1. 0 Record INFORMATION
The performance of the development industry has a major affect on the economical, infrastructure, agricultural and technical development of a country (R. Chudley, 1995). Structure is increasingly becoming highly specialized and sophisticated with high standard of quality and specs. These in conjunction with clients demand for value-for-money requires the useful occupation of equipment which can basically improve efficiency in the structure industry.
The general aim of every structure is to produce a structure that can provide the mandatory functions at most fair cost, within confirmed time frame with the required quality level. Mechanization is one of the ways by which these could be performed. The fast developing development industry now greatly depends upon equipment to achieve the high demands of quality project delivery.
Equipment implies the machinery, tools (apart from craftsmen's personal tools) used in the contractor's yard, workshop or site. Generally, equipment are introduced to deals to raise the rate of end result, reduce overall building cost, achieve high outcome benchmarks often required by present day designs and specs, eliminate heavy manual work thus reducing fatigue and carry out activities which can't be done manually or do them more financially ( R. Chudley, 1995).
The advantages of equipment to a agreement does not however necessarily cause economic personal savings unless the deal work is so sorted out that machines are totally utilized or operate for continuous periods at full capacity that is approximately 85% of its on-site time, their use will not be economical. To be economical, equipment must be completely utilized rather than left position idle since equipment, whether appointed or owned, should be paid for even if it's non-productive (R. Chudley, 1995).
Heavy equipment will be necessary for excavation, haulage, lifting and travelling of materials and folks during the engineering of a job in order to meet all the client's features. Contractors stand to gain from the utilization of equipment in the form of increased outcome per staff, increased output from equipment resulting in overall income.
Unfortunately, performance of development firms in the industry has been afflicted by several constraints with lack of access to finance arguably the most significant of the constraints. At least, it prevents companies from procuring all necessary resources because of their building works including equipment (Eyiah A and Cook P, 2003).
It is against this background that inspection has been conducted to find the equipment acquisition methods being employed by Ghanaian companies as well as the issues the contractors come across when acquiring equipment for their construction.
1. 1 Assertion OF PROBLEM
The highly complex and standardized character of current development designs and high needs in terms of quality in conjunction with often short deal durations undeniably demands the utilization of equipment. They play an extremely important role in building as well as civil engineering procedures and both time and lots of money can be kept by acquiring and using them. Heavy equipment are needed for excavation, haulage, lifting and vehicles of materials and folks during the building of a project thus performing an operation faster, more economically, carefully and with a much better quality and finish off.
Notwithstanding such great achievable benefits, it requires significant capital to procure equipment, set up place management departments and even use the gear. It often requires large bank guarantees, collaterals, high interest rates on bank loans, sometimes cumbersome bureaucratic techniques to acquire cash to purchase plant or equipment. This is probably why most Ghanaian contractors still depend closely on manual labour to execute their jobs.
On large and sophisticated projects of long durations, it could be practical to acquire place or equipment for a particular job and resell at the end of the contract. The problem here's that fluctuations in prices on our market may make it difficult to forecast costs with certainty.
Equipment holding firms often do not offer advantageous and attractive conditions for the acquisition of equipment to encourage companies to use equipment on the jobs. Very few of the companies can meet up with the required conditions before procuring most needed equipment. Again, equipment positioning businesses are usually found in the cities of our own country which are nearly always a long way away from the majority of the construction sites warranting high haulage costs from the vegetable depot.
Purchasing a flower or equipment may possibly also inform greatly on the funds of the organization as a very large amount of cash may be locked up in purchasing the herb which then should be worked well at a good utilization level to recoup purchases made into it.
Finally, purchasing equipment is reasonable investment when there is enough work in advance to keep it fully employed. Some estimates suggest the equipment must be working regularly for 3 to 5 years to recuperate the capital outlay. Nevertheless the situation in Ghana is the fact that of many companies competing for hardly any projects. Construction companies cannot be promised of regular assignments to fully utilize their investment in equipment therefore they somewhat do not spend money on everything or when they certainly, it's very minimal.
All the aforementioned problems collectively contribute to the key reason why most of the contractors cannot find the necessary equipment for engineering works and so leaving structure in Ghana still very labour rigorous.
1. 2 AIMS AND OBJECTIVES
The main aim of this analysis is to investigate the existing equipment acquisition methods in use in the Ghanaian structure industry as well as the problems that the contractors encounter when acquiring equipment with the view to recommending better and more effective routines in the development industry.
* Learn existing equipment acquisition options used by the Ghanaian company.
* Identify problems experienced by the Ghanaian company in acquiring equipment for development works.
* Examine existing preparations (if any) made between equipment employ the service of and manufacturing companies and the building companies.
* Recommending better acquisition options as well as solutions to a few of the major problems the companies face when they make an effort to acquire equipment.
1. 3 SCOPE OF WORK
A range of companies within the D1 and D2 of contractors by the Ministry of Water, Works and Housing and the Ministry of Roads and Transport in the Kumasi Metropolis will be discovered, selected and researched.
The equipment items which will be covered under the analysis will include basic equipments, globe moving, lifting, moving and excavation equipments.
2. 1 Launch: Development EQUIPMENT
Equipment plays an increasingly important role in building as well as civil anatomist operations, and both money and time can be preserved by the reliable use of mechanised aids. Equipment signifies the machinery, tools (other than craftsmen's personal tools) and other equipment found in the contractor's garden, workshop or site. These may range from small handheld electric power tools to much larger and more expensive equipment such as mechanised excavators and cranes.
The goal of any development activity or job is to make a structure of the right quality and standard at an optimum cost within an acceptable timeframe. The use of equipment for building is needed where using manual labour will not help achieve the project's goals.
* Increased development.
* Decrease in overall engineering costs.
* Carry out activities which can't be carried out by the traditional manual methods in the framework of economics.
