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Module 6

The Construction Equipment Policy provides guidelines for decision-making regarding equipment acquisition, utilization, maintenance, and management. It emphasizes the importance of analyzing objectives and aligning policies with the company's mission while facilitating consistent actions and intelligent cooperation. Key considerations include whether to hire or own equipment based on factors like cost, usage duration, and the specific needs of construction contracts.

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2 views5 pages

Module 6

The Construction Equipment Policy provides guidelines for decision-making regarding equipment acquisition, utilization, maintenance, and management. It emphasizes the importance of analyzing objectives and aligning policies with the company's mission while facilitating consistent actions and intelligent cooperation. Key considerations include whether to hire or own equipment based on factors like cost, usage duration, and the specific needs of construction contracts.

Uploaded by

dare ogunsola
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Module 6: Construction Equipment Policy.

A policy is a pre-determined guidelines that provides direction for decision

making or action taking. Construction Equipment Policy is also the framework

from which the operating principles of equipment acquisition, utilization,

maintenance and management are derived. It is also a general statement or

understanding which guide thinking in decision making. The essence of policy is

the existence of discretion within certain limit in guiding decision making.

Policies are generally enough to give the manager sufficient freedom to make

judgements while at the same time they are specific enough to establishing

constraining boundaries. Policies must be made upon thorough analysis of

objectives and should be consistent with the company’s mission and philosophy.

The functions perform by policies in an organizations are:

a. It tends to prevent deviation from planned causes of actions

b. it ensures consistence of actions

c. it facilitates co-ordination of actions

d. It fosters an intelligent exercise of initiatives.

e. It furnishes a basis of judging the quality of executive actions.

f. It provides a guide for thinking in future planning.

g. It provides intelligent co-operation.

1. Determining the size and value of construction equipment fleet that could be allow

under the control of a single manger.


2. Know the size of construction contract they will be able to take in relation to the

availability of their equipment and the nature of construction equipment

investment they would be able to undertake on a given project.

3. Assess the cost and complexity of the individual machine in relation to technical

changes.

4. The need for computer facilities to undertake investment analysis and cost record

keeping on construction equipment.

5. Appreciate the existence of competition in business and the need for adopting

improved management methods so as to be able to remain in business.

Policy helps to make decisions to guide individual on what to do most especially on site.

Policy are usually pre-determined.

It is obvious therefore that, when construction equipment policy is being considered you

are indirectly the pre-determined guidelines surrounding equipment accusation,

utilization, maintenance and replacement.

Plant acquisition policy

This is a pre-determined guidelines that provides direction for decision making and action

taken as regards the issue of plant acquisition. It is obvious that a contractor can never

afford to own all types of sizes of equipment that might be used for the kind of work he

does. Therefore, it is imperative to have a policy in deciding whether to own a plant or

hire. Moreover, in deciding whether to acquire a plant through ownership various options

are available.
- Outright purchase

- Hire purchase

- Through leasing

What can be finance or operational leasing

Factors to consider/hiring/owning plant

Factors to consider

A major construction equipment policy decision is whether to hire or own a plant. The

argument for and against each are as follows.

a. If an item of plant is needed on a contract for sufficient length of time for the

machine to pay for itself based on the average hire rate, it will be wise to buy if

only to collect the residual value of the contract.

b. if there is a continuous requirement for such an item on all or other future

contracts, outright purchase is favoured i.e owing

c. If however, the total cost of the item cannot be seen to be recovered from the

contract or the contracts, to hire should receive consideration.

d. A specialist machine requiring the services of a specialist trained operator, and

which will be expensive initially, and unlikely to be used on future contracts, then

the equipment should be hired

e. In the case of a contractor already owing one or more of a certain type of machine

but whose immediate needs for a limited period are greater than the capacity of his

own owned machine, the contractor should hire.


To be specific/factors

These are other specific factors data could be considered by a contractor to own or hire

construction equipment

a. For outright / cash purchase

1. The price of the machine

2. Interest on loans from the bank or finance house

3. Capital investment grant

4. Depreciation allowances

5. Operators wages and degree of training

6. Overheads and maintenance

7. Repair cost likely to be incurred over the period under consideration

8. Insurance

9. The advantage of immediate call on the machine

10. Transport cost likely to be incurred

11. Residual value

12. Continuity of use

13. Rapidity of wear due to site condition

14. Possible lack of availability of hire machine

15. Security and storage accommodation for the plant when not in use.

b. For hiring

1. The hire rate over the period


2. No capital investment / investment grant

3. No allowance

4. Specialist operator

5. Higher transport cost

6. Inefficient use of machine

7. Less insurance cost

8. Freedom from maintenance and undue wear

9. No capital expenditure involved

The options selected i.e to hire to buy an item of equipment should be the one that will

provide the use of the equipment at the lowest total cost, consistent with the use that the

contractor will make of the equipment.

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