Cost Objective Model for Construction Equipment Replacement Policies

Abstract

Most construction companies, particularly companies whose projects are primarily constructed with earthmoving equipment, depend heavily on their construction equipment fleets, which represent substantial locked capital investment and require acceptable utilization levels to recover expenses incurred and losses from this investment. The equipment, which possesses a finite physical and economic life, inevitably requires replacement, and equipment maintenance costs increase with the equipment life. Different methodologies are employed to establish the replacement schedules of construction equipment, including a cost optimization model that identifies the best schedule for optimizing (minimizing) expenses. This paper investigates the mechanics of one of the most widely used replacement analysis theories and its implementation in a practical and simple mathematical cost optimization model. This research develops an objective function, which utilizes data sheets provided by equipment manufacturers that can be applied to any type of heavy construction equipment. A Matlab program was employed as a decision-making computer-aided tool to assist the project manager or the procurement department in setting the replacement policies for the company projects.
Keywords: construction equipment, earthmoving equipment, optimization model