* Eliminate heavy manual work thus lowering fatigue and as a result increasing productivity.
* Updating labour where there's a shortage of employees with the necessary skills.
* Keep up with the high specifications required particularly in the context of structural anatomist works
(R. Chudley, 1997).
2. 1. 2 SOME TYPICALLY COMMON CONSTRUCTION EQUIPMENT USED DURING CONSTRUCTION.
Presented this is a brief information of a few of the important engineering equipment which may be used during the construction of a building project.
2. 1. 2. 1 EARTH MOVING MACHINES
The equipment detailed here are the bulldozers, graders, scrappers etc that are used to move significant amounts of excavated materials during engineering.
The key earth-moving machine is the heavy-duty tractor, which when fixed with tracks to grip the ground and with a huge movable blade fastened in front, is named a bulldozer. The bulldozer as shown in fig 2. 1 below enable you to clear clean, small trees, dirt, remove boulders, and level ground. They may even be utilized as towing tractor or a pusher to a scrapper. They comprise essentially of the track or wheel mounted power product with a mould blade at the front. Many bulldozers have the capability to modify the mould blade to create an angledozer which can tilt the mould blade in regards to a central swivel point. They become even very helpful especially in civil engineering projects, which often require the moving of millions of cubic meters of globe. These bulldozers are however not appropriate for last leveling and cannot be used for loading thus requiring other equipment to insert.
These are occasionally called loaders or loader shovels and key function is to scoop up loose materials in leading attached bucket, elevate the bucket and first deposit the material into an attendant transfer vehicle. Tractor shovels are powered to the pile of loose materials with the decreased bucket. The quickness and the energy of the machine will then allow the bucket to be filled. To improve their versatility, the tractor shovels can be fitted with a 4 in 1 bucket enabling them to carry out bulldozing, excavating, raising and loading activities.
Like the scrapper, the tractor shovel is not suitable for work in rocks and waterlogged areas and will require a crawler tractor to work in the latter condition.
Somewhat just like scrapers are graders that are self-propelled, wheeled machines with a long, inclined or vertically versatile metallic blade. Graders are primarily completing equipment; they level globe already shifted into position by bulldozers and scrapers. They act like the bulldozers for the reason that they have an extended slender variable mould blade, which is usually slung under the centre of the machine. The mould blade can be suitably fine-tuned in both horizontal and vertical planes via an perspective of 300 the second option enabling it to be used for grading sloping finance institutions. This John Deere grader seen in Fig 2. 2a below has a laser beam leveling unit installed on its blade which constantly changes the height of the blade to ensure that the bottom is made exactly flat.
The low purpose ability of a grader does not generally enable use within excavations. A grader cannot fill nor move spoils of significant quantity over an extended distance. It really is bulky in proportions and for that reason not ideal for work in small and/or limited areas and edges.
A scraper is a machine which may be pulled by way of a tractor or may be self-powered and includes a blade and a dish or pot. The bowl is reduced to minimize and collect garden soil where site stripping and leveling functions are required regarding large level of earth. The ground will then be released to be able to form an even layer of a predetermined width or be transported off for disposal elsewhere.
To obtain maximum efficiency, scrappers should operate downhill and as much as possible have simple haul streets and hard areas broken up before scraping. Scrappers are not suitable for utilization in waterlogged areas and in rocky grounds. They can not be utilized in launching and also would need travelling between sites.
[Microsoft Encarta 2006; R. Chudley, 1997]
2. 1. 2. 2 EXCAVATORS
These form part of the primary equipment items which are often used in construction. They are mostly used to excavate as well as weight different types of dirt. Each different kind of excavator has specific dirt conditions where it is most effective. Below is a brief description of a few of the common excavating equipment found in construction. All of them may easily be categorized under one of the next categories: Multipurpose, Basic or General and Goal Made excavators.
Multi-purpose excavators like the one shown if fig. 2. 4 are installed with a launching and excavating prominent bucket and a rear backactor bucket. When in operation using the backactor bucket, the machine is brought up off its axels by back installed hydraulic outriggers or jacks and in some models by putting leading bucket on the floor.
A trencher is designed to excavate trenches at continuous width with a higher degree of accuracy and speed. It could minimize trenches of widths between 250 and 450mm and up to 4. 00m profound. It involves lots of excavating buckets installed on a continuous system over a vertical increase. The growth is lowered in to the ground to the mandatory depth to be excavated. The spoil is then moved along a mix conveyor to deposit the ruin along the side of the trench.
A trencher as shown in fig 2. 5 is most ideal for long and deep trench excavation and it also gives a pretty appropriate and clean trench width and would therefore not require further trimmings to factors of trenches it excavates.
A trencher cannot weight materials it excavates and also struggling to work in rock and roll.
Skimmers are being used for surface stripping and shallow excavation build up to 300mm deep in which a high degree of accuracy is necessary. They often requires attendant haulage vehicles to remove the spoil and they also have to be transported between sites over a low-loader.
The restricted characteristics of the bucket movements will not allow high productivity rates as compared with other over site excavating equipment. A skimmer requires a large operational area and it is therefore not advised for work in small and restricted areas.
Backactors are about the most frequent excavating equipment used in construction. These are suited to trench, foundation and basement excavations especially in limited areas. They can be used in combination with or without attendant haulage vehicles since the ruin can be put alongside the excavation for use in backfilling. Unlike the face shovel, they excavate by moving the bucket on the chassis of the machine. It then raises the bucket in a tucked position to discharge the excavated materials through leading available bucket. They can be used to load hard but broken down materials. They require a low-loader transportation between sites and trenches excavated using the backactor may need other equipment for trimming to obtain desired smooth sides. Shown below in fig 2. 6a and b are pictures of your John Deere and Pet cat backactors respectively.
