The Constructor

What is Operating Cost of an Equipment?

ownership cost of equipment

ownership cost of equipment

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The operating cost of construction equipment comes into play only when the machine starts to operate. The operating cost is dependent on the period of operation (hours), location of the construction site, the site conditions under which the machine is operated, the type and category of the equipment.

Different costs that come under operating costs are explained in this article.

Components of Operating Cost

There are seven main types of costs that come under the operating cost of an equipment. They are:

  1. Cost for Repair and Maintenance
  2. Fuel Costs
  3. Tire Cost
  4. Cost of filter, grease and lubricating oil
  5. The wage of Equipment Operator
  6. Cost of Replacement of high wear parts of equipment
  7. Mobilization, demobilization and Assembling Cost

1. Cost for Repair and Maintenance

This cost is the amount required for the repair and maintenance of the construction equipment subjected to wear and tear due to the daily operations it performs. Repair and Maintenance cost covers a substantial percentage in the overall operating cost. This cost includes:

This cost increases with the age of the equipment. Proper and timely maintenance of the construction equipment helps to decrease the repair and maintenance cost with time. Most of the minor repair is performed at the site without any delay. Major repairs can be performed at a specific facility set up for the equipment by skilled and authorized dealers of the equipment.

The annual repair and maintenance cost of the equipment is calculated as the percentage of annual depreciation cost of the equipment. This cost can also be determined by reviewing the past records of similar equipment or by referring the manufacturer’s guidelines of the equipment.

2. Fuel Cost

The internal combustion engines provide power to the construction equipment. These use gasoline or petrol or diesel as fuel. The amount of fuel consumed depends on the nature of working conditions and rated flywheel horsepower (fwhp).

Flywheel horsepower is defined as the power that is required to operate a piece of equipment.

Hourly fuel consumption can be estimated by checking the past records of fuel that is consumed by similar equipment under similar working conditions. In the absence of past records, the equipment's fuel consumption given by the manufacturer can be used to estimate the fuel cost.

3. Tire Cost

The tire cost has two main expenses, the tire repair cost and the replacement charges. The cost of pneumatic tires comes under the operating cost category.

It is to be noted that the pneumatic tires wear out fast compared to the equipment. More the wear, lesser the life of the tire.

Tire repair charges = Percentage of tire depreciation cost.

Here also, the repair cost can be obtained from the past records of similar equipment that was working under similar environmental conditions.

4. Wage of Equipment Operator

The hourly wages and the additional benefits given to the operators also come under the operating cost of the equipment. This cost includes normal wages, bonus, fringe benefits, etc.

The operator's wages vary with projects. It is normally calculated as a separate cost category and finally added to the operating cost.

5. Cost of Replacement of high wear parts of equipment

Some parts of the equipment have a shorter life as compared to the service life of the equipment. These are hence categorized as high-wear items. These include cutting edges, drill bits, bucket teeth, blades, etc.

The normal expected life of these items can be estimated either from the past records or from the manufacture guidelines.

6. Mobilisation, demobilisation and Assembling Cost

This cost includes:

  1. The transportation costs from one project to another
  2. Cost for unloading
  3. Cost of assembly at the project site
  4. Road Permits

7. Cost of Lubricating oil, grease and filter

The quantity of lubricating the oil, grease and filter is dependent on the frequency of changes, operating hours, engine characteristics and working conditions at the construction site.

The time period between the changes can be determined from the past records.

Quantity of lubricating oil Required by an Engine = Amount added during complete change + Smaller amounts added between the changes.

Quantity of oil required by the engine is given by the equation,

q1 = {[hp x f x 0.006]/7.4  } + c/t


q1= quantity of oil required in gal/h,
hp = rated horsepower of the engine,  
f =  operating factor, c = capacity of the crankcase in gallons,
t =number of hours (i.e. duration) between the oil changes.

Also Read: What is Ownership Cost of an Construction Equipment?
Also Read: Select Construction Equipment for a Construction Project

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