|
Contractor Roundtable Highlights
Used Equipment: Financial Aspects Drive Purchases
While on the one hand, construction contractors are feeling the effects of a soft used equipment market when they try to take theirs to auction, it also is leading more of them to consider purchasing used equipment.
International Projects
Robert Hall said that Bechtel considers using late-model used equipment for international projects when it can be purchased near the project for an affordable price. That's because moving equipment from region to region can be a significant cost. For contractors like Boh Brothers, concerns about used equipment's maintenance record keep the company from buying more used equipment, Chris Ryan said. Both Boh Brothers' Chris Ryan and Fluor's Charles Snyder don't expect the current used equipment oversupply to last.
Utilization Curves
Contractors' emphasis on utilization also affects how long they keep equipment.
Fluor's Snyder says in general the amount of time his company keeps construction equipment hasn't changed a great deal, but the factors that determine when to replace equipment have changed.
"What has changed is how we look at when we turn machines and what drives those decisions," Snyder said. "From a capital management perspective, utilization and lack of utilization is a bigger driver to the return on assets and return on capital than major repair points and operating costs."
Though utilization may increasingly influence how long contractors hold on to equipment, residual value continues to influence which equipment they purchase in the first place, and whether they buy or rent, according to roundtable participants.
New Contractor Roles
With the increased focus on utilization, construction contractors are taking on new roles. Some are beginning to rent out equipment, sometimes even to competitors. Both Bechtel and Boh Brothers said that in an effort to maximize utilization of capital, they have made the unprecedented move of renting equipment to competitors, despite internal resistance.
Large construction contractors are also increasingly becoming their own best resource for service, according to roundtable participants. The Walsh Group's Andrade said that often his company hires trained service technicians from dealers, and that his company's service capabilities are often better than dealers'.
It was noted that contractors' technicians may often be more experienced on a particular piece of equipment than dealer service staff because "that's what they do all day," said Hall.
<<Back to: Growth in rentals: Key factor in financial equation
|