The principal function of this machine is to excavate against a face or a standard bank above its trail or wheel level. It is well suited for clay and can be utilized in excavating and even rock and roll which must be loosened, usually by blasting before the excavation. A face shovel gets the added good thing about loading materials excavated into dump trucks. It may also be used thoroughly for relocating spoils within a given radius or short distance and for heaping spoils for future use.
Face shovels like the one shown in fig. 2. 7 above usually require attendant haulage vehicles for the removal of the ruin and a low-loader transportation between sites most especially in developed areas. Also, they are not ideal for deep excavations.
2. 1. 2. 3 TRANSPORTING EQUIPMENT
These are mainly used for the vehicles of workers, materials, machines and equipment in one site to the other or in one location to the other within a relatively large site. They range from normal saloon car to the large low loader lorries designed to transport other items of contractors equipment between development sites and the gear garden or depot.
These transfer vehicles add the small two person plus a limited amount of materials to the top vans with purpose designed physiques such as those designed to carry bed linens of wine glass. The vans can be supplied with an uncovered tipping or non-tipping container mounted behind the traveler cab for use as a 'pick-up' truck.
Lorries which are usually referred to as haul vehicles can be found as street or site only vehicles. The street haulage vehicles have to adhere to all the requirements of the concerning vehicle utilization which among other requirements restrictions size and axle lots. The website only vehicles are not so constrained and can be designed to carry two to three times the axle fill allowed on the general public highways. They are also designed to stand up to the rough landscape experienced on many development sites.
Lorries specifically made for the travelling of large items of equipment are called low loaders and are usually equipped with integral or removal ramps to assist in loading equipment onto the carrier platform.
These can range from a straightforward framed cabin which can be put in the box of a small lorry or pick-up pickup truck to a typical bus or mentor. These vans can even be designed to bring a limited volume of seated passengers insurance firms fixed or detachable seating as well as windows built in the van edges thus giving the vehicle a dual function.
Dumpers are used for horizontal vehicles of materials which range from aggregates to wet concrete on / off building sites generally by means of an intrinsic tipping neglect.
Highways dumpers or dumper pickup trucks are similar but much larger design and may be used to take materials such as excavated spoil along the highways. A wide range of dumpers can be found with variuos holding capacities with hydraulic control for either a side, leading or elevted tipping. They are made to traverse rough ground but they aren't desinged to carry travellers. Shown above in fig. 2. 8a and 2. 8b are shown a typical site dumper and a dumper truck respectively.
These are being used for horizontal and limited vertical vehicles of mterials positioned on pallets or banded along such as brick packages. They are generally suitable for construction sites where in fact the building height does not go beyond three storeys. They are available in three basic varieties particularly staright mast, over head and telescopic growth (shown in fig. 2. 9a-c) with various height, reach and lifting capacities.
Hoists are designed for vertical travel of materials, people or both. Materials hoists are usually mobile and they can be dismantled, folded onto the chassis and moved to some other position or site under their own electric power or towed by a haulage vehicle.
Passenger hoists are designed to carry passenger people although they most can be capable of carrying the load of individuals as well as materials.
2. 1. 2. 4 CRANES
Cranes are raising devices designed to raise materials through rope operation and move the strain horizontally. Crane types can range from simple rope and pulley to intricate tower cranes but most can be placed within one of three communities particularly: static (operate from a fixed position), mobile (working position can be evolved by cran under its own vitality) and tower (can be managed from a set position or rail attached to become mobile) cranes.
* Self propelled cranes
* Lorry Mounted cranes
* Track attached cranes
* Gantry/Site cranes
* Tower cranes
Below in fig. 2. 10 is shown the various types of cranes found in the building industry.
2. 1. 2. 5 Concreting equipment
these equipment perhaps fall among the band of equipment which may be readily entirely on most constrction sites since concrete usually forms a huge propotion of the materials found in construction. Concreting equipment can merely as grouped under the following headings: mixing, vehicles and placing.
These are used in combining concrete especially in large quantities. In addition to the very large productivity mixers most concrete mixers generally speaking use have a rotating drum designed to produce concrete without segregation of the combine.
Most small batch mixers are of tilting drum type with outputs up to 200 lit/batch. They are usually hand loaded which makes the quality control of successive mixes difficult to modify. Medium batch mixers can perform outputs up to about 750lit/batch and could be designed with a tilting drum mixer or as a non-tilting drum mixing machine with a reversable drum. These mixers usually have vital weight bacthing launching hoppers, scrapper shovels and normal water tank thus giving better qualtity control than the small batch mixers.
The pictures shown in fig. 2. 11 and 2. 12 are the quite typical 10/7 concrete mixing machine and 6m3 capacity ready combination concrete machine.
EQUIPMENT FOR TRANSPORTING CONCRETE.
Wheel barrows are the most common form of moving concrete in small quantities. But also for large volumes as high as about 600 litres, dumpers are more appropriate. Ready combined concrete trucks are being used to transport mixed concrete of amounts between 4-6m3 from a blending equipment or depot to the site. Release can be immediate into inserting position via a chute or into some form of site dumper like a dumper, crane skip or dumper.
After placing concrete in its formwork, excavated area or mould, the cement must be properly proved helpful around any insets or reinforcement and finally compacting the concrete to the required consolidation. This is done to some degree satisfaction using tamping planks or rods but most appropritely using vibrators.
Poker vibrators consist of a hollow steel tube casing in which is a rotating impellar which generates vibrations as its heard makes connection with the casing.
[Microsoft Encarta 2006; R. Chudley, 1997]
2. 2 EQUIPMENT ACQUISITION
Generally, a engineering company has two options in acquiring equipment: it may either own machinery and equipment or hire it. Management must decide early on if the equipment needed on site is to be employed or purchased outright, if it's not already available within the company. 'Purchasing equipment is reasonable investment when there is enough work ahead to keep it totally employed. Some quotes suggest the equipment must be working regularly for 3 to 5 years to recover the capital outlay' [J. E. Johnston, 1981]. Your choice to buy will invariably have important financial implications for the company, since extensive capital sums will be locked up in herb, which must then be run at an monetary utilization level to make a profitable rate of return on the investment. Lately however, the expansion of the independent equipment hire sector of the development industry has greatly facilitated this latter option and approximately 50-60% of equipment currently used on tasks is appointed. Many companies however prefer to hire only those components of equipment which are required to meet peak demand or specialised duties [F. Harris and R. McCaffer, 2001].
