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iii iiiiiiiiiiiii iii STATE OF COLORADO MINED LAND RECLAMATION DIVISION OF CO Department of Natural Resources O tiW,i~.~\q~ ^ 1313 Sherman St., Room 215 CO 3 ~e ' ' ~~ ~ "~~~~ Denver. 8020 ~ ~" ~ 303 866-3567 - . ~/Rl6 FA%:303 832-8106 Roy Romei. Governor DATE: December 26, 1989 Dvs onD actor T0: Carl Mount FROM: Tom Gi 11 i s ,`0~ RE: Peabody Coal Equipment Cost Estimating Methodology I have completed a review of Peabody's proposed method of estimating equipment ownership costs for multiple shift work using Cost Reference Guide (CRG) base data and utilizing doubled annual use hour values to reduce hourly depreciation, overhead, and cost of facilities capital (CFC). This proposed method, and the Division's nethod, were discussed and compared in detail with Mr. Thomas Curl of Dataquest. Mr. Curl in turn met with Bill Woodall and Don Hopkins of Dataquest to determine the most appropriate method of using the CRG to estimate equipment ownership costs for independent earthwork contractors and not large scale mining operations. It was the conclusion of Dataquest personnel that the Division's existing method of using CRG base values and adjustments based on empirical independent contractor averages is a more appropriate method than that proposed by Peabody. As such, the Division cannot accept the hourly equipment costs proposed by Peabody. The minimum acceptable equipment costs remain those previously forr.~arded to Peabody by the Division. _,~ The Division's method of using CRG cost data consists of evaluating in sequence the full range of adjustments available in Section 23 of the CRG, "Cost and Production Formulas". For each cost element listed, the Division compares the base value of each cost factor pertaining to that cost element with average independent contractor cost factor values obtained from annual survey data of Associated General Contractor (AGC) members. This survey data is compiled by Dataquest and published in the Contractor's Equipment Cost Guide (CECG). The Division's adjustment for multiple shift work is made as specified in Section 23.VII of the CRG. Personnel from Dataquest did not feel that doubling CRG base annual use hours to produce a 0.5 adjustment factor for equipment depreciation and overhead was an appropriate method of adjusting ownership costs for multiple shift work, especially within the context of an independent contractor equipment ownership scenario where very little or no multiple shift work is done over the economic life of the equipmen] It has been the Division's direct experience in over 200 contracted reclamation projects completed in the last 7 years that independent contractors rarely, if ever do work on a 2 or 3 shift per day basis. Without exception, all of the jobs contracted by the Division since it's inception have been done on a single shift basis, and this work has included several large surface mine earthwork projects.