Don't hire construction equipment before reading these money saving tips

23/11/2016

Picture courtesy of Joao Neto

Most construction projects hire equipment. Sometimes these costs can form a significant portion of the project costs.
Say a project’s equipment rental costs make up 40% of the project’s total costs then just saving 5% of these costs could translate to an additional 2% or more profit. That doesn’t sound like a lot of money, but many projects only make 10% profit so an extra 2% of profit means the project will make 12% profit which is an increase of 20%. Wouldn’t the bosses be pleased with that? But put some of these tips into practice and you could find the savings are even larger – resulting in even bigger profits.

In this article I discuss some ways that you could save money on equipment rentals on your project.
Pass these tips to your project team.

Ordering the equipment

Make sure your order the right equipment of the right size. Some contractors think that bigger is better. But, bigger usually means more expensive to hire. It almost certainly means more fuel, which means more money. So unless you can use that extra capacity don’t go for the bigger model. Of course the opposite happens and contractors get a machine that’s too small and it’s scratching at the dirt or taking hours to load the trucks meaning it is inefficient.
Ensure you are getting reliable equipment. Often cheaper items are older which could mean they aren’t as efficient as newer models, consume more fuel and break down more often. Older machines may also not have the latest safety features and they could be noisier, leak oil or be smoky. What you saved on a cheaper machine could be far exceeded by lower production and an increased fuel bill.
Check what the rental rate covers. Often the extra charges can be nearly as expensive as the basic rental cost. The cheaper rental could work out more expensive than the expensive rental once all the additional costs are factored in.
Ensure the equipment is insured. You don’t want to be paying several hundred thousand dollars should something happen to the equipment. Also check what your company’s insurance covers. Frequently contractors pay extra for insurance for equipment, while the company already has insurance in place which covers hired equipment. Many rental companies make extra profits on selling insurance for their equipment so it may be advisable to investigate alternative insurances.
Some items may be cheaper to buy than rent. Projects are sometimes quick to rent a piece of equipment because it is cheaper. However, do the math and you may find, particularly for small items, or items required for an extended period, that it’s cheaper to buy than rent them.
Make sure the rental company understands how long the equipment is required for. Longer rentals may have a reduced rate.
Rented equipment is usually charged at an hourly rate, a daily rate or a monthly rate. Often there is a minimum period that the rental company expects to be paid. Will your project work the machine for those hours? The rental agreement may state that you have to pay a minimum of 10 hours a day. Well if your project only works 8 hours a day you’ll be paying 2 hours for nothing.
Enquire what happens when the project can’t work because of inclement weather. One can often negotiate that equipment rental is reduced to 50% should the project be unable to work because of rain. If you are a good customer or a good negotiator you may even be able to negotiate this to a nil rate which is even better.

Paperwork

Image courtesy of fantasista at FreeDigitalPhotos.net

Check the rental agreement and paperwork to ensure that:

The agreement is in line with what you ordered, and the terms and rates are what were negotiated.
There are no terms hidden in the small print that can’t be complied with.
That you understand the terms and conditions in the agreement and ensure that these are complied with.

Image courtesy of stockimages at FreeDigitalPhotos.net

When the item arrives on the project

Check that it is the item you ordered before it is off-loaded at the project. It can be expensive to reorganise transport to return the incorrect item of equipment.
Check for any visible damage and report it immediately. Remember the owner will charge you for any damage when the item is returned. Prior damage that hasn’t been reported may be incorrectly charged to your company.
Check the condition of wearing parts (such as; teeth on excavator buckets, cutting edges on graders, etc). Normally the project is charged for replacing these items and they can be very costly.
Check the condition of tires. Again the hirer is usually responsible for the cost of worn or damaged tires. In addition badly worn tires may become punctured easily, causing lost time.
Ensure that the equipment doesn’t have any oil leaks. Vehicles should have all the correct safety features and they must be functional. Equipment that travels on roads must be road worthy including having a current vehicle license.
Check the fuel level and report the amount of fuel to the rental company if it’s not full. Most rental companies expect that the machine is returned with a full fuel tank, yet often the machine arrives with an empty tank. Large machines could have a capacity of hundreds of litres which could cost several hundred dollars to fill.

