It’s a common occurrence for utilities and contractors: A piece of heavy equipment is needed, but it’s not immediately available in the fleet, so the project manager rents what’s required. But that may not always be the right strategy – especially when the rental is done outside the fleet manager’s purview.
“I have seen cases where equipment was rented for lengths up to 27 months and turned back in to the rental store,” said Daniel Fitzpatrick, fleet manager for NorthWestern Energy, which provides electricity and natural gas to more than 700,000 customers in Montana, South Dakota and Nebraska. “When this happens, you lose any rental credit and the equipment.”
Paul Lauria, president of fleet management consulting firm Mercury Associates (http://mercury-assoc.com/), has seen it too. “One of the problems we see, particularly in utility companies, is they allow business units to rent equipment to fill a temporary need,” he said. “Two years later, the rental unit is still in the fleet and no one has been paying attention. It would have been cheaper to purchase and then dispose of it.”
Granted, haggling over a purchase or evaluating the merits of rental versus ownership may not make sense when thousands of customers are without service. So, while there likely are no hard and fast rules that utilities can develop to address this issue, following some broad principles can help.
“It makes financial sense to own your equipment,” Fitzpatrick said. He tries to purchase any rental equipment at a reduced price when the rental ends, or when money has become available. “Where a buyout is not an option, focus on the interest rate and controlling costs in the short term.”