The Science of Buy vs. Rent Dewatering Equipment Decisions

Dealing with groundwater is among the top challenges in underground tunnel, structure and pipeline projects. Groundwater in excavation sites can lead to increased costs and project delays if not planned for and handled properly. These situations make bypass and dewatering applications a common need for contractors in many tunneling projects. It is always best practice to turn to qualified and knowledgeable experts before beginning any sort of underground tunnel, structure and pipeline projects.

Bypass and dewatering requirements typically vary from one tunneling project to the next. The selection and specification of pumps and associated equipment demand significant expertise. These variables can make it difficult for contractors to own the extensive equipment inventory needed to prepare themselves to address all the situations they may face.

Equipment is a significant, yet necessary, dewatering project cost — without equipment, work can’t get done. But too many firms overspend on equipment because they don’t do the adequate buy vs. rent analyses that would likely reveal opportunities to adjust strategy and ultimately cut costs.

These analyses can be time-consuming for contractors to conduct. What’s more problematic, companies may lack the historical data necessary to calculate, for each asset, total cost of ownership (TCO) and utilization, the two critical variables that drive smart buy vs. rent decisions. But the opportunities for potential cost savings are large enough that firms should find their way around these problems, even if it means partnering with a third party for help.

The Key Numbers: TCO and Utilization

The crux of making data-informed buy vs. rent decisions is calculating TCO and comparing owned equipment to the cost of renting a similar unit for the amount of time it’s needed. That is normally a pretty good quantitative indication of when it makes sense to rent instead of own, and vice versa.

Total cost of ownership, as the name implies, encompasses more than just the purchase price. It includes taxes, insurance, extended warranties, interest on financing, the cost of transporting the equipment from worksite to worksite, storage costs, and depreciation. Notably, it also includes maintenance and repair costs (parts, supplies and labor) as well as fuel and oil costs, all of which vary based on usage and worksite conditions. This is where a good fleet management solution comes into play. Without those historical records, any analysis amounts to guesswork rather than math.

A construction company also needs to factor in whether it has the qualified mechanics on staff that are needed to maintain, repair and troubleshoot bypass and dewatering equipment on projects. In these situations, the optimal move may be to outsource maintenance of owned equipment to a qualified equipment rental provider that maintains their expertise in-house.

Calculating utilization, the percentage of time equipment is used, also requires historical records, and for many contractors, this is another sticking point. Again, a good fleet management solution can provide data on where assets are, who’s using them, and how often they’re using them.

To figure daily utilization, add up the number of full days an asset was used over the course of a month. Include combined partial days (if a pump was used on four half days, consider that two full days). Divide the sum by the number of working days in the month to get a percentage, for example, 0.75 (75 percent) or 0.4 (40 percent). That’s the utilization.

Because making a buy vs. rent decision for every individual unit in the fleet would be too cumbersome for most contractors, a company will probably want to set up some exception-based calculations — for example, decide to analyze only those assets with 50 percent or lower utilization.

If utilization is under 50 percent, the asset is probably worth reviewing as a candidate for renting. Given the variability of what’s required among dewatering projects, owned equipment may often go unused if it cannot be utilized across multiple application scenarios. Remember, while equipment is sitting idle, it’s also depreciating in value.

Finally, to make a quantitative buy vs. rent analysis, compare the cost of ownership over a certain time period, for instance, six months, against the cost of renting a similar piece of equipment for the days or weeks during that time period the equipment would be used.

When Buying Makes Sense

For some pieces of non-specialized equipment that are used regularly, it’s almost a no-brainer to buy instead of rent. It generally makes more sense to own equipment with high availability – durable, dependable machines – since the TCO and utilization rates should be favorable. The same goes for equipment that’s so specialized that it’s difficult to find in the rental market or it bears a high rental cost.

Equipment might be worth owning, even if the utilization is quite low when calculated in hours per month, if a company uses the unit every day. In this case it’s clearly essential to operations despite sitting on standby most of the time. A similar instance in which it might pay to own, regardless of other factors, is when the cost in downtime of not having the asset when it’s needed would be enormous. Identifying critical assets is a key step in making the buy vs. rent decision, since a critical failure can drastically impact TCO in addition to slowing down projects.

When Renting Makes Sense

Renting equipment makes sense when it saves money, of course, but also when a company wants to avoid a capital expenditure. There are, after all, opportunity costs associated with sinking money into an expensive piece of heavy equipment. Renting preserves buying and borrowing power. Bonus: The rental cost is often a deductible business expense.

Renting can also make sense if it allows a contractor to complete work faster by using exactly the right equipment for the dewatering project at hand. Renting is also a good way to test out a unit – and see how often it will be used – before deciding to buy.

There are other benefits to partnering with a rental provider. Typically, there are a variety of techniques that can be deployed to control groundwater. Look for equipment rental providers that have an experienced team of engineers and field technicians to design and provide bypass and dewatering solutions. They can play a major role in project planning and execution that will lead to safety and cost savings benefits at every step, from providing and installing specialized dewatering equipment to operation and maintenance to decommissioning.

An equipment rental provider needs to have the scale and local resources to completely support a demanding construction worksite. This includes the expertise and equipment to quickly address pump operation issues on a 24/7 basis to avoid project delays.

Third-Party Expert Help

Even for companies that use a fleet management solution and have historical maintenance and utilization records to reference, making a buy vs. rent analysis is not always an easy or straightforward proposition. For instance, a large worksite might have hundreds of pieces of equipment, and if they’re all equipped with telematics, that’s thousands of data points that need to be interpreted. And those data points may not tell the full story at first glance.

For busy fleet managers, aggregating and analyzing the data necessary to make intelligent buy vs. rent decisions can be a tall order. But not doing it can be costly to the company.

Saving money by understanding when to rent or buy comes down to having the tools and systems in place to effectively manage maintenance operation and measure utilization. Partnering with a rental equipment provider with expertise in dewatering solutions and fleet management may be well worth the investment. It can help a contractor maintain a safe, workable area without unwanted water that can slow down a project.

Majid Tavakoli is Director of Dewatering Technology, United Rentals.