2. 2. 1 ECONOMIC CONSIDERATIONS
The benefits of equipment to a task does not necessarily result in economical savings since extra momentary site works such as street works, foundations, hard standings and anchorages may have to be provided at a price which may be more than the savings created by using the equipment. The site layout and circulation may need to be organized around equipment positions and accommodation. The entire advantage of using the equipment can only be came to the realization if the gear is well been able, both on and off the site, and this requires a detailed knowledge of the economic areas of using equipment and vehicles. For example, a crane can be expensive if the design will not allow a reasonably continuous program of work whilst it is on the webpage.
To be financial, vegetable must be totally utilized rather than left ranking idle since equipment, whether chosen or owned, will have to be paid for even if it is non-productive. Full utilisation of equipment is usually regarded as around 85% of on site time, thus making an allowance for daily habit daily and organized maintenance which needs to be carried out to avoid so far as practicable equipment breakdowns which could disrupt the construction programme. Many devices work in conjunction with other items of equipment such as excavators and their attendant haulage vehicles therefore a correct balance of such equipment items must be obtained to accomplish an economic effect (R. Chudley, 1995; R. E Calvert et al, 1996).
2. 2. 3 EQUIPMENT POLICY
2. 2. 3. 1 OWN ALL EQUIPMENT
The policy practiced by many businesses is to get, or lease long lasting, most of the gear needs and therefore provide availability all the time, with the added good thing about the prestige attached to demonstrating the utilization of held equipment. However, much capital will be locked up in the gear, which must become with the capacity of generating an adequate rate of go back. A major drawback of this strategy is the challenge of maintaining adequate levels of utilisation. Equipment holdings are usually developed to service a growing demand, and will turn into a heavy liability in the case of an economical recession. Any available work may then subsequently need to be undertaken to support the fleet, since equipment cannot easily be bought from a declining market.
2. 2. 3. 2 Employ the service of ALL EQUIPMENT
Many specialist employ the service of/rental firms provide you with the way to obtain equipment now on the open up market. To use advantage of this service avoids both the responsibility of maintenance and the tying up of capital. The gear may be employed for a particular period and frequently times the gear operator is provided by the equipment supplier.
The main downside of hiring is that the hire rate depends upon market makes and suppliers are essentially beyond the control of the employ the service of, except for limited negotiation between competing firms.
2. 2. 3. 3 A COMBINATION OF Employ the service of AND OWN
A mixed coverage of getting and selecting equipment may be the most well-liked option. For example, regularly required items might be purchased and hiring adopted only to smooth out demand (Edwards D. J, 2003).
1. Acquire equipment new and operate to a down value and sell it.
2. Acquire second-hand equipment and operate to scrap value.
3. Acquire equipment new and operate to scrap value.
4. Get a second-hand equipment and operate to a down value and resell.
2. 2. 4 FINANCING OF EQUIPMENT
A organization, having decided to buy a equipment instead of hiring, has the following ways of paying for the equipment.
1. Cash or outright purchase
2. Employ the service of Purchase
3. Credit Sales
2. 2. 4. 1 CASH OR OUTRIGHT PURCHASE
When using this program, the buyer gives cash or immediately at the time of purchase, in doing so providing tangible asset on the total amount sheet. Obviously, this option is only possible if cash is offered and for that reason presupposes that gains have been built up from traders such as shareholder, bank loans, etc. Also, some large or theoretically unusual agreements sometimes include monies to permit the contractor to purchase the necessary equipment at the start of the task [F. Harris and R. McCaffer, 2001].
1. Equipment availableness is very within the control of the builder.
2. Hourly cost of equipment is normally less than employed equipment.
3. Owner has selection of charging method used.
1. Capital outlay and interest charges
2. The cost of maintenance and repairs
3. The expense of transporting equipment between sites
4. Insurance premium and
5. Position time on site.
1. Will that of equipment generate sufficient turnover to offer an satisfactory rate of go back on the capital employed?
2. Is ownership of the gear, somewhat than obtaining it by some other method, absolutely necessary for the business enterprise?
3. Is outright purchase the only way of acquiring the equipment? [F. Harris and R. McCaffer, 2001]
2. 2. 4. 1. 1 COST OF Buying AN EQUIPMENT
When a product of equipment is put functioning, it commences to degrade. Regardless of the care in preserving and repairing it, the equipment will wear out or become obsolete and needs to be replaced. Who owns the equipment has to provide a reserve fund to replace it when it's worn out. Where in fact the contractor does not include a proper allowance for depreciation of his equipment in his estimation, there will be no funds available to replace the gear when they become aged or obsolete.
ii. Maintenance and repairs
The cost of maintenance and fixes varies noticeably with the type of equipment, the service to which it is allocated and the good care it will get. The gross annual costs of maintenance and vehicle repairs is indicated as a percentage of the gross annual cost of depreciation or impartial of depreciation and it must be sufficient to protect the expense of keeping the gear operating.
iii. Operating Costs
Construction equipment run on fuel and lubricating engine oil in order to carry out operations and the quantities consumed as well as the machine cost of fuel and lubricating natural oils vary with the sort of equipment, the conditions under which it can be used and the location. The contractor determines the conditions that your equipment will operate so operating costs can be determined. These conditions include the extent to that your engine handled at full power on a regular basis and the real time the unit operates within an hour or each day.
iv. Investment Costs
This is the price involved in getting equipment including money invested, interest on money spent, taxes of most types assessed against the equipment, insurance and safe-keeping. Insurance and taxes are paid on the depreciation value of the gear.
