Construction Today - August 2012 - (Page 11)

IN THIS SECTION term equipment strategy that could eventually catapult the company in the marketplace. Pres-T-Con g p.26 Critical Considerations In following the flow of the decision tree, business leaders must evaluate several considerations and their importance to the company: • Does the piece of equipment produce revenue or does it service revenue-producing equipment? The company must look at its production fleet and its service and fuel trucks. The support equipment in a company’s fleet can get overlooked and create excessive, unnecessary spending. • Is the equipment an essential component of the fleet? Based on current and projected work, is the equipment the correct type or model needed, or would another model be more suitable or less costly to operate? At times, companies keep equipment that is not being used. The misconception is that if the equipment is fully depreciated, it doesn’t cost anything. However, there is always a cost to keeping equipment around, especially if it has trade-in value that could be used to update the fleet. • What is the availability of company-owned or rental equipment to replace the equipment, short- and long-term? How important is it to get the piece of equipment up and running? When is the equipment needed on a regular basis? How long will it take to repair it, and how long will it take to replace it? Will revenue be lost while it is out of commission, and if so, how much over what period of time? Given business owners’ hesitation to move forward in purchasing equipment in recent years, the industry has seen increases in rentals. At times, rental demand has led to a lack of availability for rental equipment. • What is the magnitude of the repair cost compared to the potential life of the equipment? Based on utilization, is the cost to repair the equipment recoverable before the end of its useful life? Will the repair improve the equipment enough to increase productivity or reduce future costs? If so, what are the lengths of time and dollar amounts involved? • What are the costs and benefits involved in replacing the equipment? How much will it cost to purchase new or used equipment to serve the same or additional purposes? Will upgraded equipment, whether through repair or replacement, lower costs involving fuel, maintenance, or other expenses? Understanding the cost and benefits is essential to making an educated decision as opposed to an emotional decision. At the end of the day, companies should focus on what is going to improve productivity. What are the additional factors to consider regarding the costs and benefits of acquiring new equipment or replacing existing equipment? Additional questions include: • Will equipment replacement enable the company to perform more work, integrate work teams or locations, save time and increase other efficiencies? Will replacement bring in new revenue, and if so, how much? • What is the current market value of the equipment? The usedequipment market is strong now due to lack of purchases in recent Foundation and piling specialists Pres-T-Con press forward with projects despite a tough economy. RIPA & Associates g p.28 RIPA’s employees and diversification help the company stay active. Company Profiles 14 Tomar Construction 17 Dallas/Fort Worth International Airport – TRIP Program 22 Watts Constructors LLC – F-22 Squadron Operations Hangar 26 Pres-T-Con 28 RIPA & Associates 30 Sundt Construction – South County Justice Center years. The value of the equipment may be greater than anticipated. • What are the availability and benefits of equipment warranties that come with a new piece of equipment to cover unexpected repairs? • What is the expectation of future downtime and repairs? As equipment ages, the frequency of necessary repairs will also generally increase. By creating a decision tree and taking a strategic and proactive approach, companies can reduce the disruption and financial impact – not to mention the headaches – involved in making equipment decisions. Craig W. Olsen is a partner in CliftonLarsonAllen LLP’s construction and real estate practice. He has 26 years of experience serving local and national equipment contractors. He can be reached at Joshua Thimjon is a manager in CliftonLarsonAllen LLP’s construction and real estate practice. He has eight years of experience serving local and national equipment contractors. He can be reached at AUGUST 2012 CONSTRUCTION-TODAY.COM 11 http://www.CONSTRUCTION-TODAY.COM

Table of Contents for the Digital Edition of Construction Today - August 2012

Construction Today - August 2012
Best Practices
Term Contracts
Tomar Construction
Dallas/Fort Worth International Airport – TRIP Program
Watts Constructors LLC – F-22 Squadron Operations Hangar
RIPA & Associates
Sundt Construction: South County Justice Center
Ole South Properties Inc.
Columbia Residential
Cambay Group – River Islands at Lathrop
NCB Group
The Crown Group – Oak Hill Senior Living
WCI Communities
NorthPoint Development
NorthPoint Development
APEX Block Corp
Flatiron Construction Corp. – ILM Transmission Lines
Annabelle Homes – Bakken Shale
Annabelle Homes – Bakken Shale
Teqton Inc. U.S.
Kier Construction – Jamaica
Chesapeake Contracting Group – Towson City Center
HBD Construction Inc.
HBD Construction Inc.
Last Look

Construction Today - August 2012