Topic Thread

1.  Equipment Rental Rates

Posted 02-15-2017 16:39
I'm looking for help from the group in developing rental rates for equipment. Thanks!

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Samantha Nickerson
CFO
Manning Squires Hennig Co., Inc.
Batavia NY
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2.  RE: Equipment Rental Rates

Posted 02-16-2017 08:22
I would be interested how other companies handle this topic.  As a company we have gone back and forth on two options.  The first being a percent of total costs of equipment to be allocated to each project that equipment was used.  The second option would be to collect data on the costs to rent equipment in our area and produce a rate per day for each piece of equipment we own.  On lump some projects the costs could be allocated but on a GMP or cost plus there really would need to be a rental rate to be charged per day or week.  With the GMP I would think that an invoice or receipt would need to be produced as backup for billing.


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Rich A. Schultz
A&E Construction Company
rschultz@aeconstruction.com
Upper Darby, PA
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3.  RE: Equipment Rental Rates

Posted 02-17-2017 11:19
  |   view attached
I've attached our Asset Recovery worksheet that was developed for calculating job cost rates based off of several factors:
- Purchase price
- Salvage value
- ROI % Goal
- Maintenance / Fuel
- Expected life
- Usage Rate
- Compared against outside equipment rates to make sure we are less that the street rate

Hope this helps, thanks!

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Christopher Gibbons
Accountant
Prairie Electric
Vancouver WA
(360) 573-2750
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Attachment(s)

xlsx
Asset Recovery.xlsx   32K 1 version


4.  RE: Equipment Rental Rates

Posted 02-17-2017 14:59
There are a number of organizations that provide rental rate guidelines, including the AED Green Book provided by Equipment Watch and the Tool and Equipment Rental Guide by Mechanical Contractors Association of America.  The Owner contract may include a statement that the agreed to rental rate shall not exceed a set percentage of the guidelines mentioned above (or similar), or the fair market value of the equipment.  The contract may also include a statement that the total rental cost of any Contractor-owned equipment may not exceed the purchase price of any comparable item.  For external billing, once the rates are established in the contract, an owned equipment ticket, much like a shop material ticket or invoice, could be used to show the number of days/hours the equipment was in use on site.  The equipment could also possibly be added to the documentation you are using to record daily labor, if it is a handwritten daily ticket or sign-in, sign-out sheet, or similar.

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Charlene Peacock
Principal Construction Consultant
Brashear Construction Consulting
Pittsburgh PA
charlene.peacock@brashearconsulting.com
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5.  RE: Equipment Rental Rates

Posted 02-16-2017 08:53
When we use our own equipment, we 'rent' them to the job at approximately 50% of the street rental rate. This encourages the PM's and foremen to use our own equipment when available. This charge is a job cost with a credit posted to that piece of equipment - so the job gets a charge and the equipment shows a payoff.

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Gary Garber
President
Garber Electrical Contractors
Englewood OH
ggarber@garberelectric.com
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6.  RE: Equipment Rental Rates

Posted 02-16-2017 10:54
We annually review rental rates in the area for similar equipment and set a hourly price for the machine.  Next take out a market operator labor rate and apply a gross profit percentage to back into a per hour cost of usage.  Last year, generally the end result was over costing of equipment cost that was credited back to the projects.

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Quentin Huisman
Controller
Halbrook Excavating
Ankeny IA
(515) 289-2506
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7.  RE: Equipment Rental Rates

Posted 02-17-2017 09:47

We treat our Equipment Fleet as a cost center, not as a profit center.   As such, we strongly believe in the dual rate model of an Ownership rate and an Operating rate.  These are updated annually using hard empirical data of the cost of equipment by category and actual hours usage.      This approach is considered by many to be "Best Practice."      The best detailed explanation I have found of this can be found in Mike Vorster's excellent book "Construction Equipment Economics," which is available on Amazon.   If the name looks familiar, Dr. Vorster is a frequent speaker at the CFMA National Conference and considered by many to be a foremost authority on Construction Equipment Management.  

 

Herb Brownett CCIFP

Senior Vice President

 

<a href=image001.png@01D0A998.207695B0">

 

825 Reading Road

P.O. Box 528
Bowmansville, PA 17507
P  717-445-4571

M 610-823-7615
F  717-445-7789

 

www.brubacher.net

 






8.  RE: Equipment Rental Rates

Posted 02-20-2017 22:37
At my former employer, we divided our fleet into various equipment classes and assigned a number to each unit.  Rates were calculated at the class level, assigning either a flat daily rate or a mixed daily and hourly rate.

The math is relatively straightforward, but the devil is in the details:
  • What expenses do you assign to the equipment number?
  • Which equipment costs are directly billed to the job?
  • How do you define equipment department overhead?
  • What return do you want for your capital expenditures?
I highly recommend reading Mike Vorster's book Construction Equipment Economics from cover to cover.  It is only sold through C.E.M.P.  at https://cempcentral.com/book.

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Verlon Moore MS, MAgr
CEM
San Antonio TX
(210) 749-5932
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