2. 2. 4. 2 Employ the service of PURCHASE
'Hire purchase is a agreement whereby the acquiring company gives a regular fee with some predetermined point after payment of a percentage of the decided employ the service of charges, the acquiring company will buy the gear for a nominal sum' [F. Harris and R. McCaffer, 1991]. The work with purchase option dismisses the necessity for large capital amounts is averted, and the payments on the borrowed can be made progressively. Hire purchase however often includes high degrees of interest.
The interest of the purchase company or owner in the advantage is that of a security interest because the asset can be retrieved upon breach of an term or conditions of the hire purchase contract by the hirer except that under the Hire purchase Decree of 1974 the dog owner can only retrieve the property by recourse to the courts where the hirer has paid half of the full total purchase price. Thus, under a hire-purchase arrangement, installment payments made by the hirer go to fulfill the purchase price of the asset and therefore are made out of a view to buying the property (Tshribi K. , 1998).
2. 2. 4. 3 CREDIT SALES
A credit sales is a sales in which the acquiring company requires the possession or title of the gear item immediately however the purchase price is paid in installments. These installments are the purchase piece, plus any funding charges the vendor makes. Credit sales, like outright purchase, get capital allowances immediately and can be utilized just as as outright purchase.
2. 2. 4. 4 LEASING
A leasing design is basically different from either outright or high purchase in that the name theoretically never moves to an individual or lessee. A rent may be defined as a contract where the lessee obtains the utilization of the capital asset possessed by another get together (the lessor). Keystone Capital, a lender in America writes, 'One of the largest reasons to lease business equipment is that it offers fairly minimal upfront costs. Leasing has now become very popular all over the world and especially in the producing world where small and mid-sized businesses are predominant. Leasing enables business entrepreneurs to get more benefits from the leased items alternatively than buying. It gives you to help make the best use of the equipment without having to invest to possess them. This lets you keep your capital in the lender while making important assets and ventures in your business', (www. keystonecapitalonline. com)
'Leasing engineering equipment for your business is an excellent choice. Corresponding to industry research, about $3, 401, 620, 772 of building equipment is leased every year by businesses in america. These businesses rent building equipment because they know that leasing offers numerous advantages over other styles of financing, including taxes deductions, balance sheet management, . . . personalized solutions, better asset management, improved cashflow, flexible end of term options. . . ', (www. directcapital. com). R. E Calvert et (1997) al also write that an more than 60 percent of most equipment is hired in the UK by companies.
Finally, renting can lessen the burden that taxes have on your company's finances. Depending on how your rent is structured, you could be able to totally deduct lease payments as a company expense, as opposed to depreciating the value of the gear as though it were a capital costs. Leasing however is a regarded as a fixed term contract so that lessee cannot come back the leased asset in the event of a altered business needs. The lessee also offers the responsibility usually of retaining the leased equipment. This might become expensive particularly if the lessee does not have in-house maintenance skills [R. J. Carter and P. Price, 1995].
There are several varieties of lease which might be designed to go well with the parties concerned.
a) Money Lease
Also known as a capital rent or conditional sales, this type of lease is normally arranged by a lender which neither has any particular desire for the gear nor offer technical support. It might be more suitable if you would like to keep the equipment by the end of the rent. The local rental charges will cover the asset's capital cost, except for its expected residual value at the end of the rent, together with a service charge designed to meet up with the lessor's overheads, interest charges, servicing costs and an element for income. 'The main good thing about this kind of lease is the fact that it offers you the choice to purchase the gear for a nominal payment and payment conditions on fund leases have a tendency to last near the expected useful life of the equipment', www. buyerzone. com. The lessee has full use of the property as though it were managed and at the end of the lease the asset is sold by the lessor yet not necessarily right to the lessee. In any financial lease contract, neither the lessor nor the lessee can terminate the agreement without legal fines.
b) Functioning Lease
Whereas a financial rent is generally provided by a financial institution, the lessors in the case of an operating rent are likely to be the manufacturers or suppliers of the advantage, whose purpose is to assist in the marketing of that. The charges here are frequently lower than those required by way of a finance lease because the sort of asset involved would either have a good second-hand value, or be linked with a lucrative service arrangement or way to obtain free parts. Indeed, the revenue expected by the expected by the lessor might well result from these second option services.
Clearly, this type of layout is best suited for large and/or technically superior equipment items where in fact the manufacturers have skilled workers and are capable of carrying out the mandatory services and maintenance. Most haulage pick up truck manufacturers offer this method of trading when a healthy second-hand market is available [F. Harris and R. McCaffer, 2001].
A further benefits to the lessee is that the title remains with the lessor but unlike funding lease, no entry is necessary on the lessee's balance sheet. Subsequently the administrative centre gearing1 would stay unchanged and this could therefore be especially convenient to a highly geared company, which
1Gearing is the percentage of the business's loan capital (credit debt) to the value of its typical shares (equity)
might normally find difficulty in bringing up loan capital for immediate purchase or even hire purchase of the gear item. The rent charges are believed as a company expense and are also include as costs in the revenue and loss profile. The lessor or the lessee can terminate the agreement at any time, on the foundation that the lessor will be responsible for any damage occurring to the leased item. This sort of Leasing is very near a normal lease agreement.
2. 2. 4. 4. 1 Payment options
While set monthly payments will be the norm especially in developing countries like Ghana, they aren't your only choice. Depending on your company's finances, your equipment rent financing range from one of the payment plans that may be more appealing. If the company's cash flow ebbs and moves with the seasons, you might want to consider a miss lease. A lease with this repayment composition allows you to skip obligations during slow weeks without having to be penalized. They are really suitable for recreational and agricultural businesses that count heavily on times of the entire year for significant servings of their income.
