Cost of Equipment

In this step the estimators must define what will be needed to complete the Project and what the Cost of Equipment is:

Cost of Equipment. Calculate man hours
Cost of Equipment | Calculate Man Hours

To execute this stage, the group of estimators with the support of specialists must define the type of equipment required for the project and then establish its costs.

Equipment Type | Calculate Man Hours

Type of Equipment.
The term equipment includes all the machines, tools, furniture and accessories, vehicles, computers, electronic devices, office machines, etc., used for the execution of a Work.

In this Blog, the term Equipment encompasses the set of machine, tools and vehicles used to execute a Construction Work.

To define the Type of Equipment needed to execute a Project, it is analyzed and examined, for example:
The documentation of the Folder.
The information in progress that was elaborated in the previous posts of “Identification and computation of Materials” and “Calculation of direct man-hours”.
The descriptions provided by the Specialists on how the Project being quoted is executed, step by step.
The preliminary Work Plan of the Project, which defines the time of use of the Machinery, Vehicles, etc.

The previous analysis defines:
The type and quantity of vehicles for transfer and internal movement of workers and hierarchical personnel (collectives, 4×4 or 4×2 vans, vehicles for Supervisors, etc.).
The number and type of trucks for General services, (for example, those required for the provision of drinking water, irrigation water, and industrial water, for internal transport of Materials and Machinery, etc.).
The type of Heavy and Light-duty Equipment, Mobile Cranes, Motor Welding Machines, Current Generator Groups, Welding Machines, etc., required to execute the Project.

Cost of Equipment: Daily cost of vehicles and machinery

Definitions:

Useful Life of Vehicles and Machinery | Calculate Man Hours

The Useful Life is defined as the period during which the Equipment works with a reliable and economically justifiable performance.
The Useful Life of a Work Equipment is affected by the severity of the conditions under which it is used, the care with which it is maintained and repaired and by its technological obsolescence.
Generally, the Useful Life is estimated in total hours. To guide the reader, we present the following values:
Light-duty construction machinery: 6,000 hours of total work; 3 years of duration (for example drills, grinders, etc.).
Heavy-duty machinery: 10,000 hours of total work; 5 years of duration (for example a Front Loader).
Ultra-heavy duty machinery: 16,000 hours of total work; 8 years of life (e.g., Asphalt Plant).
In order to reach the values above, 2,000 hours of annual work have been assumed, which is quite close to reality.

Cost of Equipment: Original Equipment Value

The Acquisition Value or Original Value is the market price of the Equipment. In order to do this, all the expenses demanded by the acquisition of the Equipment must be taken into account.
If the Equipment is of foreign manufacture, the quotation must include the price of the unit placed in the port of embarkation (FOB), the expenses of embarkation, freight and disembarkation in the Port of destination (CIF), port rights of storage, insurance for goods in transit, other related expenses (such as letters of credit, guarantees, etc.), transportation to the machinery park of the owner, etc.

Resale value of machinery and vehicles at the end of their useful life

The Rescue Value for heavy machinery (loaders, motor graders, tractors, etc.) generally fluctuates between 20 and 25% of the Acquisition Value.
The Rescue Value for machinery and light-duty equipment (compressors, mixers, motor pumps, etc.) generally fluctuates between 10 and 20% of the Acquisition Value.

Cost of Equipment: Value to Depreciate

Depreciation is the loss of value of equipment as a result of its use or age. It is assumed that the Equipment will decrease in value from its original total cost at a uniform rate. The Straight Line Depreciation Method is used here.

Average Equipment Value | Calculate Man Hours

Value to Depreciate divided in 2.

Cost of the Equipment: Cost for Maintenance and Repair

The cost of maintenance and repair is normally considered as a percentage of the depreciation value, according to the following values
Heavy-duty maintenance cost: 80 to 100% of depreciation value.
Maintenance cost for normal work: 70 to 90% of depreciation value.
Maintenance cost for light duty: 50 to 80% of depreciation value.
The cost of labor and the cost of spare parts are taken as a percentage of the maintenance cost of the machinery or vehicle during its useful life.
The cost of labor is 25% of the maintenance cost.
The cost of spare parts represents 75% of the maintenance cost.

