Capital Equipment Acquisition in Heavy Construction

• Published in: International journal of construction education and research Vol. 3; no. 3; pp. 159 - 178
• Main Authors: Clapp, Doug, Shuler, Scott, Nobe, Michael D., DeMiranda, Michael, Nobe, Mary Ellen C.
• Format: Journal Article
• Language: English
• Published: Taylor & Francis Group 11-12-2007
• Subjects: acquisition; decision analysis; heavy equipment
• ISSN: 1557-8771; 1550-3984
• DOI: 10.1080/15578770701715003

Capital equipment acquisition is an important process in the heavy construction industry. Equipment is often one of the largest investments for a company and has a significant effect on cash flow and profit potential. The purpose of this article is to investigate capital equipment acquisition processes of heavy construction companies. The equipment acquisition process was analyzed by evaluating equipment replacement policies, the position of the individual making equipment purchasing decisions, and the effect of company size on equipment replacement policy. A questionnaire was used to survey members of the Associated General Contractors of America and various asphalt and concrete pavement trade associations in the United States. Results suggest there is a direct correlation between the size of the company and the use of capital budgets and equipment policies as decision-making tools. Results further indicate that the chief executive officer is often the decision maker when it comes to equipment acquisition, regardless of company size. Equipment replacement is based on repair cost and equipment efficiency. An average of 75% of equipment is owned and is paid for in cash or through lease-buy options.