Intermediate Equipment Handbook
Intech Associates
1.1 INTRODUCTION
This Part of the Handbook has been prepared to assist contractors and road
authority personnel to realistically and accurately price items of equipment and to
help compare the costs of carrying out a work activity using different equipment
types, or labour. This is an essential function, particularly when comparing the
advantages and disadvantages of carrying out work using alternative
technological approaches.
Pricing equipment items is not an easy task. The process depends on a wide
range of assumptions which need to be made regarding the costs of ownership
and operation, and the performance of the equipment at the site.
It should be appreciated that accurate costing requires the collection and
updating of a wide range of information on a regular basis. This is an essential
fleet management function.
However, the effort made in setting up and maintaining a good (albeit simple)
cost recording system should be rewarded many times over in improved
management of the equipment fleet, and enhanced profit potential for a
contractor. The costing system should be able to record all inputs, usage and
overheads related to the individual item of equipment under the components of
the costing system described in Section 1.4 of this Handbook. The records can
be kept on a paper or computer based system. It is important that the record
keepers are properly trained and motivated to ensure that the records are as
accurate as possible. Regular checks and reconciliation (cross checks) should
be carried out.
This Part of the Handbook will guide the user through the various factors to
consider and introduces a simple cost model to help the owner/user. The cost
model has been developed on a computer spread sheet, however in the form
presented in Part 2 of this Handbook it can be used manually with the aid of a
pocket calculator. Its simplicity means that only 3 sides of A4 paper are required
to carry out a complete costing for a piece of equipment. Example calculations
are also provided in Part 2 of this Handbook for some of the items of equipment.
The system allows the costing to be repeated easily when any of the cost
components vary due to changing circumstances.
It is important to remember that, for a contractor, if the costing is too low he/she
will lose money. This may not be realised until eventually trying to replace a
piece of aging plant. If a contractor’s costing is too high he/she will risk not
securing sufficient work. Although an appreciation of the market price for a piece
of equipment is important, it is essential to also be aware of the actual, full
equipment costs. Only in this way can potential sustainability, profit or loss be
known. It is important for contractors to know when to decline a job opportunity.
A piece of plant can pay back its investment (and allow the contractor/owner to
make a profit) if costed and managed properly. If not, it can be a costly liability,
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