Management of construction
Equipment
Equipment policy
1.
Equipment acquisition; method of purchase, leasing,hiring
2.
Comparison between leasing and purchasing.
3.
Estimation of owning and operating cost and hiring cost.
4.
Analysis of equipment utilization and price variance
 Equipment Procurement
1.
Marketing aspect of construction equipment(availability
and dealers).
2.
Procurement methods and practices.
3.
Commissioning of equipment

5. Management of
construction equipment
5.1 Equipment policy
5.1.1 Equipment acquisition :
Equipment can be acquired by purchasing,
leasing and hiring .
Purchasing : It is the activities for getting the
right material to the right place at the
right time, in the right quantity and quality
at the right price from reliable source.
5.1.1 Purchasing methods
Methods of purchasing :
1.
Receiving requisition
2.
Review requisition
3.
Selection of suppliers
4.
Place order
5.
Monitoring
6.
Receive orders
(Garg, R.K. and Sharma V., Production planning
and Control Management, Dhanpat Rai
Publishing Company)
5.1.1 Purchasing methods
Receiving requisitions :
All department of company demand
materials or equipments to the purchasing
department according to their needs to
perform their functions.
Receiving requisitions should include:
a. What to buy b. how many items c. when to
provide d. name of indenter (representative
of foreigner company, product, a person) e.
estimated cost
1.
5.1.1 Purchasing methods
b. Review requisition :Before taking final
decision, It is done to get materials or
equipments for following purposes:
 Buy in best price,
 Get alternative materials for longer life,
 Redesigning and revision of specifications
for getting latest version of equipments
for more efficient, more production etc.
Purchasing methods
c. Selection of suppliers:
To select the supplier from short list , consider
following factors:
 Quality of their products
 Product price
 Delivery schedule
 Services (repair maintenance, sales spares etc)
 Technical assistance (installation, commissioning)
 Training program
 Lead time
Purchasing methods
d. Placing orders: After selection of suppliers
and negotiation of prices, orders of
materials or equipments are placed
formally to purchase. Determine the
following:
 Items numbers and quantity
 Quality of products
 Fix delivery schedule
 Delivery place etc
Purchasing methods
e. Monitoring :
Monitoring of purchasing order is for
controlling delivery schedule. Delivery
schedule may change due to suppliers
production delay and change orders with in
his own firm.
Untimely deliver of materials or equipments
create problems such as:
 Decrease production
 Increase stop cost etc
Purchasing methods
f. Receive orders:
 Receipt contracted item numbers and
quantity
 Receipt contracted quality
 Receipt material or equipment in an
acceptable condition
and provide payment .
Final price can be discount for large
quantity and for prompt cash payment.
Leasing
Lease is a legal contract between two
parties (lessee and lesser ) to use lesser’s
assets or equipment and thus
enforceable by all parties under the
contract law of the applicable jurisdiction.
(wikipedia)
Hiring:
5.1.2 comparison between
leasing and purchasing
Purchasing
a. Obtain equipment
by full payment of
hard cash or by
installment basis
b. Get ownership of
equipment
c.
Can use longer
period of time
d. No need any
agreement
Leasing
a.
Obtain equipment by
paying only for used
period of equipment
b.
No transfer of
equipment ownership
c.
Can use only
contracted period
d.
Need lease
agreement to use
5.1.2 comparison between
leasing and purchasing
e.
f.
g.
Unlimited use
Purchaser should
register equipment,
depreciation,
storage, and
perform repair and
maintenance of
equipment.
Purchaser may
face equipment
obsolescence.
e.
f.
g.
Provision for
restricted or limited
use
No problem of
registration,
depreciation,
storage, repair and
maintenance
No tension of
equipment
obsolescence
5.1.2 comparison between
leasing and purchasing
h.
Should pay
equipment tax to
government and
do insurance.
h. Paying tax and
doing insurance
depend upon
lease contract.
5.1.3 Estimation of owning and
operating cost and hiring cost
1.
Owning cost:
a. Investment cost :investment, interest
on investment, various taxes on the
equipment, insurance expenses, storage
cost, expenses on unloading, clearance
and custom duty, cost of transportation,
errection and commissioning charges
etc
5.1.3 Estimation of owning and
operating cost and hiring cost
b. Depreciation cost : Efficiency and value of
equipment constantly reduces with the lapse
of time during use which is known as
depreciation. So we need depreciation fund
or sinking fund to replace old equipment to
new one. Depreciation cost is collected from
yearly profit.
c. Major repair :replacement of major parts of
equipment; so need major repair fund.
5.1.3 Estimation of owning and
operating cost and hiring cost
2. Operating cost:
a.
cost of fuel
b.
Cost of lubricants : engine oil, air filter oil,
transmission oil, hydraulic oil, grease etc
c.
Servicing and maintenance cost : filters, tyres,
tubes, electrolyte etc.
d.
Labour cost
e.
Cost of field repair : fan belt, bearing, filter etc.
f.
Overheads : watch man payment, electricity,
storage yard, maintenance staffs etc.
