Project Management Module

University Capacity Building Program

Machinery Basics
(Calculation and Management)

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University Capacity Building Program 1
 Cost Management

I. Machinery basics - Calculation

II. Machinery basics - Management

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Cost management: Machinery basics
Calculation - WHY:
Basic information for the calculation of a tender estimation
“Total hourly rate”
Basis for internal cost allocation between among subsidiaries or/and
construction sites, joint – ventures.
To compare cost effectiveness and operating efficiency of pieces of the
equipment
Assistance in insured events or adjudications

Management - HOW:
Organisation of the administration of the equipment department
(Not discussed)
Disposition and logistics of the whole equipment park
Cost charging of equipment rentals on construction sites
“Daily Rate”

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 I. Machinery basics - Calculation

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Calculation: Equipment Times and Periods
Livetime Period between Fabrication and Destruction (Years).
Economic Life (n): expected period a machine can be used economically and technically
(Years, Working hours)
Average Allocation Time (v): reducing the economic life because of lost working days for:
- Weather
- Equipment maintenance and repair
- Employee holidays
- Miscellaneous downtimes
(Months: e.g. 10 months per )
Disposal Time includes:
- mobilisation and demobilisation
- Working Time
- Time for Standby
excluding time for disposal downtimes on site without charge
(Days: 30days in 4 weeks/ month)
Working Time = Basis for cost estimation per item of a bill of Quantity
(Hours, Hours/unit: 8 hours/day, 5 days/week, 4 weeks/ month)
includes:
- Technical preparation an re-tooling
- Operating time
- Standby due to technical needs
- Times for personal allowance and waste times

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Calculation: Cost Elements

Included Cost elements:

1. Ownership Cost Elements (K).
The ownership portion of the rate consists of an allowance for
a. depreciation and
b. interest or facilities capital cost of money

2. Operating Cost Elements (R, F, OG).

Operating costs include allowances for the following:
a. Repairs (includes maintenance and major overhauls)
b. Fuel
c. Oil, and grease (includes servicing)

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Calculation: Cost Elements (Not included)

NOT included Cost elements:

Operating labour
Mobilization and demobilization
Field office overhead expenses
Home office or general and administrative (G&A) overhead
expenses
Investment tax credit or Contingency allowance
Profit
Parts and labour escalation
License fees, property taxes, storage, and insurance costs

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Cost Elements: 1.a+b. Depreciation + Interest (K)
K: Monthly amount for depreciation
K  k  A (€ / mth) and interest
k: Monthly percentage on the
average value of original price
A: Average value of original price
(new purchased)

100 p  n  100 v: Average allocation time (Month)

k  % p: imputed percentage of interest
v 2v = 6,5%
n: Economic Life (Years)
Based on: - Simple calculation of interest
- Rate of interest: 6,5%
- Straight-line method is used to compute depreciation
- Time unit: Month
- No Salvage value

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Cost Elements: 1.a+b.Depreciation + Interest (K): Example

Hydraulic Excavator: Average original price A: 117,500.00 €

- 60 kW power, Standard percentage p: 6,5% p
- > 6 tons own weight Economic Life n: 7 years
Average allocation time v: 60 months

2
K kA  117,500.00  2,350.00
100

100 p  n  100 100 0,065  7  100

k     2,0 %
v 2v 60 2  60

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Cost Elements: Operating Costs (2.a.Repair R)
Repair R:
R  r  A (€ / mth)
Example Repair R:
Hydraulic Excavator:
- 60 kW power,
- > 6 t own weight
A: Average value of original price
(new purchased)
r: Monthly repair percentage on the
average value of original price
Experience based between 1-5%
under normal conditions
Average original price A: 117,500.00 €
Repair Percentage r: 1,6%

1,6
R  r A  117 ,500  1,880.00 € / mth
100

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 Cost Elements: Operating Costs (2.b,c FOG)
FOG F: P: Installed engine power (kW)
F  ( f  P )  (1  s ) (€ / h) f: Fuel factor under average conditions:
- 0.15 l/ kWh,
- 1.00 €/l => 0,15 €/kWh
s: Additional factor for oil and grease:
- 6%

Example Fuel FOG:

Hydraulic Excavator:
- 60 kW power,

F  ( f  P)  (1  s)  (0.15  60)  (1  0,06)  9.54 € / h

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Cost Elements: Summary
Example: Hydraulic Excavator (s.a.)