Step-up leases provide a solution for companies with limited cash that are depending upon the acquisition of specific equipment to increase income. This sort of lease identifies that the company can handle increased lease payments as time passes, and keeps payments low at first then ramps them up regarding to a pre-determined agenda.
An alternative to a step-up lease is a 60- or 90- day deferred lease. As its name indicates, this lease gives you to defer your first repayment for 2 or 3 three months. Usually you will not have to provide a down payment with this program (www. buyerzone. com/money/equipment-leasing/buyers).
Lease conditions range anywhere from 6 to 120 weeks, although almost all fall season between 12 and 60 weeks. The lease term that you select upon depends closely on what you choose to do with the gear at the end of your lease. Usually, you have four options. You could
* Return the equipment to the lessor with no future obligation.
* Renew the lease.
* Choose the equipment for a nominal fee or predetermined price agreed after at the lease inception.
* choose the equipment at fair market value
Before agreeing to any particular end of lease clause, carefully think about what state the gear will maintain at the end of the rent, and whether you'll want to secure a newer model at that time.
2. 2. 4. 4. 3 GREAT THINGS ABOUT LEASING
1. Renting Conserves Capital Power
Leasing eases the strain on working capital because you can buy the equipment and technology you need today while distributing your repayments affordably across time. This enables someone to reserve your capital for other day-to-day expenses. It converts a big cash deal price into a low, affordable, tax-deductible monthly payment.
2. Capital Conservation
'If it appreciates, buy it. If it depreciates, rent it'. Traditional loan company lines are simply perfect for operating the day-to-day operations of the business but not for financing long-term equipment acquisitions. Leasing provides an alternate source of credit and financing more fitted to depreciating technology investments. Don't invest in depreciation.
3. In leasing, collateral is hardly ever required because the leased property assists as security as the lessor keeps ownership on the property. In event of default, the lessor can repossess the advantage, a relatively self-explanatory process in most countries.
4. Preserve Credit Lines
Leasing will not weaken your borrowing electric power because no money has been borrowed. Just because a rent is not considered a long-term arrears or liability, it generally does not appear as personal debt on your financial record, making you more attractive to traditional lenders if you want them. Lease and your existing line of credit remain healthy and designed for the unforeseen.
5. Resolved rate lease payments
No variable interest rates here. Fixed payments allow a lessee to more effectively anticipate equipment costs and cash needs.
6. Leasing Overcomes Budget Restrictions and Guards Against Obsolescence
Lease repayments are often lower than purchase installments, making the the majority of your current budgets. This enables lessee companies to acquire every one of the equipment had a need to meet current demands, rather than having to work with outdated or poor equipment.
7. Avoid Obsolescence
Buying helps bring about keeping equipment far beyond its useful life. Out-dated equipment is often stored away until it is less than worthless (sold for under the costs of selling). Equipment leasing protects your company from having to keep outdated equipment. Trade-in, add-on and upgrade features and allows you to help make the needed adjustments as your business grows up.
8. Renting Lessens the Impact of Inflation
Through leasing, you can offset inflation with set lease payments. You are able to find the equipment you need at today's prices and shell out the dough with tomorrow's, less valuable cedi.
Leasing gives you to react quickly as your need for equipment and technology arises. You can be approved for financing within time through minimal documents and you will have the equipment you will need in operation and producing income for your business, quickly and without complications.
10. Taxes advantages
The Internal Revenue Service will not consider an operating rent to be always a purchase, but rather a tax-deductible over head expense and therefore does not charge VAT on leased equipment. Therefore, you can deduct the lease payments from your corporate income. Lease rental payments are produced from pre-tax somewhat than after-tax earnings.
2. 2. 4. 4. 5 Leasing in ghana
Leasing companies are a relatively new sensation on the financial world of Ghana. The activities of leasing companies are intended for providing money leases, usually for industrial equipment, automobiles and office equipment. Capital and money are usually provided by the corporate owners who frequently comprise of banks, insurance companies and other financial institutions.
Leasing companies play a very important role by giving brief to medium term funding for development of private sector companies which is unavailable through the traditional sources. In recognition of its importance to the current economic climate and the necessity for statutory legislation, the Finance Rent Rules of 1993, PNDCL. 331 was specifically enacted to streamline funding lease agreements. This rules has given labor and birth to such Non-Banking FINANCE INSTITUTIONS like the Ghana Leasing Company Ltd. , Leasafric Company Ltd. and Merban Fund and Leasing Co. , Ltd. (Bank and Financial Law Journal of Ghana, Vol. 1 No. 1). Place Pool Ghana Limited also provides functioning kind of leasing in Ghana. Ecobank Ghana Ltd lately created a leasing plan called Ecobank Leasing to help internet marketers acquire their capital resources.
However, 'knowledge about leasing is known as to be low among the business enterprise community and the overall community'; as Ken Tshribi (1998) would input it, 'renting remains in its infancy generally in most developing countries'. Elsewhere 'in the developed economies, leasing is utilized to financing about 1 / 3 of private assets' (Daily Image, November 7th 2006, pg. 16). This raises the concern and question; what makes contractors in Ghana not taking benefit of the funding option of leasing as in the developed countries?
2. 2. 4. 5 LEASING IN TANZANIA
The International Financing Organization (IFC) with support of the Swiss Government's State
Secretariat for Economic Affairs (SECO) is applying a 2. 5 time job in Tanzania to build up and support the growth of financial leasing. The project, known as the Tanzania Leasing Job (TANZALEP) among other things, provides specialized assistance and capacity building to the Government of Tanzania, for the Government to set up place appropriate and permitting legal, regulatory and taxation environment for financial leasing. In addition to its use Government, TANZALEP provides renting product/business development support to banks, potential leasing companies, equipment supply companies, institutional investors, and micro leasing companies. It provides training and capacity building to professional associations, businesses and regulators, and mobilizes domestic and international investment for leasing (Moyo V. Ndonde, 2006).
