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Module 9: Equipment Cost Estimation

Writer's picture: BHADANIS Quantity Surveying and Construction Management Training Institute for Civil Engineers & Construction Professionals OnlineBHADANIS Quantity Surveying and Construction Management Training Institute for Civil Engineers & Construction Professionals Online

Overview

Equipment cost estimation is an essential part of construction cost management. Construction projects often require various types of machinery and equipment to perform tasks like excavation, lifting, and material handling. Accurately estimating equipment costs ensures that project budgets are realistic and that the project can proceed without financial interruptions. This module will explore the principles of equipment cost estimation, different methods for estimating equipment costs, and the factors that influence these costs. It will also provide practical examples and how to apply these principles in real-world scenarios.

Table of Contents

Introduction to Equipment Cost Estimation

In construction, equipment costs typically account for a significant portion of the project budget. The cost of equipment is influenced by various factors, such as the type of equipment used, how long it is needed, operating costs, maintenance, and the cost of hiring or leasing the equipment. Accurately estimating these costs ensures that the project remains financially viable and avoids budget overruns.

There are two primary approaches to equipment cost estimation:

  • Direct Equipment Costs: This includes the initial purchase cost, leasing costs, fuel, maintenance, and repair costs associated with equipment.

  • Indirect Equipment Costs: These involve costs related to the equipment’s operational impact, such as labor required to operate the equipment or costs associated with downtime.

Types of Equipment in Construction

Construction projects require a wide variety of equipment depending on the scope and nature of the work. Common types of equipment include:

1. Earthmoving Equipment

These machines are used for excavation, grading, and earth handling. Common examples include:

  • Excavators

  • Bulldozers

  • Backhoe Loaders

2. Material Handling Equipment

This equipment is used to transport, lift, and move materials on the construction site. Examples include:

  • Cranes

  • Forklifts

  • Dump Trucks

3. Concrete Equipment

Concrete-related machinery includes equipment used for mixing, pumping, and placing concrete. Examples are:

  • Concrete Mixers

  • Concrete Pumps

  • Concrete Vibrators

4. Paving and Compaction Equipment

Used for roadwork and compaction tasks. Examples include:

  • Rollers

  • Pavers

  • Compactors

5. Other Specialized Equipment

For specialized tasks, the equipment could include:

  • Pile Drivers

  • Asphalt Cutters

  • Drill Rigs

Equipment Cost Estimation Methods

There are several methods available to estimate the cost of equipment for a construction project. The choice of method depends on the available data, the type of equipment, and the project’s requirements.

1. Rental Cost Method

This method is typically used when the equipment is being rented or leased for the project. The estimator calculates the daily, weekly, or monthly rental cost, including delivery charges, insurance, and maintenance.

Example: If the rental cost for an excavator is $500 per day and the machine is required for 10 days:

  • Total Equipment Cost = 10 days x $500/day = $5,000

Tabular Format:

Equipment

Rental Rate

Duration

Total Cost

Excavator

$500/day

10 days

$5,000

2. Ownership Cost Method

This method is used when the equipment is owned by the contractor. The cost is based on the equipment’s purchase price, expected lifespan, maintenance costs, and the number of hours it is used.

Formula:

  • Hourly Equipment Cost = (Purchase Price + Operating Costs + Depreciation) / Total Working Hours

Example:

  • Purchase Price of Excavator: $100,000

  • Operating Costs (Fuel, Oil, etc.): $20,000 per year

  • Estimated Lifespan: 5 years (5,000 hours of use)

  • Depreciation per hour: $100,000 / 5,000 hours = $20/hour

  • Total Hourly Cost = ($20 Operating Costs + $20 Depreciation) = $40/hour

Tabular Format:

Equipment

Purchase Price

Operating Costs

Lifespan (hours)

Depreciation

Total Hourly Cost

Excavator

$100,000

$20,000/year

5,000 hours

$20/hour

$40/hour

3. Time-Based Costing Method

In this method, equipment costs are calculated based on time intervals, such as daily, weekly, or monthly rental costs, but it also includes indirect costs such as the cost of operating the equipment.

Example: If a bulldozer costs $600 per day to rent and is required for 20 days:

  • Total Equipment Cost = 20 days x $600/day = $12,000

Tabular Format:

Equipment

Rental Rate

Duration

Total Cost

Bulldozer

$600/day

20 days

$12,000

4. Unit Rate Method

This method involves estimating the equipment cost based on a specific unit of work. For example, the cost of using a crane might be calculated based on the number of tons it lifts per day.

Example: If the cost of renting a crane is $1,000 per day, and it is expected to lift 50 tons per day, the cost per ton lifted would be:

  • Cost per ton = $1,000 / 50 tons = $20 per ton

Tabular Format:

Equipment

Rental Rate

Work Done

Cost per Unit

Crane

$1,000/day

50 tons

$20/ton

Factors Affecting Equipment Costs

Several factors influence the overall cost of equipment used in construction projects:

1. Type of Equipment

Different types of equipment have vastly different costs. Heavy equipment like cranes and bulldozers will cost more than smaller machinery like forklifts or concrete mixers.

2. Duration of Use

The longer the equipment is used, the higher the overall cost, particularly if rented. Equipment rental rates are often calculated on a daily, weekly, or monthly basis.

3. Maintenance and Repairs

The costs of maintaining and repairing equipment during the course of the project can add up. Older equipment tends to incur higher maintenance costs, which must be factored into the estimate.

4. Transportation Costs

If the equipment is being rented, transportation costs for delivery to and from the site can significantly add to the overall equipment cost.

Example: Transportation costs for delivering a large excavator to a remote site might be $2,000, which should be added to the overall rental cost.

5. Depreciation

For owned equipment, depreciation is a critical factor. As equipment ages, its value decreases, which is factored into the cost estimate.

Practical Examples of Equipment Cost Estimation

Example 1: Construction of a Residential House

  • Excavator: Rental cost = $400/day, required for 5 days.

  • Backhoe Loader: Rental cost = $300/day, required for 3 days.

  • Total Equipment Cost:

    • Excavator: 5 days x $400 = $2,000

    • Backhoe Loader: 3 days x $300 = $900

    • Total Cost = $2,000 + $900 = $2,900

Tabular Format:

Equipment

Rental Rate

Duration

Total Cost

Excavator

$400/day

5 days

$2,000

Backhoe Loader

$300/day

3 days

$900

Total Cost

-

-

$2,900

Example 2: Road Construction Project

  • Paver: Rental cost = $1,200/day, required for 10 days.

  • Roller: Rental cost = $800/day, required for 7 days.

  • Total Equipment Cost:

    • Paver: 10 days x $1,200 = $12,000

    • Roller: 7 days x $800 = $5,600

    • Total Cost = $12,000 + $5,600 = $17,600

Tabular Format:

Equipment

Rental Rate

Duration

Total Cost

Paver

$1,200/day

10 days

$12,000

Roller

$800/day

7 days

$5,600

Total Cost

-

-

$17,600


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