Providing constructional plant and equipment

A contractor will own a stock of plant and equipment which is available for loan to construction jobs the contractor has in hand. When items are loaned to site, the job account held in head office will be debited with the cost of plant delivery, plus rates per day (or per hour) according to whether the plant is working or standing idle on site. These rates are termed internal hire rates.
Plant not available from stock will need to be obtained by the agent from some outside plant hirer, who will charge outside hire rates which are usually higher than internal hire rates. An agent may also choose to use plant from a local plant hirer because the cost of delivery may be less than that from the contractors plant depot if the latter is remote from the site.
Internal hire rates for plant will need to cover the cost of plant depreciation, running maintenance, major overhauls and renewals, plant depot and administration costs and some adequate return on the capital investment involved.
The cost of working repairs to plant is high, representing some 25 per cent or more of the normal commercial outside hire rate. The frequency of repairs is particularly high for mobile plant, where tracks may need frequent attention, and tyres may need renewal at high cost every few months. Wire ropes for cranes need constant renewal and a stock of same has to be kept on site.
Decision as to what plant and equipment should be owned by the contractor is a complex matter. Easily transportable equipment which can be used several times, such as temporary site offices, is commonly held in stock by a contractor. Plant with a long life and little maintenance, usable on many jobs such as flat wheel diesel rollers might also be held. But deciding what other major plant should be held for hiring out to sites involves many  considerations such as how often will it be used; its cost and expected working life; transportability; insurance, running and maintenance costs, and whether the resulting estimated internal hire rate gives an adequate return on capital invested, and shows a worthwhile saving over outside hire rates.

The risks involved in using owned plant have to be taken into account also.
Breakdown repairs of some plant can cause several days delay to the whole job which may be very costly; whereas if hired plant breaks down it may take only a day or two to get a replacement from the hirer or from some other firm.
Also hire firms can often supply an experienced driver with plant, and their hire charge will cover all maintenance, repair, breakdown and renewal costs, which reduces the contractors on-site commitments and risks. Additionally some operations, such as bulk excavation, may be let to a sub-contractor who provides all plant and drivers required for payment of either a fixed lump sum or more often unit rates for the measure of work done.

Scroll to Top