Operating the equipment

Obviously it goes without saying that the equipment should only be operated by skilled and licensed operators. Using operators who aren’t qualified to use the machine could; void warranties and insurances, result in accidents, damage the machine and result in poor productivities.
Ensure that the equipment is properly maintained and that repairs and maintenance are only done by qualified people. Damaged equipment shouldn’t be operated until a competent person has assessed the damaged and warrants that it is safe to operate the machine.
Check that the equipment is only used for appropriate work. Equipment is often damaged when it is used for purposes it wasn’t designed to do.
The equipment must be used productively – this includes:
1. Ensuring it is used for what it was hired or rented for – often, for example, loaders are used for transporting equipment around the project instead of loading dirt.
2. Making sure that equipment that isn’t required anymore is returned to the hirer.
3. Ensuring the work couldn’t be performed by a cheaper item of equipment.
4. Checking that there isn’t too much equipment on the project.
5. Ensuring, particularly with earthmoving equipment, that the equipment teams are balanced – that the size of the excavator is correct for the trucks being loaded and that there are the right number of trucks so that the excavator isn’t waiting for trucks to load or that trucks aren’t waiting to be loaded.

At the end of the rental or hire period

Check that the equipment has completed all the tasks on the project that it is meant to complete. Too often machines have to be remobilised because they were returned to the hirer before they had completed all the tasks on the project.
Ensure the hire, or rental, company is notified in writing that the equipment is no longer required and organise transport to send it back.
Check that all the items rented with the machine are returned with the equipment. Non-returned items may result in additional costs such as continued hire costs and extra transport costs to get the item back to the owner.
Make sure that the item is clean and that the condition of the machine is checked and recorded. Unfortunately there have been cases of construction companies being charged for equipment damages that didn’t occur on their project

Conclusion
It is important that the project team understands the cost of equipment and ensure that it is properly looked after and operated by competent operators, that it is used productively and is put off hire when it is no longer required.
Equipment costs contribute significantly to the overall cost of the project. Reducing these costs will improve your project’s profit.
If you found this article useful please like it and share it with your team and connections.

Please like and share this article.
This article is adapted from information in the author’s popular books: 'Successful Construction Project Management: The Practical Guide' and 'Building a Successful Construction Company: The Practical Guide'.
'Construction Claims: A Short Guide for Contractors' has just been published. These books are available on Amazon and other online book stores.
Paul publishes articles regularly on LinkedIn and his website.

Paul writes regular articles for other websites, gives lectures, mentors, and is available for podcasts and interviews.
© 2016 This article is not to be reproduced for commercial purposes without written permission from the author.

32 Comments

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Copyright 2016 - The attached articles cannot be reproduced for commercial purposes without the consent of the author.
The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.

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Bradford Snelson link

21/4/2017 10:52:05 pm

It makes sense to me that bigger is not always better when it comes to construction equipment. I feel like in many instances you might be working in a confined space or with limited mobility. It would also make sense to me to spend some time researching the company you are renting them from to make sure that they have a good reputation for maintaining their equipment.

Paul

24/4/2017 09:31:55 am

Thanks Bradford.

Violette Lebrac link

12/8/2017 06:56:57 am

Thanks for mentioning that less expensive models might the older ones and may not work as well as newer versions. My husband wants to rent contractor equipment for our home renovation and wants to get the best equipment for the best price. I think speaking to a professional rental company would help you decide the best and the cheapest models.

Ridley link

27/10/2017 04:04:22 am

Thanks for the great earthmoving equipment rental tips. I agree that only professionals, trained to operate the machinery should do it. So, if we want to rent a bulldozer, do we hire someone to use it, too?

