Whether you are a corporate equipment manager for a construction company, such as Doug King Jr., CEM, Sherwood Companies, or a regional asset manager, as is Steven Fooy, CEM, with Kinder Morgan, writing equipment specifications is a science in that it calls for the careful consideration of many factors. Among them:
- What is the project manager going to do with the machine?
- Can it be used as part of the fleet on future projects?
- Is the application long- or short-term?
- What size and type of equipment is needed to do the job?
The 500 pieces of heavy equipment and 475 highway vehicles for which King is responsible are used primarily for earthmoving projects such as highways and bridges, lakes and dams, asphalt and concrete paving, quarry operations, and utilities.
At an energy company, Fooy faces a different set of challenges that involve nearly 300 machines that operate in his region alone. Fooy says the operation is one of the largest energy companies in the United States. Projects include natural gas pipelines, petroleum, liquids, chemicals and energy solids (coal, rebar steel, pig iron). The company maintains more than 130 locations nationwide with several on rivers, the Great Lakes, and ocean ports.
Each location may have its own specific equipment specification requirements based on the different applications. He is responsible for everything from mobile equipment to processing equipment for the Midwest region. “Many specifications are driven by operations,” Fooy says. “Obviously, operations know what kind of product they handle, but each terminal is different. Some require bigger machines, some smaller, so they drive a lot of specs.”
It is Fooy’s job to make sure the specs make sense.
“I don’t want to over-spec a machine, which makes the cost higher than is required,” he says. “In communicating with operations, it is important to understand the application, products that are handled, and the anticipated life cycle.”
In addition, he says, Kinder Morgan has a corporate equipment group that has developed standard specifications.
“The idea behind it is that if we can spec these machines as closely as possible to the company standard, it makes it much easier to transfer one piece of equipment from one location to another,” Fooy says. “Also, standard specifications help you have trained technicians on staff at any terminal who are familiar with the product and have an existing association with the dealer. It really starts with the operations people.”
At Sherwood, King says, “Before we spec a machine we have to know what we are going to do with it. Usually, we have a generic description in mind—a dozer, loader or scraper. We go to the job foreman, project manager or superintendent to get more information on how he’s going to use it and for how long.”
With that information, King zeros in on a unit that fits the needs of the job.
“If we are spec’ing a machine specific to the project—for instance, a 6-foot boom—but won’t be using it anywhere else at the end of the application, at that point we decide whether to rent it or lease it,” King says. “On a short-term project, we might rent the equipment. If the job is going to take several years, we might purchase or lease it. That discussion goes on quite often since utilization drives everything. In a case where a unit can be used elsewhere or probably will be needed in the future, then we have the option of purchasing the equipment and placing it into the fleet.”
Also considered with fleet purchases—an excavator for example—is, again, what it will be used for. “We look at more than one job and more than one use,” King says. “Are we going to run a hydraulic hammer with it, use it for rock removal or stacking riprap? We might want to put auxiliary hydraulics or a thumb on it.”
Fooy uses the same approach.
“In a case where we need, for instance, a certain size crane to unload a barge of steel on a project, but don’t need it in the fleet, we probably would rent it,” he says.
Unlike construction companies that many times purchase a piece of equipment to use on long-term or future projects, Fooy says, “We’re pretty standard.”
Says King, “If we’ve worked, for instance, with a loader that we really like, but have had trouble with the brand of coupler the dealer or OEM has put on, the next time we order we specify a different coupler. Another example is trouble with an undercarriage on a dozer. When we spec the next vehicle, we order a different kind of undercarriage.”
In one undercarriage situation, King says, “We weren’t getting the undercarriage hours we should have. We felt we should get up to 8,000 hours, but we just weren’t getting there. Some of the units failed at 2,500 or 1,500 hours. If a pin fails in the middle of the track on one machine, you have to take the track down to fix it. In newer machines, you only have to take the box link out and replace it.
“What we consider is downtime. We feel we can get a longer life out of the newer machine and repair it quicker.”
King says he is constantly looking for ways to make a machine last a little longer. “The difference between a [Cat] Systems One track versus a conventional track is a deal with us,” he says, explaining that they can run without having to stop and “do a midlife pin and bushing. The cost between the two might not be that much different. The saving is the downtime.”
If Fooy runs into common issues involving one product brand at several locations, he says, “We certainly dig into that. We look at the dealer’s strengths and weaknesses. There are certain areas where we might have only one brand of equipment, mainly because the dealer isn’t strong in that area or we don’t have an agreement with him.”
