When Ernie Audet Jr. wants a new piece of equipment quickly, he rents. Audet wastes time and money when he lacks equipment needed for a job.
Rental equipment is a $25 billion industry and almost all contractors—large and small—depend on it. Audet’s firm, E. W. Audet & Sons in Providence, R.I., has 150 employees and does just about any kind of installation along the East Coast. He has found that rental prices among major companies are competitive, so rather than shop around, he has built up good working relationships and relies on three or four rental firms. “I don’t rent from one guy and dump him right away. We do have allegiances and alliances with different companies that serve us. We look for performance. We look for service. And when I say performance, it seems like with contractors, everything’s a ‘now’ situation. Actually, with the advent of the computer, it’s a ‘yesterday’ situation,” Audet said.
He related a recent situation when he needed extra cranes: “This morning, I called someone and said, ‘OK, I need a 16-footer and a 32-footer—this is Tuesday—and I need it Thursday on a job outside of Boston. They said, ‘OK. We’re there.’
“There’s a respect back and forth and they know they’re supposed to have a performance situation in order to be able to supply equipment here,” Audet said.
For Audet and other contractors, convenience is a big factor in rental transaction, but money saved probably trumps that consideration. According to Elaine Barreca with the American Rental Association (ARA), renting today is “very economical” for many in the construction industry.
“Contractors rent when it makes financial sense,” Barreca said.
Again, renting can save time. Purchasing and leasing equipment can be a more lengthy process, said Michael Disser, vice president of marketing for National Equipment Services (NES). As with other major rental companies, NES tries to make a transaction as quick and as easy as possible.
Their Web site (www.nesrentals.com) has an account login with which a contractor can enter an account number and check out current or past invoices, or pull up an “on-rent” report that shows an inventory of equipment on the job. New customers can apply for an account online or come to one of NES’ 170 locations in 35 states and Canada. They fill out a two-page credit application, provide a certificate of insurance and, in most cases, NES will get back to them in 24 hours, though credit approval may take longer.
“It’s a relatively painless process,” Disser said.
He agreed with Audet, saying that NES can get equipment to a job site fast.
“And if you’re a guy who’s working on multiple job sites, your needs change on a daily basis, if not an hourly basis. And then they change from site to site,” Disser said.
According to the ARA, if you own a piece of equipment and only use it 10 to 20 percent of the time, renting is a better option. According to Disser, renting eliminates long-term commitment, interest and maintenance costs. Rented equipment doesn’t become obsolete and advancements have made up-to-date models more safe and productive. Keeping pace with new technology is an expensive proposition.
“How are you going to do that?” Disser asked. “Keep buying new equipment all the time?”
Extra storage and transportation for new equipment are hidden costs, and renting decreases downtime, another crucial issue for contractors.
“If you’ve got equipment that’s not working properly, who’s going to fix it and how quick are you going to get it fixed?” Disser said. “And you’ve got guys that you’re paying who are going to be standing around the job site. That costs more than it does to fix the equipment.”
Who rents what?
Disser said construction contractors make up 65 percent of NES’ total revenue and that the company has 2,000 electrical contractors as customers. As for dollar volume, the top 20 percent of ECs—larger contractors—make up 80 percent of the revenue. Conversely, the remaining 20 percent of revenue is derived from 80 percent of their total EC customers.
“And that means we have a lot of small customers that make up our data base,” Disser said.
Those figures match “work-performed” statistics in The 2002 Profile of the Electrical Contractor, this magazine’s survey of 6,000 firms. It showed that smaller contractors—one to nine employees—account for 75 percent of the work force but only 20 percent of work performed. Larger companies represent only 22 percent of contractors but do 80 percent of the work.
As a rule, contractors rent large equipment and almost never rent small tools. Scissors lifts, cranes and boom lifts seem to be the most popular rental items. This makes sense because, as William O’Rourke said, “The job might take different shapes.”
His company, James J. O’Rourke, Warwick, R.I., which does $10 million in sales and carries about 50 electricians, has been in business since 1947. They own all their vehicles, including larger trucks.
“We’ve been in business so long that we own most of our equipment. It’s different when you’re starting out and have to equip yourself,” O’Rourke said.
They do rent scissors lifts when equipment has to be tailored to the job and will occasionally pick up a bucket truck from a rental company or a competitor. Renting those items is beneficial to O’Rourke because maintenance costs don’t figure in.
Audet’s situation is similar. His company has amassed an equipment inventory by virtue of their broad range of projects, company size and length of time in the business.
“My philosophy has been that we own most of our stuff. The only equipment I can say we actually rent is any large cranes—we have our own small cranes—and platform lifts, and we do that because of an OSHA and a safety-type situation,” Audet said.
“It’s more convenient to rent a lift and dispose of it in a month or six months—whatever the case may be—as opposed to buying and almost having a rental fleet. But backhoes and dump trucks and pullers and bucket trucks—you name it—we own outright.
“It’s not so much the long-term situation but the type of equipment,” Audet said. “The vertical lift, the man lift on the job site, almost 95 percent of time, we’re going to rent it.”
Again, those percentages are close to the figures in our contractor profile. The survey uses “rent” and “lease” interchangeably, a common mistake; nonetheless, the figures are similar to NES totals. In 2001, 26 percent of contractors leased or rented lifts and scaffolding while 4 percent leased/rented pipe threaders, benders, cutter and power tools. Less than 1 percent leased/rented hand tools, testers and multimeters. By contrast, more than 80 percent bought hand and power tools and 19 percent purchased lifts.
Clearing misconceptions, looking ahead
As noted, consumers frequently confuse leasing with renting. The major differences are: lease contracts are longer and more binding; rental customers have the option to return equipment within the rental period and pay only for the time they’ve kept it; and rent-to-purchase arrangements are not as predominant as a lease–to-buy.
The need for certification to operate rental equipment is another common misconception. The American National Standards Institute (ANSI) and the Occupational Safety and Health Administration (OSHA) set safe-use standards that outline the rentor’s and rentee’s specific responsibilities. Rental agencies must provide training, but there’s no formal certification process.
“The use of the word ‘certification’ can be misconstrued sometimes,” Disser said.
Employers must train employees because, after the rentor does the initial training, additional people may use the equipment on the job site. Also equipment requirements can be different. Forklifts will have different standards than scissors lifts, for example. While OSHA and ANSI are minimum requirements, some states, municipalities and even job sites may have added safety requirements.
“Our responsibility is to provide safe equipment that’s fit for the intended purpose and use as designated by the manufacturer,” said NES’ Disser. “And that we provide safety information, manuals and training on the safe use of equipment. We do that with every rental because we have to do that with every rental. And because we want to do that with every rental. We want to provide safe equipment and keep our customers safe as well.”
What about the future? NES looked into global positioning system (GPS) technology and did a few installations. But Disser thinks the systems will become more prevalent in the industry when prices drop and its advantages are better understood. GPS can be used for tracking and fleet management, and came into vogue because equipment—especially large machinery—was being lost and stolen.
“If you’ve got a $200,000 piece of equipment, you’re going to want to know where that thing goes,” Disser said. EC
FULMER, a Baltimore, Md.-based freelance writer, can be reached at email@example.com.