Plant acquisition - Revision history

Designing Buildings at 07:44, 10 November 2020

2020-11-10T07:44:21Z

← Older revision		Revision as of 07:44, 10 November 2020
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	* Working capital.		* Working capital.

−	[[Category:~~Cost_/_business_planning~~]] [[Category:~~Procurement~~]] [[Category:~~Products_~~/~~_components~~]] [[Category:~~DCN_Product_Knowledge~~]]	+	[[Category:DCN_Definition]] [[Category:DCN_Product_Knowledge]] [[Category:Cost_/_business_planning]] [[Category:Procurement]] [[Category:Products_/_components]]

Editor at 14:55, 3 August 2017

2017-08-03T14:55:08Z

← Older revision		Revision as of 14:55, 3 August 2017
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	* Deferment of possession.		* Deferment of possession.
	* Gross value added (GVA).		* Gross value added (GVA).
		+	* How to manage construction plant.
	* Internal rate of return.		* Internal rate of return.
	* Profitability.		* Profitability.
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	* Working capital.		* Working capital.

−	[[Category:Cost_/_business_planning]] [[Category:Procurement]] [[Category:Products_/_components]]	+	[[Category:Cost_/_business_planning]] [[Category:Procurement]] [[Category:Products_/_components]] [[Category:DCN_Product_Knowledge]]

Designing Buildings at 14:08, 13 March 2017

2017-03-13T14:08:09Z

← Older revision		Revision as of 14:08, 13 March 2017
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	Construction plant is generally re-useable, and so, as well as being purchased new, it may be purchased second hand or hired. The Construction Plant Hire Association suggest that, ‘The UK plant hire industry is the best established and most professional in the world, and is worth over £4 billion to the UK economy.’		Construction plant is generally re-useable, and so, as well as being purchased new, it may be purchased second hand or hired. The Construction Plant Hire Association suggest that, ‘The UK plant hire industry is the best established and most professional in the world, and is worth over £4 billion to the UK economy.’

−	However, many contractors prefer to hire only those plant items which are required to meet peak demand or specialist activities. The decision to purchase plant out-right ~~will need~~ to be carefully weighed up ~~by a company~~, since it must then be operated at an economic utilisation level ~~in order~~ to produce a profitable rate of return on the investment.	+	However, many contractors prefer to hire only those plant items which are required to meet peak demand or specialist activities. The decision to purchase plant out-right needs to be carefully weighed up, since it must then be operated at an economic utilisation level to produce a profitable rate of return on the investment.

−	In other words, the more down time (time when the plant is standing idle) ~~for the plant~~, the less value it is providing for the company, and the lower the return on their investment. ~~The company~~ may believe that by purchasing and owning outright a plant asset, they will attract more of a specific kind of work and therefore increase business.	+	In other words, the more down time (time when the plant is standing idle) there is, the less value it is providing for the company, and the lower the return on their investment. However, a business may believe that by purchasing and owning outright a plant asset, they will attract more of a specific kind of work and therefore increase business.

−	~~The company will need~~ to ~~consider the following points~~ before purchasing ~~the~~ plant:	+	There are a number of issues to be considered before purchasing plant:

−	* Whether the plant will provide an adequate rate of return on the capital employed? ~~(I.e. will it be used enough to make it worthwhile?)~~	+	* Whether the plant will provide an adequate rate of return on the capital employed?
	* Can the company obtain the plant through some other means or it is necessary to own it outright?		* Can the company obtain the plant through some other means or it is necessary to own it outright?
−	* Is outright purchase the only way of acquiring the plant?
	* Is there the potential of hiring the plant out to others?		* Is there the potential of hiring the plant out to others?
−		+	* Will it be possible to sell the plant on when it is no longer required?
−	~~The company~~, ~~when arranging~~ the ~~finance to purchase~~ plant~~, can~~ use ~~cash or outright purchase,~~ hire purchase or leasing.	+	* What are the maintenance, repair and transport costs associated with using the plant?
		+	* Can it be securely stored when not in use?
		+	* Will finance be necessary?
		+	* Are there options for hire purchase or leasing?

	= Cash or outright purchase =		= Cash or outright purchase =
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	= Hire purchase =		= Hire purchase =

−	This ~~method~~ involves a contract between the company and ~~the~~ supplier of finance. The company agrees to pay a ~~specified~~ rent during the contract period. The title of the asset may transfer to the company at the end of this period for a previously agreed sum. While this option doesn’t require a large amount of up-front capital on the part of the company, it can involve high rates of interest ~~that must be paid during the period~~.	+	This involves a contract between the company and a supplier of finance. The company agrees to pay a specific 'rent' during the contract period. The title of the asset may transfer to the company at the end of this period for a previously agreed sum. While this option doesn’t require a large amount of up-front capital on the part of the company, it can involve high rates of interest.

	= Leasing =		= Leasing =

−	~~With~~ this ~~option~~, the title ~~never passes~~ to the lessee ~~(i.e. the company). Instead~~, there is contract that states the company can obtain the use of a plant asset which is owned by the lessor in return for specified rent payments. The two forms of appropriate ~~lease~~ for acquiring construction plant ~~include the following~~:	+	In this case, the title does not pass to the lessee, instead, there is a contract that states the company can obtain the use of a plant asset which is owned by the lessor in return for specified rent payments. The two forms of lease appropriate for acquiring construction plant are:

	=== Finance lease ===		=== Finance lease ===

−	Arrangement with a financial institution ~~that~~ the rental charges cover the asset’s capital cost, in addition to a service charge.	+	Arrangement with a financial institution, where the rental charges cover the asset’s capital cost, in addition to a service charge.