5.1.3 Estimation of owning and
operating cost and hiring cost
3. Hiring cost :
a. The cost of operator
b. Fuel cost
c. Cost of minor maintenance during hiring
equipment
d. Cost of minor repair (depends on
agreement)
e. Charge or fee of equipment per hour or
day
5.1.4 Analysis of equipment
utilization and price variance
Equipment utilization factors=operating
hours/available hours
b. Capacity utilization=(operation
hours/available hours)*100
Price variance :
more equipment utilize …may be less price
Less equipment utilize….may be more price
a.
5.2 equipment procurement
5.2.1. Marketing aspects of construction
equipment (availability, dealers)
5.2.2 procurement method and practices
5.2.3 commissioning of equipment
5.2.1. Marketing aspects of construction
equipment (availability, dealers)
Study market:
 Availability of various equipments, their
performance and prices
 Availability of dealers for selling of
equipment, servicing and spare parts
 Availability of spare parts, their quality
and prices
 Lead time providing spare parts
5.2.1. Marketing aspects of construction
equipment (availability, dealers)
Comparisons of various equipment in
different parameters : engine power,
engine performance, blade and
bucket capacity, fuel consumption,
Durability or reliability of equipment
and dealers
Comparison of prices of same
equipment from different dealers
5.2.1. Marketing aspects of construction
equipment (availability, dealers)
 Provided services : sales , services and spare parts of
equipment
 Availability of skilled technical team for best servicing
or technical support
 Facility of hire purchase, number of installment or
terms of payment, interest rate,
5.2.1. Marketing aspects of construction
equipment (availability, dealers)
 Delivery period or schedule of equipment
 Warranty period of equipment
 Free service period
 Training program
 Taxes
 Transportation charge
 Place of delivery
 Installment or commissioning of equipment
5.2.2 Procurement methods and
practices
Procurement deals with the sourcing
activities, negotiations and strategic
selection of goods and services.
Purchase is the process of how goods and
services are ordered. (procufy.com)
Procurement is concerned with acquiring
(procuring) all of the goods ,services and
work that is vital to an organization.
Procurement methods and
practices
Procuring process for goods and services
a. Needs analysis: Determine the need whether
procurement provides the optimal solution
b. Funding approval : Determine the project
scope and development a business case for
funding
c.
Project procurement plan: Determine the
strategy for approaching the market to
ensure strategy objectives are achieved
Procurement methods and
practices
Service provider selection : Evaluation of
responses, negotiations and awarding the
contract
e.
Contract management : Transition between
contracts and managing performance.
f.
Procurement evaluation: Assess service
provider performance and value of money
(www.procurepoint.nsw.gov.au
d.
Procurement practices
Provision for public or institution
procurement:
a. No need estimation if value less than
NRs. 25000.
b. Invitation tender from national and
international if worth value more than
NRs. 10,00,000.00
c. Invitation of sealed bid worth value less
than 1million.
Procurement practices
d.
e.
Direct purchase if worth value up to
1,50,000.00
User or consumer committee can
procure up to 6000000.00
Procurement method for
selecting consultant
Quality and cost based selection
2.
Quality based selection
3.
Fixed budget selection
4.
Least cost selection
5.
Consultants’ qualification selection
6.
Single source selection
7.
Individual consultant selection
(procurement of consulting selection by
Rajendra P. Adhikari, Ph. D)
1.
Commissioning of equipment
Process by which an equipment, facility or
plant is tested to verify if it functions
according to its design objectives or
specification.
(www.businessdictionary.com)
Check list for commissioning
of equipment
1.
2.
3.
4.
5.
Provide operator’s manual with machine
Provide short training to skilled operator
Explain warning labels and safety
precautions
Provide workshop manual or
maintenance hand book for preventive
and break down maintenance
Deliver parts book with equipment
Check list for commissioning
of equipment
6.
7.
8.
9.
10.
Provide some equipment parts and tools
Provide all necessary attachments and their
installation if necessary
Provide certificates and documents (bill
book, warranty books etc.)
Operate all systems of equipment to ensure
these system functions properly
Demonstrate all operations : starting and
stopping engine, transmission system, cab,
boom, stick, bucket, ripper ,lightings etc.
Check list for commissioning
of equipment
Aware Health and Safety legislations
12.
Aware of road regulations for
equipments : taxation, driver license
etc.
11.
Procurement methods and
practices
Procurement method
 Select vendors
 Establishing payment term
 Strategic vetting (selection)
 Negotiation
 Contracts
 Actual purchasing of goods
Procurement methods and
practices
Procurement process:
1. Define the business need
2. Development the procurement strategy
3. Supplier selection and evaluation
4. Negotiation and reward
5. Induction (initiation) and integration
(incorporation)
www.purchasinginsight.com/resource
Procurement methods and
practices
Plan the procurement based on identified
need
2.
Scope the procurement
3.
Determine the procurement method (tender)
4.
Prepare to approach the market (tender
evaluation)
5.
Approach the market
6.
Evaluate submissions and conclude the tender
process
7.
Manage the contract
(www.finance.gov.au/Procurement)
1.
Thank you