storage expenses 2. Taxes to move aggregate from a stockpile to the feed hoppers.
The work will be d. General repair steady at an efficiency equal to a min hour. What is the tax depreciation basis of rating in Table 2. What" is the tax 2. The work will be steady at an efficiency equal to a min hour. The engine will work at half throttle.
Calculate the theoretical fuel. E depreciation basis of the new tractor? Tires for this machine cost consumption. The estimated salvage value at. The company's cost of capital is 8. The company believes it can sell the loader after 7 yr 3, There will be no major overhauls. The hour. What is the depreciation part of this of the time and at three-quarter throttle to travel and dump.
The machine's ownership cost? Use the time value method to calculate crankcase capacity is 10 gal and the company has a policy to change oil depreciation. Use the AAI method of calculation. Tire repair 2. The tires should give 3, hr of service. In this usage the estimated life for bucket. What is the The company's cost of capital is 9.
Property operating cost for the loader in this application? What is the owning cost for the 2. Use the time-value method to calculate the depreciation portion of the ownership cost. The company's cost of capital is 7. The 2. There are no et work efficiency will be equal to a min hour. The crankcase capacity is 16 gal, and the company has a policy to change oil every hr. What is the depreciation. The cost of other owning cost for the grader? In this.
The local price for a 2. The company believes it this application? There 2. The company's cost of capital is 3. The estimated salvage value at is the depreciation part of this machine's ownership cost? The company's cost of capital is 6. A set value method to calculate depreciation. The work will be at an efficiency equal to a The engine will work at full throttle while loading the bucket 4. The 5. Tire repair finance industry. The tires should give 4, hr of service.
The 7. In this usage, the estimated life for bucket construction industry and equipment news. What is the S. Collier, Courtland A. Ledbetter Engineering and Economic Cost Analysis, 2nd ed. Dubuque, IA. Modigliani, Franco, and Merton H. Miller Schexnayder, C. Hancher C04, December. C02, June. AED is an et international trade association representing construction equipment distributors, manufacturers, and industry-service firms.
C hap t e r 3 Planning for Earthwork Construction Respond to future changes. Proyide a yardstick for monitoring and controlling execution of project activities. It is a decision-making process, an anticipatory decision-making process that chooses courses of action that will be performed in the future or when certain events occur.
Systematic planning requires screening of variables and alterna- tives that potentially affect the success of the project.
There is no single best way to conduct a construction activity. Perfor- mance of a work task depends on variables related to the work itself: 1 the. Planning for Earthworkww quantities involved, basically volume or weight; 2 the haul distances; 3 the grades for all segments of the hauls; 4 the work hazards; and 5 the various contractual and legal constraints.
Typical constraints are Construction w. Contract requirements described in the drawings and technical specifi- cations, including time duration or requirements as to completion dates.
Legal requirements OSHA, licensing, environmental control that must be. Therefore, before a project is undertaken it is necessary to systematically analyze project conditions and develop alternatives that potentially provide success.
When the engineer prepares a plan and cost satisfied. Climatic conditions that limit when certain activities can be performed, such as paving or stabilization operations, or that limit earthwork oper-.
An earthwork volume sheet allows for the systematic recording of information and making the necessary earthwork calculations. The The earlier you plan before execution the more you will be able to influence mass diagram is an analysis tool for selecting the appropriate equipment execution by having time to carefully consider the impacts of all constraints for excavating and hauling material.
For planning purposes, tasks should be divided into smaller independent. This enables us to structure unwieldy and complex prob- lems into smaller digestible tasks.
Although similar work may have been performed previously, no two projects will have identical job conditions. The pace, complexity, and cost of modem construction are incom- patible with trial-and-error corrections as the work proceeds. Therefore, planning is undertaken to understand the problems and to develop courses of action.
Safety et mal solutions rather than something that is "good enough. In planning any construction operation it is necessary to give considerable attention to safety. Engineers have both a moral and a legal responsibility to the The goal of planning is to minimize resource expenditures required to suc- public, to construction workers, and to the end-users of our projects to make cessfully complete the project and to ensure that the work is accomplished in a Sure that workplaces, work processes, and the general environment are safe.
Planning is necessary in order to The machines that are used in heavy construction greatly extend human capa- 1. Understand project objectives and requirements.
If a large earthmoving truck strikes a nonnal size vehicle the results 2. Define work elements. In there were 1, highway construction work 3. Develop safe construction methods and avoid hazards. Improve efficiency. Coordinate and integrate activities. Federal Highway 6. Develop accurate schedules. Administration, February 23, Wind speed limits were not established. All equipment operations entail risk. By making an assessment of risk, you are able to focus your resources.
