2. Equipment Cost - Operating Cost

Operating costs occur only when the equipment is used, unlike ownership costs that are incurred whether or not the equipment is operated.

Operating costs are expenses that arise only when equipment is actively used on a project. In contrast, ownership costs, such as depreciation and insurance, must be paid regardless of the equipment's operational status. This means if a piece of equipment is idle, the owner will still incur ownership costs but not operating costs.

Imagine renting a car. You will pay a rental fee (ownership cost), regardless of whether you drive it or not. However, you'll only pay for petrol (operating cost) when you actually use the car.

Components of operating cost include consumables like fuel, lubrication oil, and maintenance costs. Maintenance costs can be categorized as major or minor based on the degree of repair required.

The operating cost includes several specific costs. Consumables such as fuel and lubricants essential for the equipment's functioning are a major part of these costs. Additionally, labor wages for operators are included in the operating costs. Maintenance can be classified into major and minor categories; minor repairs are part of operating costs while major repairs, which require significant investment, fall under ownership costs.

Consider a bicycle. The costs to add oil or replace a tire (consumables) are akin to operating costs, while buying a new bike to replace an old one is like ownership cost since it is a substantial investment made regardless of whether you ride it frequently.

Operating costs vary significantly based on equipment usage, the number of operating hours, job conditions, and the type of job being performed.

As operating hours increase, so do costs linked to fuel consumption, repairs, and maintenance. Additionally, the conditions under which the equipment operates can lead to different operating costs—working in challenging conditions will generally lead to higher wear and tear and necessitate more repairs compared to operating under milder conditions.

Think of two cars, one driven mainly on smooth highways and the other often used on pothole-filled city streets. The city car will likely need more servicing and repairs, thus incurring higher operating costs than the one mostly on highways, which experiences less wear and tear.

To estimate operating costs, historical data and manufacturer recommendations can provide valuable insights.

Accurate estimation of operating costs can often be based on historical data gathered from past projects with similar equipment under comparable conditions. Additionally, manufacturer handbooks often contain estimated operating costs for their equipment based on various operating conditions, which can help provide a more accurate cost prediction.

Just as a chef might refer to a cookbook for ingredient quantities based on past experiences, a construction manager can refer to historical data and manufacturer handbooks to project costs for machinery usage.

Maintenance and repair costs increase as the machine ages. These costs vary depending on usage and job conditions.

The older a piece of machinery gets, the more maintenance it typically requires due to increased wear and tear. This means costs for repairs will rise over time. Moreover, if a machine is subjected to tough job conditions, the maintenance costs are likely to increase even further.

Think of an old car; as it ages, it might need more frequent oil changes, tire replacements, and other maintenance to keep it running smoothly. Similarly, construction equipment requires more attention as it accumulates operational hours.

A formula based on years of operation and sum of the years' digits helps estimate repair costs efficiently.

The hourly repair cost can be estimated using a formula that considers the operational years. This involves calculating a ratio based on the current year of operation compared to the total years of the machine's useful life, adjusted by the lifetime repair cost and total operating hours.

Imagine a school where the cost of maintenance for textbooks increases as the books get older. Estimating how much money to set aside for each year is similar; you look at how long the books will be in use and adjust based on their age.

Tire costs are a unique part of operating costs and require careful estimate considering various factors like usage and repair needs.

Estimating tire costs can be complex due to various factors that influence tire life, such as project conditions and operator skill. Tire costs largely differ from other parts of equipment because of their shorter lifespan and faster depreciation. A typical approach is to add around 15% to the cost of tire replacement for repair needs.

Consider a person who frequently drives on rough terrain versus someone who drives only on well-maintained roads. The person on rough terrain will need more tire repairs and replacements, leading to a different cost structure for maintaining the vehicle.

Consumables like fuel, oil, and other small parts represent critical components of operating costs.

Fuel consumption is influenced by the machine's engine type and horsepower, and the actual operating time may differ from total hours due to efficiency and load factors. Identifying the right fuel consumption rates based on these equipment and job characteristics helps in precise cost calculation.

When baking bread, the type and amount of flour (fuel) used affects the bread's quality. Similarly, in construction, how and when machinery is used affects its fuel consumption, especially under varying job conditions.

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