CEE 6141

Construction Operations and

Productivity

By

Dr. Balimu Mwiya

 Mechanical Plant:
• Mechanical plant priced on same basis as
labour for a specific task eg an excavator
digging a trench

• Static plant which cannot be associated

solely to one item is included in the
P&Gs as a lump sum for the period
required e.g scaffolding, tower crane etc
 Mechanical Plant:
Mechanical plant operated falls in two
categories:

• Small plant and tools e.g hand-held

power drills
• Large mechanical plant and scaffolding

Plant rate usually quoted as a rate per

hour either including or excluding the
operator
 Example:
Hydraulic excavator with a 1 m3
bucket can carry out 30 operations
per hour and costs ZMW750 per
hour, then the excavation costs with
this machine will be ZMW25.00 per
m3.
 Purchase or Hire:

• Availability of capital outlay

• State of current and expected workload
• Length of time plant may be required
• Expected rate of utilization
• Proper storage requirements
• Maintenance facilities
 Plant Hire:
Advantages

• Contractor's capital is not locked up in expensive pieces of

equipment and cash flow is not affected.
• Hiring costs can be paid monthly as the contractor is paid
for work completed in interim payments.
• Contractor does not pay for plant not required nor has any
work for.
• Modern and suitable plant is readily available on hire from
plant companies at a fixed hourly, daily, weekly or monthly
rate.
• Cost of maintenance, repairs and replacement is borne by
the plant hire company.
• In some instances the plant hire company will provide the
experienced and skilled operative, therefore the contractor
does not have permanent operative's wages to pay.
• The contractor has no storage problems when plant is not
being used as it is returned to the hire company.
 Plant Hire:
Disadvantages

• Effective planning and programming of work schedules

is required to minimize expensive idle time on hired
plant.
• A suitable machine may not always be available when
required, especially at short notice.
• The contractor still has to pay for the hire cost when
work is aborted due to bad weather.
• The plant operator does not work for the contractor
full-time and so there is no incentive to perform well.
• Plant may not be in good shape to undertake the
work, constant breakdown will cause the contractor
costly delays.
• Hire rates depend on market forces, which fluctuate
and can be a cause of loss to the contractor if the hire
cost escalates
 Purchase:
Advantages
• Ownership of a purchased item of plant
is immediately transferred to the
acquiring company, which as a company
asset can be used as security for finance.
• Outright purchase of an item of plant
entitles the acquiring company to capital
allowances i.e. tax savings.
 Purchase:
Disadvantages

Cost to own plant

Initial cost:
• Interest charges, fixed for short periods

Running costs:
• Utilization
• Rate of deterioration
• Cost of plant is high if under-utilized during economic life
• Frequent breakdown increases maintenance costs
• Plant deterioration accelerated if overused with inadequate
maintenance
• Obsolescence depending on technological advances
• Contractors must ensure plant is economically utilized and
does not fall into disuse before the end of its economic life.
 Purchase or Hire:
Additional costs whether hired or owned:
• Cost of transport — From plant depot to
site, the extent of this cost depends on the
distance from depot to site.
• Cost of working base — If tower cranes are
employed on site they require suitable
concrete base or track to work on.
• Cost of erection/dismantling — Contractor
incurs the cost of having items of plant
(hoists, scaffolding, tower crane etc.)
erected and dismantled.
• Cost of operators — Machine operators and
associated labour are costs to be considered
by the contractor.
 PLANT RATE:
Factors:
• Initial cost and finance
• Depreciation
• Interest on capital borrowed
• Life of plant
• Hours worked per annum
• Repairs and renewals
• Insurance and licences
• Fuel, oil and grease
• Inflation.
 PLANT RATE:
Consider the cost of:
• Transporting the plant to site,
– Dependent on the location of the plant and
the site
• The operator, his travelling time, skill
level, bonuses etc forming part of the
rate
 Initial cost and finance:
Always consider that you have borrowed
money from a bank or finance company
in order to purchase the particular piece
of plant (LOAN - there will be interest to
be paid)
OR
Could have invested the money in the
bank rather than in a piece of plant
(Sinking fund – loss of interest on the
investment)
 Depreciation:
Two methods
• straight line method (common)
• written down value method

