1.
Introduction to
Construction Management
Presentation By: Aditi K. Shah

2.
Content
▪ Importance of machineries in construction
▪ Classification of Construction Equipment
▪ Plants & Equipment used in construction
▪ Factors affecting selection of construction equipment
▪ Financial aspects related to construction equipments
▪ Discounted present worth analysis
▪ Depreciation
▪ Cost of owning and operating construction equipment
▪ Economic life of construction equipment
▪ Equipment replacement policy

3.
The importance of machineries for
construction
▪ Work can be completed fast.
▪ Cost of project is reduced.
▪ Less number of laborers required.
▪ Excavation work can be carried out rapidly by using Power
shovel, Dragline etc.
▪ Output is higher
▪ Transportation of construction materials can be done easily by using
Trucks, Wagons, Dumpers etc.
▪ Heavy loads can be lifted with the help of Tower crane, Elevator etc.

4.
The importance of machineries for
construction (contd.)
▪ Better quality in construction is obtained by using construction
equipments.
▪ E.g.: canal lining, concrete spreading, compaction & finishing are
carried out by lining machine.
▪ Finishing & rolling of bituminous roads is not possible without
Rollers.

5.
Power Shovel

6.
Dragline

7.
Dumper

8.
Tower
Crane

9.
Lining
Machine

10.
Concrete
Mixer

11.
Bulldozer

12.
Scrapper

13.
Air
compressor

14.
Belt
Conveyor

15.
Classification of Construction
Equipment(according to work cycle)
1. Intermittent Type:
a. Bulldozers
b. Scrappers
c. Power Shovels
d. Concrete Mixers
e. Dragline
2. Continuous Flow Type: a. Air Compressors
b. Belt Conveyors
3. Mixed Type:
a. Motor Graders

16.
Classification of Construction
Equipment(according to nature of Automation)
1. Manually Operated Equipment
2. Semi-Automatic Equipment
3. Fully Automatic Equipment

17.
Classification of Construction
Equipment(according to Standardization of machine)
1. Standard Equipment
2. Special Equipment

18.
Difference B/w Standard and Special
Equipments
Standard Equipment
Special Equipment
▪
Commonly used in all projects
▪
Used only in special cases
▪
Manufactured commonly & easily available from
dealer
▪
Manufactured as per requirements, special order
has to be placed
▪
Initial investment is low
▪
Initial investment is high
▪
Resale price is high
▪
Resale price is low
▪
Delivery is easy & fast
▪
Delivery is difficult & delayed
▪
Repairs and spare parts are easily found
▪
Repairs and spare parts are difficult to find
▪
Disposal is easy
▪
Disposal is difficult
▪
Unit cost of production is less
▪
Unit cost of production is high
▪
Rent is low and reasonable
▪
Rent is high and unreasonable
▪
E.g. Canal Trimmer
▪
E.g. Belt Conveyor

19.
Plants & Equipments used in Construction
▪ Equipment for Excavation
▪ Earthmoving equipment
▪ Hauling equipment
▪ Hoisting equipment
▪ Conveying equipment
▪ Pile driving equipment
▪ Drilling equipment
▪ Equipment for production of
aggregate
▪ Plant for grouting and guniting
▪ Machineries for bituminous road
▪ Machineries for concrete works
▪ Dredging equipment

20.
Equipment
for
Excavation

21.
Earthmoving
Equipment

22.
Hauling
Equipment

23.
Hoisting
Equipment

24.
Conveying
Equipment

25.
Pumping
Equipment

26.
Compacting
equipment

27.
Pile Driving
Equipment

28.
Drilling
Equipment

29.
Equipment for
production of
Aggregate

30.
Grouting

31.
Guniting

32.
Machinery for
Bituminous Road

33.
Dredging
Equipment

34.
Factors affecting the selection of
Construction Equipment
1. Use of standard equipments
2. Size of equipment
3. Uniformity of type
4. Country of origin
5. Initial cost of equipment
6. Availability of spare parts
7. Unit cost of production
8. Operating facility
9. Suitability for future

35.
Financial aspects related to
construction equipments
▪ How to arrange finance
Sources of
equipment
▪ Whether to buy or hire
Long term
Short term
Buy
Down
payment
On loans
mobilized
Lease
Payment in
installments
Time lease
Leasing with
option to buy
later

36.
Direct purchase
Advantages
Disadvantages
▪ Equipment is always
economically operated
▪ If equipment becomes obsolete, it is
useless
▪ It receives better care &
maintenance
▪ Large sums involved remain blocked
▪ It can be available and used at
any time
▪ Tendency to perform work as per
available equipment
▪ Disposal is difficult
▪ Equipment may be used beyond its
economic life
▪ Equipment may remain in idle
condition for some time

37.
Hiring (advantages)
▪ Little care is required for maintenance and storage
▪ Desired equipment is available in working order at short
notice
▪ Investment costs can be diverted to other better purposes
▪ No fear of obsolescence of equipment, full advantage is
taken by contractor of the improved technical aspects of
equipment
▪ If found useful, equipment can be bought later

