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O&O Costs: Excavators

August 31, 2008 |

The 20-metric-ton excavator has proven a reliable workhorse and popular machine size for a generation of earthmoving contractors. And as befits a mature machine design, the owning and operating cost parameters are well established. What you pay your excavator operator tops the chart in terms of operating costs, followed by fuel.

While there is not much you can do about the price of labor or fuel, manufacturers are building in a lot of improvements that make these machines less expensive and more productive to operate. The key is to know what costs you can control, keep those to a minimum and then accurately calculate all of your costs to sharpen your bids and improve profitability.

To dig into the details of excavator owning and operating costs we teamed up with two experts from Komatsu America: Chuck Murawski, product manager; and Peter Robson, senior manager tracked products.

Here are their suggestions and some ballpark calculations based on a new Komatsu PC200LC-8 excavator. Keep in mind that the dollar figures here are provided for discussion purposes only. The numbers you come up with in consultation with an equipment dealer should include more personalized information and variables specific to your jobsites and applications.

Komatsu, as well as many other manufacturers, offers a spreadsheet program into which you can plug your numbers and quickly figure out to the nearest dime how much your next machine will cost you to run.

Easy on the fuel
As the pie chart on page 45 demonstrates, operator wages in most cases will be your biggest O&O cost, followed closely by fuel. Just keep in mind that an experienced (i.e. well-paid) operator is an efficient operator. He’ll move more dirt, more productively and likely be easier on a machine as well – not over-revving the engine, stressing the frame or undercarriage or failing to grease the lube points.

Diesel prices are anybody’s guess these days and growing in importance. “People tell me they’re not even sure they’re making money any more,” Murawski says. “The price of fuel used to be a small part of the operating costs. Now it’s huge.”

The severity of the application has a big impact on the amount of fuel the excavator burns and the final operating cost. According to Robson, light applications include things like slope finishing, light material digging and lightweight lifting. Medium applications include excavating, loading and breaker operations. Excavation of hard bank material would fall under the heading of heavy applications.

Punch these variables into an O&O spreadsheet and you get quite a range of fuel costs, from $8.55 per hour for light applications to $20.25 per hour for heavy applications assuming $4.50 per gallon. One thing you don’t want to do is guesstimate your fuel use as average. Do so and you may be leaving a lot of money on the table. A better strategy is to get together with your equipment managers and add up exactly what your excavator’s fuel burned per hour is over the longest period of time for which you have records. Use this data to develop specific numbers for specific applications and calculate accordingly.

Most manufacturers now offer different work modes that optimize the engine rpms to the work being done. You’ll also find auto-idle systems and more efficient hydraulics on the better machines. In an era of $4.50 a gallon diesel, you’d be foolish not to take advantage of these. And make sure your operators understand and make full use of all these fuel saving technologies. The days of operators always using the most powerful mode are over.

Going high tech
Telematics systems are becoming increasingly popular on heavy equipment. Komatsu has had its Komtrax system as standard on most machines for more than two years. This remote monitoring system reports hourly fuel consumption on a daily, monthly and annual basis. Telematics systems offer you a great tool for not only monitoring how your machines are performing in real time, they also help you compile historical data to get highly accurate cost and performance information. (For more on telematics, see the August issue of Equipment World, page 39, or check out the web version at www.equipmentworld.com.)

“Komtrax can tell you a lot of things, like how much time the machine was in the economy mode vs. the power mode, how much it went over hydraulic pressure relief, how much the engine is at idle vs. working and how many hours the machine traveled,” Murawski says. Telematics systems will also give you early warnings of potential problems with engines, hydraulics or transmissions, helping you avoid catastrophic failures and the associated costs and downtime penalties. In addition, the fuel tank level can be measured remotely enabling service personnel to better schedule fuel deliveries. A service meter reading daily report allows preventive maintenance work to be scheduled efficiently.

Holding value
The biggest number to the positive in your owning costs is the resale value of your used excavator. The figure Komatsu projected for its PC200LC-8 in five years is $58,227, but Murawski notes that this amount can vary up or down by as much as 50 percent. A review of auction results on the previous dash-7 Komatsu PC200LC machines from TopBid (see below) suggests that that may be a conservative estimate and that a similar machine, well cared for, will hold at least that value if not do better. Keep in mind these are 2- to 5-year-old excavators, whereas our O&O resale figures for this article are based on estimates of what this year’s model will be worth in five years.

Service meter readings also affect the resale value, Murawski says. Monitoring engine idle time and taking steps to reduce this will increase resale value and lower fuel bills. A recent study by Komatsu indicates that the PC200LC-8 class excavator idles about 40 percent of the time.

Component lifecycles
The major components on an excavator will usually last longer than the five-year turnover period we’ve selected for this O&O analysis, For example, the typical engine, hydraulic and transmission rebuilds don’t happen until somewhere around the 11,000-hour mark. Undercarriages for these excavators usually last about 12,000 hours. In this calculation these costs have been built into the hourly repair rates.

Operating cost changes and fuel consumption
You need to know whether your applications will be light, medium or heavy duty in order to accurately calculate your costs.

In the example we used a medium-duty application, but look what happens to the numbers when fuel consumption changes. If your financial projections included a medium level of fuel consumption but you actually had light fuel consumption your bids on a monthly basis would be $506.25 too high (the cost difference between 2.8 and 1.9 gph.) If you projected medium fuel use but experienced heavy fuel use, your bids would be $956.25 too low per month (the cost difference between 4.5 gph and 2.8 gph).

O&O QUICK FACTS

A 30-percent increase in major component life will reduce O&O costs approximately 15 percent.
Each $1 increase in the cost of a gallon of diesel increases O&O costs about 7 percent.
Increasing service intervals from 250 to 500 hours will reduce your O&O costs by roughly $1 to $2 per hour.

EQUIPMENT WORLD’S TOP BID
Auction price results
Machine: Komatsu PC200LC-7 (model years 2002 to 2006), for auctions held July 2007 to July 2008.

Low: $37,000 (2002 model year, 7,032 hours)
Average: $72,000 (based on 25 machines, model years 2002-2006)
High: $95,000 (2005 year model, 2,000 hours)

For more information and auction prices go to www.topbid.com.

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