Owning and Operating Costs

The directional drill is one of the newest designs in the construction equipment pantheon, one that sparked a revolution in underground construction in the last two decades. But it’s also fairly sophisticated – in most cases a two-man machine – and it doesn’t exactly lend itself easily to a simple cost analysis such as those you would do for more basic machines like excavators or dozers.

We asked two experts from Vermeer, Bob Evans, trenchless service manager, and Ryan Erger, trenchless solutions specialist, for help in estimating the costs involved in owning and operating a directional drill.

As with any of these owning and operating cost exercises, remember that the costs, life cycles and other information presented are only estimates. They will vary based upon conditions, site preparation, maintenance and many other factors. And directional drilling is a high-skill application so operator experience will also play a big role in how much it costs to run one.

Before we delve into this we need to pick a fairly representative machine and establish the average lifecycle for this type of machine. Evans and Erger recommended we focus on a 36,000-pound machine. The obvious variable in machine life is the maintenance program, they say, but on average a drill’s useful life will be approximately 4,000 hours. A crew will put approximately 1,100 hours per year on a drill depending on conditions.

In our regular O&O cost calculations we deduct the value of the used machine at the end of its lifecycle from the cost of the new machine. This is a good model to follow if you turn over machines, like dozers and excavators, on a regular three- to five-year schedule to avoid the expense of major repairs and rebuilds. But not all O&O calculators use this model, and the more conservative models recommend you give your machines $0 of value at the end of their lifecycle.

Directional drills as a general rule aren’t flipped on a regular basis. Many crews do their own maintenance, and these machines can be kept in good running condition far beyond the 4-year/4,400-hour lifecycle we use here. So we’ll use the more conservative approach and assume you’re not going to add the resale value back into your formula. Your choice of O&O cost models may have tax considerations, so be sure to discuss the subject with your accountant or tax advisor before deciding how to price your work.

If you are more likely to trade directional drills on a regular basis, the residual values at the end of some lease/purchase agreements can be 3 to 5 percent above market value, say Evans and Erger. Market value, based on recent used equipment sales, can be as high as 75 to 85 percent after the first year of operation. However, resale prices can vary widely and depend on numerous variables.

Another owning cost that we’ve omitted here, but that you need to plug into your own calculations is insurance. Since directional drilling carries risks that open-cut applications do not, the insurance, both on the machine and your general commercial liability may vary depending on your insurance carrier, their familiarity with trenchless construction and your safety record. Also add into your total calculations the cost of a mixing system, truck and trailer to transport the drill; plus any tags, fees, or licenses to haul the equipment. Since these may already be part of your equipment fleet, we’ve omitted them here.

As in all of our O&O cost calculations, the final numbers you come up with on machine costs are not what you should charge for a job, but only your direct costs. To price your work accurately you have to add the direct costs to your overhead costs and factor in a profit margin as well.

OPERATING COST VARIABLES
Sending a drill stem and tooling down through the earth is a journey into the unseen. Anything can and frequently does happen. So it’s impossible to predict with any certainty what costs will be. Likewise, operator skill, soil conditions and the quality of your mud mixing program will have a big impact on your costs. What we’re presenting in these charts represents only averages, but here’s some advice from Vermeer on gauging these costs:

· Drill stem. Depending on the abrasiveness of the boring conditions, a forged, one-piece drill stem can have 50,000 feet of boring life. Rod will have much less life if it is used in abrasive conditions, is over-steered, if threads are not properly cleaned, and if proper thread lube is not used. The cost for a set of drill stem can run approximately $28,000.

· Downhole tools. Standard “dirt” tooling (drill heads and back reamers) typically last a year with proper maintenance. Reamers may require periodic additions of hardfacing to their wear surfaces. A tooling package (three reamers and a dirt drill head) costs approximately $8,000.

· Fuel costs. This size of drill will use approximately 4.5 gallons per hour at full rpm. Obviously, if you are running at less than full engine rpm, your fuel use drops accordingly. Considering that a drill does not run at high idle 100 percent of the time we adjusted this figure to give you an average of 3.5 gph.

LONG TERM COSTS
Even though our study here just charts a directional drill through 4 years/4,400 hours, Evans and Erger say they’ve seen plenty of drills go to 12,000 to 14,000 hours with good maintenance. That essentially triples the life of the machine for a fraction of the cost of the purchase price. If your program calls for maximizing the life of your directional drill, anticipate the following rebuilds (all figures are approximate):

· Engine: 8,000 hours/$9,500

· Undercarriage: 8,000 hours/$20,000 to $25,000

· Hydraulic system: 8,000 hours/$23,000