Purchase of Industrial Machinery

Author: E.E. Kimberly

There is little danger of buying shoddy new electrical apparatus in the United States of America, unless it is in the field of fractional-horsepower motors and very small transformers. In these markets there are offered items of low cost and, of course, of inferior construction. However, the fact that inferior construction and possibly low efficiency may be found does not condemn the manufacturers. It merely requires an accurate understanding of the financial engineering of purchase to guide the buyer in his choice between high and low first cost, when the operating costs are different.

There are motors, generators, transformers, protective equipment, etc., with various relative first costs, efficiencies, performance factors, and life expectancies. First cost, efficiency, and performance are reducible items and may be readily compared, but maintenance and life expectancy are irreducible items and can be judged only by the history of the apparatus if such is available. Furthermore, the reputation of the manufacturer is the only assurance that unsatisfactory performance, if encountered, will be rectified. It is common practice for all manufacturers to refuse responsibility for defects arising more than 1 year or 2 years after the date of purchase. This is felt to be necessary for their protection against the results of abuse of the apparatus in service.

A motor, for example, is bought with the expectancy of about 20 years of service. Where the need for a motor continues, a reinvestment would be required every 20 years. If the purchaser could contract with a party of the second part to furnish this motor service henceforth, the contract price paid that party at the beginning of the service would be the present worth of the permanent service. For the present worth of the investments and reinvestments, let the symbol PW_D be used. Furthermore, if the user could contract with a party of the third part for the cost of operation henceforth, the contract price paid would be the present worth of that permanent service. For this present worth let the symbol PW₀ be used.