In addition to appropriate legal environment, TANZALEP is growing appropriate services for both established and possible leasing companies while making available money for leasing procedures, creating awareness for the general public and businesses, providing asset
management and monitoring skills and making a lucrative supplementary market for leased equipment,
among other things.
2. 2. 4. 6 HIRING
Hiring and leasing are sometimes thought to be similar as well as for equipment items that are on work with for very long periods the difference between your two ways of acquisition may be unclear. Short-term hire of engineering equipment is not usually regarded as leasing and the business hiring the gear pays off an hourly, weekly or monthly rate for the gear. The period of hire may well be as short as one week or a month and for that reason, the building company is not focused on a long most important period, as it would be in the case of a finance lease.
The use short-term employ the service of is common in the structure industry and within the industry, there is a 'well-developed equipment employ the service of industry to serve this market. Many structure companies who own their own equipment run an equipment division as a subsidiary offering exterior fire to others and the internal hire with their own construction department, which might be the mother or father company within the same positioning group [F. Harris and R. McCaffer, 1991].
2. 2. 4. 5. 1 The benefits of plant hire
* Contractor's capital is not locked up in expensive pieces of equipment;
* Hiring costs can be paid once a month as the company is paid for work completed in interim monthly payments;
* Contractor will not pay for vegetable not required nor has any help;
* Cost of maintenance, maintenance and replacing is borne by the plant work with company;
* Occasionally the plant employ the service of company provides the experienced and skilled
operative, which means contractor doesn't have permanent operative's pay to pay; and
* The contractor has no safe-keeping problems when flower is not being used as it is delivered to
the seek the services of company.
2. 2. 4. 5. 1 The negatives of herb hire
* Effective planning and encoding of work schedules must reduce expensive;
* A suitable machine may not always be available when required, especially at short notice;
* The contractor still has to pay for the seek the services of cost when work is aborted scheduled to bad weather;
* The vegetable operator can not work for the builder full-time and so there is absolutely no incentive; and
* Work with rates rely upon market causes, which fluctuate and can be considered a cause of reduction to the
idle time on appointed herb (R. D. Buchan et. al, 2001).
2. 3 EQUIPMENT ACQUISITION IN OTHER AFRICAN COUNTRIES
The equipment acquisition options and problem already mentioned aren't peculiar to only the contractors in Ghana. Just as in Ghana, government authorities and donor agencies experienced to sponsor several programs to mitigate some the of the down sides contractors encounter.
Generally, companies have been given equipment to allow the successful completion of specific jobs (Bentall et al. , 1999). In Zimbabwe, a local bank was decided on to provide equipment after the Department of Streets and contractors experienced made the standards. A sponsored warranty fund was reserve to compensate the bank in case of default by companies (Bentall et al, 1999). In a similar structure in Zambia, companies made regular repayments for equipment after which ownership was transferred to them (Bentall and Schultz, 1998). Some countries established Contractors Support Companies (CSA) to manage most, if not all, the problems of companies. Typical of the was the Country wide Construction Organization (NCC) of Kenya. It consisted of a 'university', accountable for training, 'building company', responsible for contracting jobs to contractors, and a 'loan provider', responsible for granting loans (Bentall and Schultz, 1998).
TANZALEP in Tanzania has recently recorded remarkable success only after three years of its inception. The leasing market doubled between your years 2004 and 2006 while 20% of most engineering equipment and well as 77% of carry equipment in Tanzania was received through leasing by the entire year 2006 (SECO-IFC Leasing Project in Tanzania).
Ofori (1980) notes, 'not much can be achieved merely by lending contractors money. . . It's important to conceive of company development programme as relating to the provision of your deal of services, which finance is merely a component, to the contractors'. Larcher and Mls (2000) were of the view that companies should create their own loan provider, indicating that peer pressure would prevent repayment defaults. .
2. 4 EQUIPMENT Company OPTIONS
This type of organization covers both the independent equipment work with company and the equipment hire subsidiary operating under the umbrella of the holding company which might or might not be a engineering firm. The company will supply equipment to the marketplace to give a sufficient rate of come back on the utilized capital although sometimes discounts may be wanted to the parent or guardian company, in accordance with an insurance plan towards a 'favourable' or important client.
Few construction companies can build-up sufficient and diverse equipment holdings to offer an independent equipment retain service. Alternatively, the equipment fleet of a engineering company may eventually become so considerable that, to keep effective control and success, the holdings are included into a subsidiary department. The first priority may be to serve the equipment needs of the father or mother company at a income, but in order to maintain high degrees of equipment usage and thereby take full advantage of earnings; items may be appointed out to other exterior users.
However, the inclination with this technique is for the equipment to be appointed out to the marketplace when the rates are attractive, since there will be a demand for such services and the required utilization levels can become more easily achieved this way. Subsequently, there's a threat that the needs of the mother or father company may be neglected, and items will not be offered by the right time for the company's own construction agreements. As a rule of thumb, the proportion of 'appointed internally' to 'retain externally' shouldn't land below 2:1.
The issue of servicing two different kinds of client provided by a handled equipment insurance plan is eliminated when the actions of a equipment subsidiary are limited to internal work with only. This system often brings about equipment seek the services of rates which carry little relationship to advertise rates, as the type of equipment items and usage levels are dictated by the demands of the building division. Normally, the equipment subsidiary is required to achieve a place rate of come back on the capital hired. Sometimes, however, the goals cannot be achieved and the deficits must be covered by the mother or father company.
