The relationships between teams focused on building the work and teams focused on providing the required equipment are complex and must be managed within a defined and well understood organization structure. Construction equipment fleets are large and complex include everything from a small quickie saw to a 400-horsepower dozer.  Not every unit in the fleet can or should be managed in the same way and it is absolutely essential to organize the fleet into distinct groups so that each can be given the skill care and attention it deserves.

In this session, we break down the full spectrum of cost types that make up a machine's lifetime expense: depreciation and financing to fuel, maintenance, repairs. Each cost type carries its own risks, uncertainties, and patterns of behavior over the life of a machine. You must know and understand the differences between the various cost types in order to make good estimates and set good budgets.

Good decisions start with good data. Location and status data drives four things your business depends on every day: accurate estimates, real job costs, equipment management, and financial reporting that reflects what's actually happening in the field.

Utilization measures our success. Utilization measures your ability to recover the fixed costs of ownership. We want our machines to work, produce completed construction and generate contract revenue. Putting utilization first is done in three stages: identify utilization waste, measure utilization and change behavior.

You maintain machines because you want to stop them from breaking down. Since reliability measures how often the machines break down, it is the simplest and most direct measure of how successful you’ve been. Unplanned emergency downevents cause three things: delays and disruptions to production, down time on the machine and high costs.

Increasing repair and maintenance costs cause all machines to have an optimum ownership period and a sweet spot, beyond which each additional hour of work costs more than the average for all the preceding hours. Good age management recognizes the sweet spot in the life of a machine, makes it possible to identify machines that are candidates for replacement and develop robust plans for future capital expenditure.

Internal rates set the amount of money necessary to recover the cost for a machine. Charge codes define how the internal rate is used. Rates and charge codes work together to define job charges, ensure accurate job costing and measure the risk of under-utilization. Ideally, they minimize unnecessary work and ensure that job charges are fair and reasonable.

Owning and operating a machine comes with many different cost types — market depreciation builds quietly in the background, repair parts and labor hit in spurts as age and application take their toll, and fuel costs accumulate steadily with every hour worked. We need to estimate owning and operating costs that are likely to occur in the future and we need to setup a mechanism whereby equipment costs can be charged to jobs and recovered on a regular hourly or daily basis.

The equipment cost recovery system must charge jobs fairly for the equipment that is available on site and used to build the work. The purpose of creating a budget is to forecast the future such that you can measure against it, such that you can change future behavior. That’s it. It’s simply a tool of helping a business ensure that the incoming money and the outgoing money meet expectations.

Session 5 is in person and includes an Equipment Symposium.