Paul Netscher

27/10/2017 09:05:36 am

Hi Ridley, some hire companies can supply the machine with the operator - obviously they charge for this. The advantage to the hirer is that the operator is responsible for the machine. If they damage the machine the hire company is responsible. The disadvantages are the operator will only work that machine - they won't help out elsewhere when the machine isn't being used. They may also be reluctant to take orders from the hirer's supervisor. Of course I've also had some useless operators supplied by equipment hire companies and we've sent them back for replacements - so you can't assume you will be getting a good operator.

Taylor Bishop link

14/11/2017 11:12:34 pm

Thanks for going over some things to think about when getting construction equipment. I'm glad that you mentioned that you should know exactly what the rental rate covers. Not only that, but it seems like a good way to know more about what to expect when you get the equipment, and the kind of maintenance you may have to perform.

19/11/2017 09:52:45 am

Thanks Taylor, it's good to hear that this article was useful.

sutton turner link

20/2/2018 11:17:50 pm

I'm glad you mentioned to make sure the construction equipment is clean and in good condition. My dad is looking into buying used parts for a large home project. I appreciate the information on how you can save money on construction equipment.

Derek Dewitt link

12/3/2018 10:49:51 pm

My wife and I are thinking about renting some construction equipment for when we landscape our yard this summer. I like your point about how, if a machine breaks down, you shouldn't use it until a professional inspects it. We'll be sure to have it serviced by the rental company if something happens during the job.

Hazel Owens link

20/7/2018 10:57:36 am

That's a great tip about checking what the rental rate covers since it can often be nearly as expensive as the rental cost. Construction companies that rent their equipment would benefit from this since they wouldn't want to be charged too much for the rental rate since the rental cost can already get expensive. This would also help them see which rental companies offer better deals and will actually work with them rather than try to get too much money from them.

6/8/2018 05:33:20 pm

Thanks Hazel for your comments. It is important to read the fine print of every hire contract and understand what you're paying for. Insurance can be as high as 20% - which could be a waste if your insurance will cover the item, or if you can get cheaper insurance. Then you need to understand all the other charges - you don't want a shock when you get the invoice at the end of the month or when the item is returned.
Regards
Paul

Gerry link

1/11/2018 04:07:07 pm

One piece of advice I would like to add if its ok, is when hiring plant equipment do what you do when hiring a car, take a video around the machine or piece of equipment with your phone. This will ensure you are not liable for damage from a previous hire and lets the plant hire company know you are going to look after it.

25/11/2018 12:30:41 pm

Thanks Gerry for that helpful and essential advice. I'm sure many have been caught by car hire firms charging for damage caused by the previous drivers. The same happens with construction equipment.

Kit Hannigan link

16/11/2018 12:05:41 pm

I really like what you said about how construction firms should look into negotiating at least a 50% reduction on rental rates because of downtimes caused by inclement weather. One can really see how young and up and coming start-up construction companies will be able to benefit from this tip since they do not have a lot of resources at their disposal yet. Cutting costs will certainly come a long way for these types of businesses. This is a really interesting read about construction rental equipment.

25/11/2018 12:32:58 pm

Thanks Kit. it definitely pays to negotiate the best rates and consider all the possible additional costs before signing the hire contract. Equally understand who is responsible for what.
Regards
Paul

Dennis Hahn link

9/1/2019 05:40:13 pm

Yes absolutely right, we should read such useful articles before buying construction equipment. Because this equipment is of high rates and one should know properly about all the small things. Thank you for sharing and mentionioning the all important points in the blog keep sharing such informative articles!

10/1/2019 10:57:09 am

Thanks Denis for your feedback. Regards, Paul

Amy Winters link

15/1/2019 12:00:32 am

I like your tip to make sure it's the item we ordered before it's unloaded, since having to re-load it can add to the expense of the project. My husband and I want to rent a few pieces of construction equipment for a large-scale landscaping project we're doing. I'd hate to have to pay more for the incorrect piece of equipment, so thanks for sharing the tip to double check beforehand!

