What Are You Really Paying for the Equipment Your Contractor Charges to Your Construction Project or The Case of the $55 Carpenter’s Level that Was Billed at $780
Most owners involved in a construction building project believe that when a general contractor puts lots of equipment on their building site, they are gaining the benefit of a lot of productivity. When owner’s representatives / consulting project managers see a lot of construction equipment what they see is dollars flying out the door.
The tricky part is figuring out how much equipment is too much, and more importantly, how much you as the owner or facility manager should be charged for each piece of equipment. One quick way to tell how much equipment is too much is a little test I like to call the “photograph test”. The way the photograph test works is pretty simple. If there is so much equipment on the site that you feel compelled to take a photo and e-mail it to everyone you know to show them what a great construction project you’ve begun, there is too much equipment!
The second way to tell is to listen carefully when your general contractor brags about how much equipment they own. Once again, most owners and facility managers take this as a good sign while owner’s reps and project manager shudder. I recently spoke with a general contractor who bragged about the amount of equipment his company owned. He offered to take me on a tour of the yard but warned me to wear comfortable shoes since we’d be walking for hours! When I calculated the holding cost for that amount of equipment compared to their annual construction volume, I realized that this general contractor would need to add nearly 1.5% to the cost of every job they build just to cover the cost of the equipment!
So how much should you pay for equipment your general contractor or construction manager uses on your project? The answer is that it depends on whether the equipment is a consumable (like saw blades that will be fully used up on your project) or whether the equipment is capital equipment that the contractor will use again and again over the years. For consumables, it’s fair for the contractor or construction manager to expect you to pay the full cost. But when I say full cost, make sure the cost is fair. For example, general contractors or construction managers will often be given a saw, drill or other piece of equipment that utilizes consumables at little or no cost as long as they agree to buy all the saw blades and other consumables from their equipment dealer at an inflated price. This inflated price for the saw blades then gets passed along to you and as the building owner or facility manager along with a charge for the use of the “free” saw.
On a recent project where we were the owner’s representative, the construction manager / general contractor attempted to charge the owner $15/week for each 6 foot carpentry level used on the jobsite. These levels cost about $55 and will be used for years. Since the duration of this project exceeded a year, it was going to cost the owner, more than $750/year for each level. The worst part was, the level was the first piece of equipment (and the least expensive one) shown on an equipment summary page that filled an entire multi-column sheet.
If you’d like to learn more about how to protect your company from paying excessive equipment charges, drop me an e-mail at gilbertcostcontrol@gmail.com or post a comment.
Tags: BOMA, building, building owners and managers association, construction, construction equipment, construction management, design-build, facility management, facility manager, general contractor, IFMA, owner's representative, project management, TEC, Vistage, WASBO
