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Equipment Rental and the Bottom Line
Maintenance departments often undertake slightly larger construction projects as a way to more effectively control project costs and work quality. To achieve these goals, managers must understand their options when it comes to renting key pieces of equipment, including generators, power tools, earth-moving equipment, lift equipment, and pavement maintenance tools.
Before doing so, however, managers face a host of important equipment-related issues, and they must consider how to provide worker training and safety, as well as whether to buy or rent equipment.
The first step in renting equipment to use on in-house construction projects is to evaluate the nature of the project and the conditions under which the equipment would be used.
The nature of the project includes considerations of function and capacity. What functions and capacity will the project require? For example, erecting a second-story building addition requires break existing concrete with a pneumatic jackhammer, digging down to clay with an excavator, and pouring a concrete footer using ready-mix concrete.
Next, crews need to install brick pilasters or H-columns on the footer to support the new upper floors, walls and roof. If specifications call for a clear span, pre-stressed concrete double-tee roof, then the required truck crane must perform multiple tasks, including lifting pallets of brick or H-columns, I-beams, rebar and forms for upper floors, sprinkler piping, pre-stressed concrete tees, insulation, and other roofing materials.
So the crane’s capacity must include enough height, reach and weight for the most demanding of these lifting jobs. Its height will have to be enough to lift the pre-stressed concrete above the roof to place it on the supporting I-beams. The reach has to be enough to place the double-tee lifting hook at the centerline of the building addition and access to the farthest H-column footing.
The tasks will require a crane with a double-pivot, boom-and-stick arrangement and the ability to rotate 180 degrees from the load lay-down area to the installation position for double tees. The crane’s design will have to enable the outriggers to balance the load at its farthest reach with the heaviest weight.
Not many departments have such equipment for heavy lifting, and because the entire roof deck will take only two or three hours to place on the steel, for example, this application would ideal for equipment rental.
Various lifting tasks occur intermittently throughout such projects, so managers can rent various pieces of equipment best suited to each task for shorter intervals and pay only when needed. Even though the hourly rate for equipment and operator might seem high, overall project costs can be lower than if the organization buys the equipment.
Worker Training and Safety
In the example of the rental truck crane and crew, the equipment vendor would have provided training and safe operation, since the trained crew would be included in the hourly rate. The rate also would include important general liability insurance and worker-compensation coverage paid for by the vendor covering the crew while on the project site.
In cases where this coverage is not included, such as in an equipment-only rental, managers must perform due diligence in providing for training and safety. Owners manuals, instructors, and training facilities and equipment are among the considerations managers must address to ensure proper training.
Operating the equipment is not the only important consideration for safe use. The operation and maintenance manuals also specify important information about requirements for setting up and inspecting equipment, safety devices that must be in place, instructions for using them most effectively, and ongoing maintenance technicians should perform before, during and after use.
The key to proper and safe operation is a thorough inspection before each use. Even with rental equipment, project managers must be diligent in ensuring the operator or mechanic performs a complete inspection of all controls and safety devices, and that these features are in good working condition and in place on the equipment as provided for in the operating manual.
Workers should not be afraid to report problems uncovered by inspections. For example, if a crane hoist has frayed wire cable or does not have all its outriggers, send the equipment back and get a replacement. Also, attachments not authorized by the equipment manufacturer — especially those that inhibit proper operation of safety devices and controls — should be forbidden to use on the equipment. A good rule is that if it is not in the manual, it shouldn’t be on the equipment.
To Buy or Rent?
Deciding whether to buy or rent equipment can be tricky because the decision involves so many factors.
Many managers might opt to buy a general-purpose item, such as a crane or personnel lift that crews use often. If so, they can prorate the cost over many projects performed in the course of a year. Another situation where a purchase makes sense involves equipment that must be instantly available, even if it is not used often. Such equipment includes a standby generator set to automatically switch on in a storm-prone area where power outages might be very costly or damage other expensive equipment.
With a purchase, there are no costs for pick-up and return, and the unit is available on no or little notice. Also, managers can set up a depreciation schedule to write off the cost over the item’s life. If the department has a trained operator and mechanic on site and can inventory any needed spare parts, any inspections and repairs can be performed onsite between uses.
With the rental option, the transaction is all expense, no capital costs. Managers can conserve capital for other potentially more profitable investments. For example, renting a popular scissor lift costs about $400 per month, whereas purchasing the same unit costs about $10,000. Managers who opt to rent end up with equipment that has exactly the required specifications, rather than having to compromise by using available equipment.
Also, tracking equipment expenses on the project involves just the vendor’s all-inclusive monthly rental and periodic delivery and return costs. In-house training and mechanic requirements are lower, since the vendor performs maintenance. No spare parts are required, saving inventory cost and space, and the department doesn’t have to worry about equipment history and spares inventory recordkeeping.
And if the supplier is nearby, downtime costs might be reduced because if a breakdown occurs, the vendor can replace inoperative equipment with another unit. Managers also don’t need to worry about license fees or registration requirements, and if the vendor provides the operator, the vendor also handles insurance and workman’s compensation costs.
If most issues in the rent-vs.-buy decision seem to be an even trade-off, cost comparison might be the deciding factor. To determine which option is more economical, managers can compare the cost of renting to the cost of purchasing for a specific equipment item. To make this comparison, managers need to know the quoted purchase price, resale value, years of use, and annual use hours, then compare them to number of months of rental per year, rental cost per month, and cost of pick-up and return.
The purchase cost is the total of ownership and operating costs, and the cost to rent is the monthly rental cost added to pickup and return costs for the same period as the purchase. Purchase cost details include depreciation, interest, overhead labor, overhead parts, and trade-in or resale value. Operating costs associated with ownership include labor, parts and fuel.
Rental costs include the monthly rental cost multiplied by the number of months per year used times the number of years included in the purchase calculation. To determine total rental cost, multiply delivery and return costs by the number of uses in the years used in the purchase option. Comparing these two totals yields the variance amount and shows which option is the most economical.
Partnering on Rental
Before selecting an equipment rental partner, managers would be wise to visit the vendor’s facility to observe the operation. Do not be drawn automatically to the lowest bid. Instead, compare the value.