Some engineering companies operate very small equipment holdings, on the lands that achieving success from equipment possession is relatively less rewarding than other engineering activities. A small depot may be taken care of to provide small items only and almost all of the issues of buying equipment like workshop facilities, experienced and mobile maintenance crews and administrative facilities, etc. are averted. This technique, of course, relies greatly on the facilities provided by equipment employ the service of companies. However, the option of specialist equipment items can influence the work fill and agreement type available to the company, and so could influence the success of this sort of insurance plan. A major downside of this system develops when market rates changes markedly between the time of tender for work and the actual hiring of the item on the structure project.
The last option is to have an unstructured business, whereby individual agreements purchase their equipment requirements and are credited with resale beliefs when the job is completed. This option is not very common in expanding countries like Ghana and may usually limited to special items, e. g. piling hammer, which may be unlikely to be used subsequently by other standard contracts.
[Harris et al, 1991; Harris F. & McCaffer R, 2005]
2. 5 A BRIEF APPRAISAL OF THE LENDER FOR Cover AND CONSTRUCTION IN GHANA
(It really is worth saying here that the studies conducted by Eyiah and Make (2003) were quite definitely consulted in this section)
The Standard bank for Cover and Engineering (BHC) of Ghana was one of the government owned banks formerly created as Development Funding Corporations (DFIs) to provide support for targeted activities in the country (Burnett, 1994). It was proven 'to provide credit for private cover schemes, expansion and modernization of immovable property, estates and commercial construction. It had been also empowered to get involved directly in such joint endeavors using long-term money, jointly or exclusively' (Buckley, 1996). At the time of its inception, the problems contractors experienced in securing money from established options were somewhat well known. Apparently, they were considered for a special programme.
- appraisal of contractor's record to ascertain credit-worthiness;
- analysis on the kind of project so as to determine any further assistance (aside from finance) that the builder would need;
- contract by the client and contractor that repayment certificates should be prepared in the joint labels of the contractor and the lender; and finally
- allocation of cash to companies after presentation of documents such as invoices and payroll bed linens.
An appreciable level of success was achieved at the original phases of the program, until the emergence of several inter-related problems. Paramount of the was consistent delayed payments credited to companies for works completed. In conjunction with this, lots of the beneficiaries lacked managerial and specialized capacity to make income on projects where they were engaged, or even to secure more lucrative ones. Effort to address this latter problem had its setbacks. As the assisting team, sponsored by the earth Bank, was located in the local capital (Accra), contractors who had been to be supported came from all over the country with projects in various locations. These factors contributed to repayment default although, others did so deliberately. Inevitably, these were to provide guarantee, hence abolishing a major purpose of the program. Notwithstanding, default repayments became unbearable, prompting the lender to treat companies with no choice. The capital foot of the bank or investment company was thus totally eroded. Several factors are related to the recent liquidation of BHC but, probably, the bank's engagement with companies could be seen as the major factor.
Opinions on the practical and academic leading, in Ghana on ways to increase the effectiveness of funding programmes are diverse. You can find, however, a consensus that companies should establish a bank or investment company, which would be in charge of all their problems including the provision of fund. Many are of the view that the only real responsibility of the federal government in programmes for companies should be discouraged. The key role universities and polytechnics structure graduates could play in helping contractors involved in any such programme is also recognized.
(Source: Building Management and Economics - Alex Eyiah & Paul Make, Financing small and medium-scale contractors in producing countries: a Ghana research study, 2003)
- Preliminary review/survey;
- Design and development of questionnaires;
- Sampling relating population definition and test size dedication;
- Pilot Study;
- Field Review; and
- Data Examination predicated on results of field survey.
3. 1 Preliminary Study/survey
A preliminary review was conducted by the researcher to acquaint himself with the current issues in the building industry of Ghana involving acquisition and selection of equipment. This is very necessary to properly figure the seeks and targets of the analysis and also make a comprehensive questionnaire to address the goals and goals of the exploration. The researcher interacted with some key players in the development industry and also largely consulted published data and information found in magazines, newspapers, educational thesis, internet and textbooks.
3. 2 Design and development of questionnaires
Questionnaires was carefully structured following the initial analysis to specifically achieve the seeks and targets. Multiple choice answers were provided for each and every question and a choice of 'other, please condition' where appropriate to make response quicker and easier. The terms of the questionnaire was retained as simple as possible considering the track record of the contractors so as to create interest and understanding.
3. 3 Sampling
Definition of population
The inhabitants that was considered was contractors in the classes D1-D2 classification of the overall classification of contractors in Ghana in the Kumasi Metropolis. As shown in the stand 3. 3. 1 below, all the ten (10) D1 contractors were decided on with the rest of the fifty (50) determined from the D2 companies using purposive, convenience and snowball sampling method of selection to reduce the issue in locating companies in the metropolis.
Table 3. 3. 1: Volume of D1 and D2 companies in Ashanti Region
(Source: Ministry of Works and Enclosure, 2007 and AESL, Kumasi)
The test size was decided using the Kish formulation developed in 1965. This is
Where n=required sample size
N=total human population size=85+10= 95
Where V=standard problem of sampling distribution
= 0. 05
S2=the maximum standard deviation in the populace sample
S2=P (1-P) =0. 5(1-0. 5) =0. 25
P=the proportion of aspect that participate in the defined class
n1=S2/V2=0. 25/0. 052=100
N=100/ (1+100/95)=48. 72
Add non-responsive rate of 10%=10/100 x 48. 72
Therefore the bare minimum test size is around 54
60 questionnaires were given to the companies.
3. 4 Pilot Survey
Prior to administering the questionnaires to the contractors, they were pre-tested over a few pilot respondents like lectures in the Faculty of Architecture and Building Technology and Contractors working on KNUST campus. This helped in determining and rectifying weaknesses and ambiguities in the wording of questions, efficiency or difficulty in responding to the questions, usefulness of data and enough time requirement for completion of the questionnaire.
3. 5 Field Survey
The questionnaire were administered privately by the researcher to the preferred contractors and conduct face-to-face interviews where necessary and possible, to help the responden
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