Basis for actual internal cost allocation:

Cost charging for rental per month:
K (Depreciation + Interest) 2,350.00 €/mth
R (Repair) 1,880.00 €/mth
Amount/mth 4,230.00 €/mth
Example: Cost charging for
rental 10 days: 4,230.00x 10/30= 1,410 €
Costs for FOG as actual

Basis for “Total hourly rate” calculation:

Costs (K,R per mth)/(8h x 5d x4w) = 4230 / 160 = 26.44 €/h
Costs (FOG) (s. a.) = 9.54 €/h
Amount for 1 working hour = 35.98 €/h

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Ownership Cost Elements: German “BGL”

Hydraulic Excavator with accessories

Hydraulic Excavator standard equipment

Engine power Economic Life Average Monthly Monthly

Allocation time percentage percentage
Hydraulic Excavator, Crawler, > 6 t (Own weight) Depr.+ Interest Repair

Monthly Depr.+
Parameter: Engine power (kW)
Interest

Monthly repair

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Ownership Cost Elements: US Army of engineers
See Comp: US Army of Engineers (pdf - file in Documents)

How calculated: > Excel

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Calculation: Comparison: US Army Engineers<->BGL
Main differences “Working cost per hour” between:

BGL - US Army: 35.98 - 28.09 (€/h) = + 7,89 €/h

Fuel costs
1.64 €/gal = 1,64€/ 3,78 l = 0,43 €/l
BGL: 1€/l => 43% of 9.54 BGL-fuel = = + 4,10 €/h

Salvage: 20%:
19000 life hours
Original price 111,382 x 80%= 89,105€
89,105€ / 19,000h = + 4,69 €/h
+ 8,79
€/h
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 II. Machinery basics - Management

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Machinery basics - Management

Disposition and logistics of the whole

equipment park

Cost charging of equipment rentals on

construction sites
“Daily Rate”

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Management: Disposition and logistics
Situation:
Large enterprises with large equipment parks
A project manager has to find the appropriate equipment for a special Problem

Problem:
To get technical and economical information of the available equipment
The information has to be really up to date
What about the availability of certain machine
The actual location of this machine

Solution:
To search and scour heaps of paper catalogues
To make never ending phone calls ………

OR – you have an:

Overview and information tool

Order and disposition tool

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 Disposition and logistics: Tools e.g. “EIS”
Internet based info system:
http://www.fml.mw.tum.de/index.html?/Forschung/Materialfluss_Logistik/Projekte/EIS/eis.htm

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“EIS”: Information – German / English

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“EIS”: Information - Technical

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“EIS”: Information – Economic (BGL)

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“EIS”: Order Tool -1-

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“EIS”: Order Tool -2-

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 Managing Tool “Bau SU”
Equipment Groups Time schedule

Operators
Disposal Overview

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Annex: Software references

Excel Worksheet (See: Documents on CD)

Documents\Machinery Basics\CHECKRATE Equipment Calculation
Support Program.xls

Internet based info system:

http://www.fml.mw.tum.de/index.html?/Forschung/
Materialfluss_Logistik/Projekte/EIS/eis.htm

Bau-SU Bau-Software Unternehmen GmbH - Bausoftware,

Bauwesen
http://www.bau-su.de/indexNS6.php

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Annex: Literature

“Baugeräteliste ( BGL) 2001. Technisch-

wirtschaftliche Baumaschinendaten”
(Register of Construction Equipment – technical and economical
construction machine information)
Hauptverband der Deutschen Bauindustrie e.V.
ISBN-10: 3762535566 - EUR 138,00

PDF- Document (See: Documents on CD)

Construction Equipment Ownership and Operating Expense

Schedule

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Annex: Internet, Homepages
Construction Equipment Ownership and Operating
Expense schedule:
http://www.nww.usace.army.mil/cost/epframe.htm
http://www.oh.nrcs.usda.gov/technical/engineering/equipment_pr
ices.html

The Construction Equipment Association

http://www.coneq.org.uk/

Free Magazine
http://www.reed4success.com/
-> Construction equipment

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