Component Life Sketches Machine Economic Life

September 28, 2010

The article "Component Life Sketches Machine Economic Life" in the July issue of Construction Equipment compares O&O life cycles using market value depreciation as the owning component, which is the true compass of life-cycle evaluation.

I was glad to see this as I have always advocated this method should be the base model adjusted for sound business practices rather than the other way around. There are 1,031 exchange opportunities and other strategies one can employ rather than taking fixed strategies worked out by accounting theory.

At the end of the day, however, the ball to keep our eye on is the "uninterrupted use of safe, reliable equipment." The effect to the bottom line a single unscheduled job interruption has to production can be enormous. If the cost of idle assets and labor, transporting, and rental were included in the O&O costs, strategies would differ.

If equipment managers have access to those costs, and overlaid them on their equipment O&O model during the entire equipment life cycle, it gives rise to re-think some of their strategies. Unit cost of production should be viewed with the same respect as O&O cost and cash flow. This is the reason periodic inspections and proactive maintenance concepts are so important which you outline in the "Cost Cutting Keys."

This was an excellent article. Keep up the good work!

Bruce Prentice, General Mgr./Fleet Operations, Fowler Contracting, Raleigh, N.C.