Intermediate Equipment Handbook
Intech Associates
1.4 THE EQUIPMENT COST MODEL
How to Cost a Piece of Equipment using the models in PART 2 of this Handbook.
Investigations for the MART programme have shown that there are widespread
difficulties with equipment costing. These are due to a range of problems which include:
lack of awareness/consideration of all cost components,
lack of recorded data on actual costs, use and performance,
uncertainties regarding future market, costs, economic life, and utilisation, and
insufficient commercial pressures on decision making.
With the trend towards contractor implementation of road works (and possibly
intermediate equipment hire) it becomes essential that contractors, client’s
representatives and other users become aware of the true costs of equipment
ownership and operation. Where different cost components are managed in separate
departments/accounts (e.g. investment, replacement, workshop support and operation)
it is particularly important to appreciate the cost implications for each component.
When costing the equipment component of a piece of work there are two stages to the
process:
Stage 1. Determine the Cost of Provision of the equipment (to make it AVAILABLE)
Stage 2. Determine the Output or Productivity of the piece of equipment (the
UTILISATION)
The guidelines in this Handbook focus on Stage 1 of the process and should be of
particular interest to plant owners or hirers, whether they are contractors, road agencies
or specialist equipment hirers etc..
A further range of assumptions has to be made regarding the UTILISATION of the
equipment and prediction of how much work it will actually produce. This second stage
of the costing calculation is comparatively simple, however this also requires local data
to be collected on actual field experiences as productivity will vary depending on factors
such as local traditions, operator skill and motivation, site characteristics, logistics,
material and weather conditions, seasonal factors etc. Detailed guidance on this part of
the costing process is NOT provided by this Handbook.
PART 2 of this Handbook contains the cost model sheets necessary to calculate the
various cost components and the overall costs of PROVISION of a piece of equipment
(Stage 1). The costing method is designed to include all cost components relating to the
ownership, operation and overheads components. The approach may be used for any
type of intermediate or heavy equipment. Three sheets (1, 2 & 3) are all that are
required to carry out the Stage 1 costing of a piece of equipment. For some equipment
types an example of the calculations on sheet 3 are provided (these are shown on
Example Sheet 3).
October 2012
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