	=== Operating lease ===		=== Operating lease ===

−	Arrangement with the manufacturers or suppliers of the asset. This ~~is the best~~ option ~~when the~~ complex plant ~~item~~ requires skilled personnel to operate and service it.	+	Arrangement with the manufacturers or suppliers of the asset. This can be a good option where complex plant is being used that requires skilled personnel to operate and service it.

	= Find out more =		= Find out more =

Designing Buildings at 13:59, 13 March 2017

2017-03-13T13:59:17Z

← Older revision		Revision as of 13:59, 13 March 2017
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−	[[File:Bulldozer.jpg\|~~360px~~]]	+	[[File:Bulldozer.jpg\|link=File:Bulldozer.jpg]]

	= Introduction =		= Introduction =

−	The term ‘plant’ refers to machinery, equipment ~~and~~ apparatus used for an industrial activity. Typically In construction, ‘plant’ refers to heavy machinery and equipment used during construction works.	+	The term ‘plant’ refers to machinery, equipment or apparatus used for an industrial activity. Typically In construction, ‘plant’ refers to heavy machinery and equipment used during construction works.

−	Construction plant is generally re-useable, and so as well as being purchased new, it may be purchased second hand or hired. The Construction Plant Hire Association suggest that, ‘The UK plant hire industry is the best established and most professional in the world, and is worth over £4 billion to the UK economy.’	+	Construction plant is generally re-useable, and so, as well as being purchased new, it may be purchased second hand or hired. The Construction Plant Hire Association suggest that, ‘The UK plant hire industry is the best established and most professional in the world, and is worth over £4 billion to the UK economy.’

−	However, many contractors prefer to hire only those plant items which are required to meet peak demand or ~~specialised~~ activities. The decision to purchase plant out-right will need to be carefully weighed up by a company, since it must then be operated at an economic utilisation level in order to produce a profitable rate of return on the investment.	+	However, many contractors prefer to hire only those plant items which are required to meet peak demand or specialist activities. The decision to purchase plant out-right will need to be carefully weighed up by a company, since it must then be operated at an economic utilisation level in order to produce a profitable rate of return on the investment.

	In other words, the more down time (time when the plant is standing idle) for the plant, the less value it is providing for the company, and the lower the return on their investment. The company may believe that by purchasing and owning outright a plant asset, they will attract more of a specific kind of work and therefore increase business.		In other words, the more down time (time when the plant is standing idle) for the plant, the less value it is providing for the company, and the lower the return on their investment. The company may believe that by purchasing and owning outright a plant asset, they will attract more of a specific kind of work and therefore increase business.

Editor: Created page with "360px = Introduction = The term ‘plant’ refers to machinery, equipment and apparatus used for an industrial activity. Typically In construction, ‘p..."

2017-01-26T17:39:39Z

Created page with "360px = Introduction = The term ‘plant’ refers to machinery, equipment and apparatus used for an industrial activity. Typically In construction, ‘p..."

New page

[[File:Bulldozer.jpg|360px]]

= Introduction =

The term ‘plant’ refers to machinery, equipment and apparatus used for an industrial activity. Typically In construction, ‘plant’ refers to heavy machinery and equipment used during construction works.

Construction plant is generally re-useable, and so as well as being purchased new, it may be purchased second hand or hired. The Construction Plant Hire Association suggest that, ‘The UK plant hire industry is the best established and most professional in the world, and is worth over £4 billion to the UK economy.’

However, many contractors prefer to hire only those plant items which are required to meet peak demand or specialised activities. The decision to purchase plant out-right will need to be carefully weighed up by a company, since it must then be operated at an economic utilisation level in order to produce a profitable rate of return on the investment.

In other words, the more down time (time when the plant is standing idle) for the plant, the less value it is providing for the company, and the lower the return on their investment. The company may believe that by purchasing and owning outright a plant asset, they will attract more of a specific kind of work and therefore increase business.

The company will need to consider the following points before purchasing the plant:

* Whether the plant will provide an adequate rate of return on the capital employed? (I.e. will it be used enough to make it worthwhile?)
* Can the company obtain the plant through some other means or it is necessary to own it outright?
* Is outright purchase the only way of acquiring the plant?
* Is there the potential of hiring the plant out to others?

The company, when arranging the finance to purchase plant, can use cash or outright purchase, hire purchase or leasing.

= Cash or outright purchase =

This means that the plant may be paid for immediately at the time of purchase. On the company’s balance sheet it will provide a tangible asset. Whether or not this is the most profitable method of investing will depend on the company having the liquid assets required to make the purchase, and being sure that the level of return from the investment is sufficient to make it worthwhile.

= Hire purchase =

This method involves a contract between the company and the supplier of finance. The company agrees to pay a specified rent during the contract period. The title of the asset may transfer to the company at the end of this period for a previously agreed sum. While this option doesn’t require a large amount of up-front capital on the part of the company, it can involve high rates of interest that must be paid during the period.

= Leasing =

With this option, the title never passes to the lessee (i.e. the company). Instead, there is contract that states the company can obtain the use of a plant asset which is owned by the lessor in return for specified rent payments. The two forms of appropriate lease for acquiring construction plant include the following:

=== Finance lease ===

Arrangement with a financial institution that the rental charges cover the asset’s capital cost, in addition to a service charge.

=== Operating lease ===

Arrangement with the manufacturers or suppliers of the asset. This is the best option when the complex plant item requires skilled personnel to operate and service it.

= Find out more =

=== Related articles on Designing Buildings Wiki ===

* Best value.
* Capital costs.
* Cash flow.
* Construction plant.
* Cost plans.
* Deferment of possession.
* Gross value added (GVA).
* Internal rate of return.
* Profitability.
* Unfair Contract Terms Act.
* Value management.
* Working capital.

[[Category:Cost_/_business_planning]] [[Category:Procurement]] [[Category:Products_/_components]]