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GENERAL40657
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GENERAL40657
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Last modified
8/24/2016 7:59:48 PM
Creation date
11/23/2007 10:48:12 AM
Metadata
Fields
Template:
DRMS Permit Index
Permit No
C1982057
IBM Index Class Name
General Documents
Doc Date
3/2/1990
Doc Name
EQUIPMENT COST ESTIMATING METHODS STIPULATION 15 RESPONSE
From
MLRD
To
PEABODY COAL CO
Permit Index Doc Type
Stipulation
Media Type
D
Archive
No
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Mr. James Lunan - 2 - March 2, 1990 <br />Personnel from Dataquest did not feel that doubling CRG base annual use <br />hours to produce a 0.528 adjustment factor for equipment depreciation and <br />overhead was an appropriate method of adjusting ownership costs for <br />multiple shift work, especially within the context of an independent <br />contractor equipment ownership scenario where very little or no multiple <br />shift work is done over the economic life of the equipment. It has been <br />the Division's direct experience in over 200 contracted reclamation <br />projects completed in the last 7 years that independent contractors <br />rarely, if ever, do work on a 2 or 3 shift per day basis. Without <br />exception, all of the jobs contracted by the Division since it's <br />inception have been done on a single shift basis, and this work has <br />included several large surface mine earthwork projects. <br />The essential consideration with respect to equipment ownership, <br />regardless of the values and adjustment methods used in a particular cost <br />data source, is that the equipment owner must recover sufficient funds <br />over the economic life of the machine to pay for the net acquisition cost <br />and interest expense or cost of facilities capital. A basic computation <br />of net acquisition cost plus interest expense divided by economic life <br />hours reveals that Peabody's proposed ownership cost values simply do not <br />recover sufficient funds to pay for the equipment. Even if a contractor <br />were to elect to bid a state contracted reclamation job on a multiple <br />shift basis, it is doubtful that the contractor could measurably reduce <br />equipment costs below the usual single shift rates as the equipment used <br />on the job would still have about the same number of service hours and <br />years on the machine at the time of trade-in as if the machinery had been <br />used solely on a single shift basis over it's entire economic life. An <br />exception to this would be a situation such as a large scale, long term <br />mining operation where the equipment is used on a multiple shift basis <br />for all or a significant portion of it's economic life. In this case, <br />personnel from Dataquest have pointed out that the salvage value may be <br />higher fora machine that is only 4 years old at 12,000 service hours <br />(the end of it's economic life) than for a machine used primarily in <br />single shift applications that would be 8 years old at 12,000 service <br />hours. The relatively higher salvage value resulting from trade-in of a <br />later model year machine would serve to reduce the net acquisition cost <br />which in turn would require recovery of fewer dollars per machine service <br />hour to maintain equipment solvency. However, as also pointed out by <br />Dataquest, machines used extensively in multiple shift work applications <br />may experience relatively higher operating costs per service hour due to <br />increased wear resulting from the inability to perform proper <br />preventative maintenance. <br />Multiple Shift Work - Other Cost Considerations <br />The Division has for the past several years been accepting equipment <br />costs adjusted for multiple shift usage only for the few very large <br />mining operations in the state, and then only in accordance with the <br />following conditions and criteria: <br />a. The size of the joD must be significantly larger than the range of <br />job sizes experienced by the Division in contracting actual <br />reclamation jobs over the years. Job sizes falling within the <br />range of the Division's direct contracting experience are estimated <br />on a single shift basis; <br />
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