The purchase of equipment represents a capital investment by the construction contractor. The contractor has to recover enough money to pay the ownership cost and operating costs of the equipment during its useful life. Together, he must make a profit on the investment. Therefore, any estimate must include the cost of equipment used on the particular project.
Construction equipment could be purchased or rented.
The decision between purchase and rental usually depends on the amount of time the equipment is used in the contractor’s operations. If extensive use of the equipment is required, the equipment is normally purchased. If the equipment is to be used for a limited amount of time, it is usually rented.
A contractor does not necessarily have to own any construction equipment to carry on business.
There can be distinct advantages to renting equipment, including:
– No need to maintain a large inventory of specialized equipment.
– Continuous access to the latest and most efficient items of available equipment.
– No need for equipment warehouse and storage facilities during no work periods.
– Lesser need to employ maintenance staff and operate facilities for their use.
– Equipment cost accounting is simpler when equipment is rented.
Contractors may purchase equipment when factors about ownership and economics make this alternative more favorable than renting.
When the construction operations of a contractor need the steady use of certain equipment, owing such equipment may be financially better.
There can be a marketing advantage if the contractor owns their equipment. It shows that they are more financially stable than others who do not own their equipment.
Some clients request contractors who bid on their projects to list on the bid the company-owned equipment they propose to use in the work. This information is used in the client’s assessment of the bidder.
Also, the advantage of purchasing equipment is that it allows a contractor to have absolute control over the use and disposition of equipment. The contractor can use the equipment in any manner that fits the required job.
Decisions on how to do maintenance and servicing can be easily made, thus ensuring the desired operational performance.