Page 100 - Civil Engineering Project Management, Fourth Edition

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The contractor’s site organization
project, cost of any equipment purchased for it, hire charges for plant, insur-
ances, etc. and such head office oncosts that the contractor currently applies to
projects in hand. Head office should keep the agent informed of the figure
of total expenditure to date; but this figure inevitably lags behind the actual
expenditure commitment to date because of the time delay between ordering
materials and entering payment for the same in the books. Hence a prudent
agent may keep such an assessment going himself because of the importance
of controlling the overall expenditure on the job. His system may not be exact,
but his better knowledge of what expenditure is currently committed may give
him a useful guide as to how the job is progressing financially.
Most accounting in a contractor’s head office is now done by computer
using codes for different sites and classes of expenditure. Such a system can
be advantageous if it shows costs for different elements of a job or types of
work, which can help in building up a record of unit costs which can act as a
guide for future bids, or may be useful in formulating any claims. In practice,
however, such systems seldom have sufficient definition for this purpose, but
are predominantly used to show the current profit or loss on a job.

7.6 Providing constructional plant and equipment

A contractor will own a stock of plant and equipment which is available for
loan to construction jobs the contractor has in hand. When items are loaned to
site, the job account held in head office will be debited with the cost of plant
delivery, plus rates per day (or per hour) according to whether the plant is
working or standing idle on site. These rates are termed ‘internal hire rates’.
Plant not available from stock will need to be obtained by the agent from some
outside plant hirer, who will charge ‘outside hire rates’ which are usually
higher than internal hire rates. An agent may also choose to use plant from a
local plant hirer because the cost of delivery may be less than that from the
contractor’s plant depot if the latter is remote from the site.
Internal hire rates for plant will need to cover the cost of plant depreciation,
running maintenance, major overhauls and renewals, plant depot and admin-
istration costs and some adequate return on the capital investment involved.
The cost of working repairs to plant is high, representing some 25 per cent or
more of the normal commercial outside hire rate. The frequency of repairs is
particularly high for mobile plant, where tracks may need frequent attention,
and tyres may need renewal at high cost every few months. Wire ropes for
cranes need constant renewal and a stock of same has to be kept on site.
Decision as to what plant and equipment should be owned by the con-
tractor is a complex matter. Easily transportable equipment which can be used
several times, such as temporary site offices, is commonly held in stock by
a contractor. Plant with a long life and little maintenance, usable on many
jobs – such as flat wheel diesel rollers – might also be held. But deciding
what other major plant should be held for hiring out to sites involves many