Depreciation is taken as expenditure in

each year that the plant is depreciating
 Depreciation:
Straight line method

Consider:
• economic life of plant
• residual or scrap value at the end of its
economic life
 Depreciation:
Example
If the plant costs ZMW 100, 000 and
has a scrap value of ZMW 10, 000 after
seven years
Cost of plant ZMW100 000
Value at end of economic life —ZMW10 000

ZMW90 000

Years 7

Depreciation per year ZMW12 857

 Depreciation:
Written down value method

Use an unchanged percentage rate

(usually 25 per cent) deducted from the
previous year's value.
Advantage that it more accurately
reflects the resale value of the plant at
any time, because plant loses the
majority of its value in the first year
 Depreciation:
Example (same as above)
Capital cost of plant
Less 25 per cent depreciation in first year ZMW 100 000
25 000
Remaining value of plant 75 000
Less 25 per cent depreciation in Second year 18 750
Remaining value of plant 56 250
Less 25 per cent depreciation in third year 14 063
Remaining value of plant 42 187
Less 25 per cent depreciation in fourth year 10547
Remaining value of plant 31 640
Less 25 per cent depreciation in fifth year 7910
Remaining value of plant 23 730
Less 25 per cent depreciation in sixth year 5933
Remaining value of plant 17 797
Less 25 per cent depreciation in seventh year 4449
Remaining
year value of plant at end of seventh 13 348
 Interest on capital borrowed:
R=P[(1+i)ni]/[(1+i) n-1]
where:
– R = the annual repayment;
– P = the principal borrowed ZMW 100 000;
– i = the interest rate as a decimal;
– n = the borrowing period in years, 7years.
• If bank lending rate is 13.5 %
• Then the annual repayment is
R = ZMW
100,000[(1.135)70.135]/[(1.135)7 — 1] =
ZMW 22964
Cost over seven years is ZMW160 748 and
the interest paid is ZMW60 748.
 Interest on capital borrowed:
If rate of interest for investments is 7.5%, then the annual
interest lost is
– ZMW 100000 x 0.075 = ZMW7500

The annual sinking fund equation is

R= Ai/[(1+i)n— 1]
• where:
– R = the investment expressed as an annual payment;
– A = the target accumulated amount, ZMW100 000;
– i = the interest rate as a decimal, i.e. 0.075;
– n = the investment period, 7years.