38.
Examples- Purchase/ Hire
▪ The original cost of bulldozer power shovel is
Rs. 4 lacs & its salvage value is 8% of the
original cost. The bulldozer is use for 1200
hours/year and its life is 4 years. The hiring
charges for the bulldozer incl. maintenance &
repairs is Rs. 20000/month. Suggest whether
the bulldozer should be purchased or hired.
Solution: (on the board)

39.
Discounted Present Worth Analysis
▪ It involves calculating the present value of all
amounts involved in all the alternatives to
determine the present worth of the proposed
alternatives.
▪ Decision problems may be of two types:
a. Revenue dominated cash flow diagram
b. Cost dominated cash flow diagram

40.
What is Inflow and Outflow:

41.
(a) Revenue Profit dominated cash flow
diagram:
▪ In this type of cash flow diagram, the revenue, profit, salvage
value, etc. (inflows) will be assigned a (+ve) sign while costs
(outflows) will be assigned.
▪ Finally, the alternative having the maximum present worth amount
should be selected as the best alternative.

42.
(b) Cost dominated cash flow diagram:
▪ In this type of diagram, the cost(outflows) will be assigned with (+ve)
sign and revenue, profit, salvage value(all inflows) etc. will be
assigned with (-ve) sign.
▪ Finally, the alternative having the minimum present worth amount
should be selected as the best alternative.

43.
Depreciation
▪ It is the gradual loss in the value of the property due to its
use, life, wear, tear and decay.
▪ It is dependent on its original condition, quality of
maintenance & mode of use.
▪ Usually a % of depreciation per annum is allowed, which
gradually increases with time
▪ Present value of property
= Initial cost - Total amount of depreciation

44.
Types of depreciation
a) Physical depreciation
1. wear and tear from operation
2. action of time and other elements
b) Functional depreciation
1. inadequacy or suppression
2. obsolescence

45.
Methods of Calculating Depreciation:
1. Straight Line method
2. Constant Percentage method
3. Sinking Fund method
4. Sum of Digits method
5. Service Output method

46.
Straight Line method
Assumption: Property loses its value by the same amount every year.
Therefore, Annual Depreciation= Annual Decrease in property value
where, D= Annual Depreciation
C= Original Cost
Depreciation of property after m years:
S= Scrap Value
n , m= life in years
Therefore, Book value after m years:

47.
Constant Percentage method
▪ Assumption: Property will lose its value by a constant percentage of its
value at the beginning of every year.
Where, p= % rate of annual Depreciation
S= Scrap value
C= Original cost
n= life in years
▪ If any age of property is m years, the value of property after m years:

48.
Sinking Fund method
▪ Assumption: depreciation of the property = the annual sinking fund
+ interest on the sinking fund for that year
▪ If I is the rate of interest, the annual sinking fund installment(p) to
accumulate 1 Rs in m years:
▪ If I is the rate of interest, and 1 Rs is deposited every year, total
sinking fund accumulated at the end of n years:
▪ Rate of depreciation in n years:

49.
Factors affecting Cost of Owning &
operating Equipment:
▪ Cost of the equipment to the owner
▪ Demand of the equipment at the end of its useful life
▪ Number of hours it is used per year
▪ Number of years it is used
▪ Severity of conditions under which it is used
▪ State of maintenance and repairs

50.
Costs to be considered for owning and
operating equipment:
▪ Depreciation Cost
▪ Investment Cost
(Average investment=
)
▪ Maintenance and repair Cost
▪ Operation Cost (Repair charges, Depreciation on tyres and
tubes, Labour Charges, Fuel Charges, Operators and
maintenance crew charges, Miscellaneous Supplies)
▪ Down time Cost
▪ Obsolescence Cost
▪ Replacement Costs

51.
Numerical
For construction Equipment following information is available.
Initial cost of acquisition = Rs 6500000
Cost of tyre sets
= Rs 350000, replaced after every 4500 hours
Cost of lubricants, minor
Repairs and maintenance = Rs 1100/hour
Estimated life
= 13500 hours of operation
Estimated salvage value = 15% of initial cost
Estimated usage of equipment= 1500 hours/year
If MARR is 20% per year, Estimate minimum hourly rental charges for
equipment

52.
Economic life of Construction
Equipments:
Equipment should be replaced under following circumstances:
1. Depreciation
2. Downtime
3. Inadequacy
4. Normal Deterioration

53.
Equipment Replacement Policy:
A firm has to face three type of decisions:
1.
The replacement of equipment as it wears out
2.
The equipment required for expansion
3.
The replacement of old technology by new
Equipment is replaced before its estimated life to:
▪
Reduce production cost
▪
Reduce fatigue
▪
Raise quality
▪
Increase output
▪
Secure greater convenience, safety and reliability

54.
What not to consider while selecting an
equipment:
For Equipment in Use
▪ Original Cost
▪ Money already spent on repairs and maintenance
▪ Unrealistic book value
For New Equipment
▪ Any savings not clearly assessable
▪ Overhead charges

55.
Thank you