10 EQUIPMENT COST MANAGEMENT

10.1 OWNERSHIP COSTS

The use and ownership of equipment affects every type of construction company, and accurately accounting for actual costs is a complex process and has caused problems for many. The process of evaluating and accounting for all costs associated with equipment usage and ownership is complicated by the fact that some costs do not appear on invoices and, in fact, aren't incurred in the course of operations. These costs, while not easily recognized, will eventually have to be paid. Although various formulas are used to cope with equipment costs, the total costs of ownership are sometimes misunderstood. All costs, including those hidden, must be recognized and planned for in advance.

Contractors face many equipment concerns such as whether to buy or lease, which equipment to invest in, and when to invest. Equipment-intensive contractors, like road builders, landscapers, sheet metal contractors, and others have to make these decisions often, and they have a long-term and profound effect on success. Other contractors have the same concerns, but less effort may be put into these decisions because equipment isn't a big part of their business.

Debt service and maintenance costs may exist for contractors who own very little equipment, but these costs usually exist in a big way for equipment-intensive contractors. This chapter discusses problems primarily facing equipment-intensive construction businesses, but the principles apply to all ...

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