Money and management time are always limited; therefore, they should be invested in proportion to the risks and the potential consequences of an accident. The level of safety planning that is needed should be based on the specific risks associated with work conditions.
When risks are identified in advance, and steps are taken to control, reduce, or. The overall level of risk is thereby diminished. What Howard Shapiro advised con- ceming crane safety is applicable to all construction operations-UDon't. E assume anything. Ask questions and check for yourself. En When the engineer prepares a plan and cost estimate for an earthwork prQJect the decision process is often not a chain of sequential activities.
The pf6eess takes the form of recurrent chains with feedback. As decisions are proposed,. The process begins with the project documents. Project work elements are defined in physical terms: volume of stripping, Accidents are nearly always the result of multiple mistakes. Safety plan- ning should institute procedures that "break the chain of mistakes" that lead to accidents and disasters.
Howard I. Shapiro, P. This is a project material take-off or quantity survey. The take-off effort must calculate quantity survey The process of. Most of the time crane accidents are blamed on the crane operator; you'll often the excavation work is a primary part of the project. On the Eastside project in hear terms such as-"operator error"-"he reached out too far with the load"- Califomia, the contractor building the West Dam moved over 68 million cy of mass excavation "the outrigger sank into the earth and the crane turned over.
But, my 30 years of experience with crane material. Structural excavation is volumes of maier robust, and the people who operate them are both talented and resourceful- a different type of undertaking.
The excavation work is performed to support usually at cOllsid, enough so to overcome the effects of most single errors. I've found that it usually takes a string of independent and often unconnected errors to cause crane failures.
This work is usually done in a depth or over a lc We can't hope to eliminate all accidents or all errors, but by breaking confined area, it is typically vertical in extent, and the banks of the work may area. The volume of excavated material is not a decisive structural excav , In the case of tne fatal crane accident at Milwaukee's Miller Park Stadium factor as much as dealing with limited work space and vertical movement of Excavation undel : in July , the chain of errors that occured during the lifting of a large piece the material.
The project plan sheets provide the graphical information neces- in support of stru of the stadium's retractable roof included: sary to calculate work quantities. Contractors have a right to rely on owner-provided information. Three kinds of views are presented in the contract documents to show plan view many contracts will contain a differing site condition clause. A Type I differing drawing representing 1. Plan view. The plan view is drawn looking down on the proposed site condition exists when actual conditions differ materially from those "indi- the horizontal work and presents the horizontal alignment of features.
Figure 3. These clauses provide the con- with stationing noted and the project limits, the two dark exterior profile view structor some protection from geotechnical risk. They do not, however, elimi- lines. A cOIIStruction nate the contractor's responsibility for performing a thorough examination of project conditions.
After these first two steps have been accomplished for the 2. Profile view. The profile view is a cut view, typically along the centerline drawing depicting a of the work. It presents the vertical alignment of features. This is one of those. The bottom horizontal scale shows the centerline stationing, through the centerline recurrent chains with feedback. It shows Field investigations, geologic and soil studies, and analysis of meteorolog- the vertical scale gives elevation, the dashed line is the existing ground the vertical ical data enable the planner to better quantify what has been presented in the line, and the solid line is the proposed final grade of the work.
E project documents. The contract documents will usually include geotechnical data and information that was gathered during the design phase of the project. If not included directly in the documents, this material is typically available to 3.
Cross section view. The cross section view is formed by a plane cutting the work vertically and at right angles to its long axis. Figures 3. The ground surface and the finished work. The geotechnical data are gathered to continuous line denotes the final grade of the work and the cross section view. A construction drawing depicting a struction are two very different things. Download Free PDF. Lorenz Borillo. A short summary of this paper. Download Download PDF.
Translate PDF. Depending on the application, construction machines are classified into various categories which we are discussing here. Earthmoving equipment B. Construction vehicles C. Material handling equipment D. Types of earthmoving equipment include hydraulic excavators, bulldozers, compressors and loaders.
GRADER A grader, also commonly referred to as a road grader, a blade, a maintainer, or a motor grader, is a construction machine with a long blade used to create a flat surface during the grading process.
It generally includes a standard backfill blade and features independent boom swing. Excavators are heavy construction equipment consisting of a boom, dipper or stick , bucket and cab on a rotating platform known as the "house". The house sits atop an undercarriage with tracks or wheels. They are a natural progression from the steam shovels and often mistakenly called power shovels. All movement and functions of a hydraulic excavator are accomplished through the use of hydraulic fluid, with hydraulic cylinders and hydraulic motors.
A companion website provides an instructor manual, solutions, additional examples, lecture slides, figures and diagrams" Gransberg,Jorge A. Canadian Construction Equipment Author : Canada. Department of Industry, Trade and Commerce. Schaufelberger,Giovanni C.
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