• Annual contribution to the sinking fund is

R = ZMW100000 x 0.075/[(1.075)7 — 1] = ZMW11 380
• The total cost per annum is ZMW7500 +ZMW11380 =
ZMW18 880
• Cost over seven years is ZMW132 160.
 Life of plant:
• Usually established by experience.
– Consider period for which the plant will physically
last before the amount of the repair bills become
too high compared with the value of the plant.
– The second is the expected period before the plant
is made obsolete by advancing technology.
• Plant manufacturers give guide. eg plant is
guaranteed for one year and all hydraulic seals
for two years; most operators seem to get
about seven years; and there are some
machines still operating which are 10 years
old'.
• So there will be little need of repairs in the
first two years but following that repairs will
increase, until after five to seven years the
plant will require to be replaced: it is unusual
for it to last 10 years.
 Hours worked per annum:
• Plant is never utilized for every working
hour of every working day of the year.
• Eg. concrete mixers, wheeled tractor-
mounted front shovels, backhoe
excavators of the JCB3 type, vans and
trucks, are likely to be in use for the
majority of the year.
• Specialist plant eg motorized scrapers
and mobile concrete pumps will be
restricted in their use by the weather
or particular demand.
 Hours worked per annum:
Other factors reducing plant working
efficiency
• Eg. an excavator may lose the following
time, shown as a percentage of
available time:
– Weather 10
– Manoeuvering 10
– Breakdowns 5
– Operator efficiency 5
– General waiting 10
Total 40%
 Repairs and renewals:
• Mechanical plant suffers from
breakdown due to the failure of
components.
– cost of the repair
– time lost (5% included in hours worked)
• Breakdown may be prevented by
periodic maintenance.
• The cost of repairs and renewals varies
for different types of plant, but 10 %
of purchase price per annum is
standard practice.
What is it for the ZCI?
 Tracks and tyres:
• Cost of maintenance to tracks on plant working on normal
ground can be considered to be included with the repairs
and renewals figure.
• Exception is where tracked plant is working on rock, eg
quarry, where track failure is more common. In this
instance repairs and renewals should be 12 per cent of the
capital cost per annum.
• Tyre life is determined by tyre size, loading, tyre pressure,
the type of ground and the skill of the operator.
• Tyres can represent 15 per cent of the capital cost of a
wheeled loader
• Prolonging tyre life by:
– Filling the tyre with flexible foam so that tyre 'pressure' is
always correct and production losses due to punctures are
removed.
– Fitting chains to tyres, particularly when working on rock.
• For harsh conditions/ environment.
– Loaders: normal 2500 hours; harsh 1500 hours
– Trucks: normal 3000 hours; harsh 2000 hours
 Insurance and licences:
Contractors should have a contractor's all
risks (CAR) insurance policy.

• Employer's liability —to cover all

employers for their liability in respect of
death or injury to work people. Also
operatives hired with plant.
• Public liability —cover against claims by
third parties. eg through the negligence
of the operative an excavator knocks down
a boundary wall and damages a car
parked on the other side, then pays claims
by the owner of the car.
 Insurance and licences:
• Works insurance — covers new building,
and plant for fire, theft and damage
through vandalism or accidental. (cost of
recovery of incapacitated plant, eg. an
excavator bogged down in bad ground???).
• Insurances are specific to site-based plant
not licensed to use the public roads.
• For road vehicles eg vans, trucks and
mobile cranes it is necessary to have a
vehicle-specific insurance under the Road
Traffic Act and also a road licence.
 Fuel, oil and grease:
The best source of fuel consumption figures
is the site records
• However, rule of thumb is:
– Petrol engine —consume approximately
0.275 litres of fuel per brake horsepower
(bhp) hour
• • Diesel engine — will consume
approximately 0.2 litres of fuel per bhp
hour
 Fuel, oil and grease:
• From a catalogue of a 100 litre (5/3.5)
concrete mixer the power output is 2.5
bhp.
• Work constantly under approximately
the same load diesel fuel consumption
will be 2.5 x 0.2 = 0.5 litres per hour.

• The cost of lubricating oil and grease can

be taken as 10 per cent of the fuel cost
 Fuel, oil and grease:
Class Exercise
• Calculate the fuel consumption for a
common hydraulic tracked excavator
normally used with backhoe equipment,
the maximum power output is given as
130 bhp.
• When used to excavate a trench, this
machine will be working for 5 seconds at
full power during a cycle of 20 seconds.
For the remaining 15 seconds it is likely
to be operating at about half this power.
 Inflation:
• A plant rate is calculated at the time
that plant is purchased.
• If no account were to be taken of
inflation then during the last year of
the life of the plant the rate would be
uncompetitively low.
• Rates are therefore reviewed on an
annual basis and increases for inflation
are added.
 Class Exercise:
Calculate the plant rate per hour for a
100 litre (5/3.5) concrete mixer based
on the following information:
– Purchase price ZMW1500
– Interest rate 13.5%
– Engine power 2.5 bhp
– Gas oil ZMW 0.25 per litre
– Life of mixer 10 years
– Scrap value at end of life nil
– Hours worked per annum 1600
– Working efficiency 90%