Planning of Rational Terms of the Construction Equipment Replacement

Abstract

Abstract Construction organizations (contractors) perform works using process equipment subject to significant physical wear. This study report results of developing and using an analytical model and a computer tool used to plan the rational times for construction equipment replacement. Physical wear and breakdowns of construction equipment disrupt production processes and cause unexpected production pauses leading to loss of contractor’s profit. In the article, the algorithm of equipment replacement planning is described. Computer model for a decision-making on the rational times for construction equipment replacement is developed using Visual Basic for Applications (VBA). The offered algorithm for decision-making on construction equipment replacement is based on the following assumptions: decision on equipment replacement is made at the end of the year; the amount of expenses for the general period is calculated by adding the expenses of each year. If during the relevant year the equipment is not replaced, the amount is composed only of loss of profit (depending on the equipment age). If during the year the equipment is replaced, the amount, in addition to the loss of profit for the current year, includes the cost of new equipment, reduced by the value of the liquidation value of the used equipment. The offered VBA macro for Excel has a benefit of showing several options. Decision-makers can consider the best options and choose one of them. A benefit of the offered algorithm implies obtaining several alternative plans of the rational times for equipment replacement. The use of this algorithm and the computer model is justified if the effect of the decisions made is higher than the additional expenses related to information collection (on the loss of contractor’s profit and market value of the new and worn equipment).