Cost of Equipment: Cost per liter of Fuel

Here the fuel consumption of the two types of engines used in construction equipment is analyzed:
Gasoline Engines: 0.23 liter / Hp hour * fop.
Diesel engine: 0.15 liter / Hp hour * fop
.
Where fop., is the operating factor of the machine or equipment that varies according to the load factor that the engine receives and the type of operation that the machine performs.

Cost for the consumption of machine tires as a consequence of their use

Heavy machinery requires special tires for various construction applications.
The hourly cost is obtained by dividing the price of the tire in the economic life of the tire.
Tire life hours are generally data provided by the manufacturer and depend on the severity of use.
To the above value should be added the amount for tire repair which is taken as 15% of its depreciation.

The daily cost of affected personnel | Calculate Man Hours

In the case of a Vehicle, it will be its driver in the case of a Concrete Plant it will be that of its qualified operator and assistants.

The interest of the Invested Capital

Any company to buy machinery finances the necessary funds in the banks or capital markets, paying for it the corresponding interests. It may be the case that if the entrepreneur has sufficient funds of own capital, makes the investment directly waiting for the machine to pay back in proportion to the investment made.
An amount equivalent to the interest of the capital invested in the machinery is charged in this item.
It is calculated as the Average Value of the equipment (value to Depreciate divided in 2) by the Interest rate.

Cost for Insurance, Taxes, and Storage | Calculate Man Hours

Insurance premiums vary according to the type of machinery and the risks it must cover during its economic life. This charge exists both in the case that the machinery is insured with Insurance Company or that the Owner self-insures. The type of insurance to be considered is All Risks, which can be assumed at an average of 5.5%.

The taxes are applied to the acquired property. Its percentage must be calculated according to current legislation and may vary in the order of 1 to 2%.

With respect to storage, it refers to the cost caused by the permanence of the machinery in central workshops due to inactivity. This cost is estimated to be in the order of 1 to 1.5% of the Average Value of the equipment.

Cost of Equipment: Cost per hour of Equipment

Summary of Vehicle and Machinery Costs per day.

1-Depreciation

Cost of the Equipment includes: Cost per day to Depreciate that is equals:
Value to Depreciate X 8 hours per day, divided by the Useful Life in hours.

2-Interests

In the Cost of Equipment, Interest must be calculated. The daily cost for Interest is equal to:
Average value X annual interest X 8 hours a day, divided 2000 hours a year.

3-Machinery Maintenance and Repairs

Maintenance and repair costs.
The daily cost of maintenance and repairs is equal to:
Cost of maintenance and repairs for heavy equipment: 80 to 100% of the depreciation value
Cost of maintenance and repairs for normal work: 70 to 90% of depreciation value.
Cost of maintenance and repairs for light work: 50 to 80% of depreciation value.

4-Fuels

The daily cost of Fuels is equal to (Diesel Engine)
0,15litres / Hp hour X HP X 8 hours daily X cost of the liter of fuel * fop.

5-Lubricants

The correct method for finding out the hourly consumption of oil in a machine is to record the engine, hydraulic and transmission oil consumption for changes and refills at the end of each month and then divide each data into the monthly working time of the machinery.
The cost to be taken for oil consumption is obtained by multiplying the hourly consumption of oils by their price.

6-Cost for consumption of machine or equipment tires as a result of their use.

The hourly cost is obtained by dividing the price of the tire over the economic life of the tire.
A 15% bonus is also charged for the depreciation of the tire as a result of tire repair.

7-Labour | Calculate Man Hours

The cost of the worker’s daily wage, plus social charges X the percentage of affectation is equal to the daily cost of Labor.

8-Vigilance | Calculate Man Hours

Vigilance | Calculate Man hours. The daily cost per Vigilance is equal to:
10% of cost of daily Labor.

9-Cost for Insurance, Taxes, and Storage

In cost of Equipment, Insurance, Taxes and Storage costs are charged.:
For Insurance: 5.5% of the Average Depreciation Value.
For Taxes 1.5% of the updated value.
For Storage 1.5% to 2% of the value of the Average value of Depreciation.

Total daily cost

Adding the items 1 to 9 we arrive at the estimate of the Daily Cost of Equipment necessary to execute the Project that we are quoting.

See in the previous Post “Man hours calculation”.

See Category:Engineering vehicles

Cost of Equipment | Calculate Man Hours