15/1/2019 05:53:07 pm

Thanks Amy, glad I can help.
Regards
Paul

Dave Anderson link

1/2/2019 05:44:44 am

That is true that license operators should operate the equipment. Maybe it would be good to have an earthmoving contractor. Then they could use the equipment efficiently.

1/2/2019 09:48:52 am

Thanks Dave, good point and it may be relevant to large projects. But often contractors require machines so they can do their work, whether that's concrete or earthmoving. Paying the extra overheads for another contractor to manage and do the work isn't always practical or feasible. But even earthmoving contractors hire equipment since they don't always have the right equipment available - their machines could be busy elsewhere or they simply don't own the item because it won't be kept fully utilised.

Ellie Davis link

8/2/2019 07:30:19 am

Thank you for suggesting that you should make sure the equipment you order is the right size. My husband and I are needing to get some earth moving done and need to get the right equipment. I'll have to look into finding the best place to get this equipment.

8/2/2019 12:45:45 pm

Good luck with your project Ellie. Not sure the type of project and equipment you require, but do check you can operate the item and that where necessary you have the required licenses. Operating equipment incorrectly could result in accidents, injury and damage to the machine and other property.
Regards
Paul

Connor link

19/2/2019 05:53:19 pm

A lot of great points Paul, funnily enough your point when it comes to plant hire saying "Some items may be cheaper to buy than rent. " strikes a note with me as we kept hiring mini diggers for jobs think easy to get found out we could have bought one for the amount of times we rented one. Of course we have now, but hind-sight a great thing.

21/2/2019 12:56:56 am

Thanks Connor, I'm sure we've all had similar experiences - as you say hindsight is a wonderful thing. Of course sometimes we think we only need an item for a few weeks, then before we know it the machine has been on the project for several months. Good planning and organisation will make decisions easier.
Regards, Paul

20/2/2019 10:59:35 am

Thank you for pointing out that you should make sure the contractor you hire uses reliable equipment. I'm needing some earth moving done so I can build my house. I'll have to look into finding the best contractor in the area.

21/2/2019 01:00:00 am

Hi Ellie, good luck with your project. Please see my book- 'Build and renovate your home with your eyes wide open', for tips on building and renovating your home and questions to ask when searching for a home building contractor.
Regards
Paul

Daphne Gilpin link

6/3/2019 02:51:02 am

Thanks for pointing out that it's important to make sure the equipment that's ordered is the right size for the job so we don't end up paying more than we need to on something bigger. My husband and I want to hire a construction manager to help us plan the construction of a retail building. I hadn't considered that the size of the equipment should fit the scale of the job, so I appreciate you sharing that tip!

Adrian Jones link

13/3/2019 07:54:01 am

One thing to always check when renting out heavy-duty construction equipment is that you're getting the right-sized equipment since size doesn't usually matter in this case! When it comes to selecting what kind of equipment to rent out it's always a good idea to shop around and look for the best value for your money so that you can get equipment that's reliable and still easy on the construction budget. If I had the chance to rent out heavy equipment, this is one of the things that I would really consider doing since construction firms want to get the most vale out of their money.

16/3/2019 07:26:23 am

You make a good point to check what the rental rate covers since there could be extra charges for different features. This would be good if you need to find a earthmoving company that will also hire an operator so you don't have to learn the machine. It would be good to find a company that includes all of that in the rent rate so you won't be charged more.

Kate Welling link

23/3/2019 02:19:50 am

I need to get an earthmoving contractor for my property. When I'm looking, I'll be sure to check what the rental rate covers. It makes sense that this would make a difference in the long run.

Yoshiko Flora link

11/4/2019 11:03:56 am

Even if you said that a cheaper equipment rental can turn out to be more expensive than buying it, I would like to add that renting heavy equipment, such as cranes, can help companies save money on having it maintained after the project is over. If I were to spearhead a downtown residential apartment job, I would look for a local service to rent one from. With their help, one can get enough help to lift heavy steel bars or concrete containers up stories high to get it done.

Don't hire construction equipment before reading these money saving tips

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