The challenge of taking a machine’s historical performance data and working them into the writing of specifications may differ from how a construction company handles the task.
“Our growth has been through acquisition,” Fooy says of Kinder Morgan. “Historical data can sometimes be limited when purchasing privately held locations. At times, equipment history can start when the company is purchased. At times, we struggle with historical data of our own. Some of our locations need additional assistance understanding historical data and the importance of parts, labor and fuel costs entered into our CMMS program.”
By the same token, other locations have stayed on top of tracking a unit’s performance information. “In that case, we can take a look at how much we spent in repairs on a unit as opposed to what we think we should have spent,” he says.
One reason for the great variation in data among terminals, according to Fooy, is that some locations have a full-time service coordinator who is responsible for keeping that data updated. Other locations don’t have that luxury.
“It boils down to, do you want your service supervisor playing around with a computer when he still has floor-management responsibilities?” he says.
For King, historical data collection for spec writing comes many times from looking at utilization.
“If a machine has a high maintenance history,” he says, “we try to determine what caused it. Was it because of the unit’s design, was it the right machine for the job or was it an operator problem?”
The decision on whether to rent, lease or buy is made by King.
“I talk to the CEO of the company, but many times it is up to us in the equipment division to decide what we need,” he says. “That said, however, higher-level management and the specific group that needs the machine have to agree.”
If he is looking to replace a material-handling loader in a quarry, King checks to see how many times the old unit was down for repairs. He not only figures out the costs for the maintenance items, but also determines what machine he wants.
Another very important consideration is the safety of the people getting on and off the unit and whether the operator is comfortable. All of it plays a part in his decision.
In fact, safety was the reason he changed specs on both highway and off-road fleet equipment.
“We had a fatality where a subcontractor vehicle was backing up on one of our job sites,” he recalls. To make sure that never happened again, he revised equipment specifications that now requires the installation of backup cameras.
“We make every effort possible to be safe—walkarounds, thoroughly inspecting different things—but the backup cameras is an extra step that allows us to see around the equipment.”
Another element of equipment specification isn’t as tangible as installing a component, selecting a better design, or choosing the right component for a specific application. That element is managing relationships—always unpredictable—between the equipment group personnel and vendors to make sure the relationship doesn’t become tainted by unethical behavior.
Vendor relationships are also important not only in maintaining equipment, but also providing information on performance and helping in developing specifications, Fooy says.
“It is also important that we work with vendors that have a strong safety record. Vendors that have safety issues are not allowed on our facilities,” he says.
King says that making sure personal relationships don’t cross the line “is always an issue that you have to look at from a lot of different angles.”
For instance, one angle that has to be considered is the relationship between a company vice president and a vendor. The vice president tells the fleet department the vendor is “really a great guy and asks the department to at least look at the products he has,” says King. “You know up front that if you don’t give it obvious careful consideration, the guy is going to be upset.”
No matter what the circumstances are, King says, “we try to make sure that we use the same criteria on a recommended vendor that we use on any other.”
Another situation that has to be monitored closely is the common practice of free gifts that vendors offer to company decision makers.
“If we are going to get NASCAR tickets, then we are going to get the blessings up above,” King says. “I had rather buy my own tickets. Otherwise senior management has to bless it. We’re not going to just take the gift.”
Relationships that, intended or not, might well raise ethical questions can be kept honest in various ways, depending on the individual company. One, King says, could be an oversight committee not so involved in the situation. Other companies have a policy that prohibits taking anything from a vendor. Some say don’t take anything above a certain dollar amount.
“There are all kinds of different ways to do this,” says King. “Typically, it comes down to getting the OK from upper management. However, in any business it is the relationship that counts. You usually buy from people you know and trust. Ultimately, it has to be good business for both companies.”
Service and support make a huge difference in a company/vendor relationship, he says. On a larger scale, that also cuts to the heart of any transaction between dealer and end user, especially when it comes to equipment specifications.
“The equipment is not always going to be new,” King says. “Somewhere down the road it is going to need repair. If you’re waiting on a repair, and the vendor is unable to send out a technician, that’s a big deal. When we specify a brand of equipment, service and support are critical.”
Another consideration, King says, is to make sure you specify a machine that you can handle. “When you get the machine,” he says, “make sure you have the equipment to haul it. Otherwise you may have to go out and buy new trailers.”
You can never take writing equipment specifications for granted.