 September 2002Top Rental Fleet Managers of 2002Rental companies see all types of customers. They also know which of them are at the top of their game when it comes to managing their rental option. Here are five of this country’s top rental fleet managers, as determined by nominations by rental companies and editorial interviews.Ken Pfannenstiel Equipment manager LPR Construction Loveland, Colorado
With rental units comprising approximately 60 percent of its equipment fleet, LPR Construction pays a lot of attention to rental, according to Ken Pfannenstiel. “Using rental equipment allows us to save the capital equipment dollars we would need if we went out and bought it, and we still get 100 percent job write off,” he says. The steel erection company, which specializes in sports arenas and other commercial and industrial projects, primarily rents gen sets ranging from 100 to 250 kilowatts, aerial lifts and cranes, spending roughly $900,000 a year in rental. The company’s primary reason for renting? Two words: Avoiding downtime. “If you own it, there’s so much time involved when a machine goes down,” says Pfannenstiel. “You have to get someone out to the job to fix it, you may have to wait for parts to be ordered, and you’ll have to rent something while it’s down. Renting solves that problem.” Because welding equipment is so integral to its day-to-day activities, LPR either owns most of this equipment or has it out on full warranty leases. “Our in-house maintenance shop specializes in welding equipment, and we have enough welding units that we can easily handle any downtime problems that crop up with welders,” says Pfannenstiel. “Most of our welding units are also made to our specifications.” Pfannenstiel coordinates rental with LPR’s job superintendents and other field personnel. Since LPR has national account status, he’s already negotiated ceiling rental rates with most vendors beforehand. “For instance,” he says, “we now have a job in Tennessee, and our superintendent knows his ceiling prices.” Still, Pfannenstiel does not tell the superintendents which vendor to rent from. “We do, however, want to make sure that we are taken care of on a job,” he says. “So before we start work, I get in touch with our national account vendors and let them know we’ll be working in their area. This helps us have consistency in pricing and service. I don’t want to have to search for the best price every time we set up a new job.” LPR currently works with six to seven rental vendors, and its field personnel know which companies are on LPR’s preferred vendor list. Still, the door is open to other vendors, if they can prove they are up to the challenge. “I don’t just look at prices,” Pfannenstiel says. “I also want new or near-new equipment that doesn’t break down and a quick turnaround if it does. What I don’t want is inconsistency in pricing, poor service or a pickup and delivery system that’s haywire.” But he’s sympathetic to those knocking on his door because he used to be the one knocking, selling welding equipment and industrial gases to LPR for 14 years prior to being hired by the firm. “They told me they liked the way I did business with them as a vendor, and that they would like to see me develop those same partnerships with their other vendors,” Pfannenstiel says. Tony McGreavy Asset Manager J.F. White Contracting Framington, Massachussetts
J.F. White uses both straight rentals and rental purchase options, and the company is a proponent of the latter. “If we’re going the RPO route,” McGreavy says, “we require a new machine. That way, we know the total operating history of the piece from day one. We like to use RPOs in as many deals as possible, because it prevents us from tying up our liquid capital.” Still, the company doesn’t hesitate to send an RPO machine back, even if it’s been rented for several months. They won’t convert the machine if they can’t find a further use for it or if the company’s intentions change. Which is one of the reasons the company values RPOs: nothing says you have to buy the machine. McGreavy works with the company’s job superintendents and project managers, taking their machine orders and determining the best way to fill them. He first chooses machines from White Equipment Leasing, the company’s in-house equipment leasing firm, which rents company-owned equipment to its jobs. If they don’t have what’s needed, he then looks to his rental vendors. “And if it’s something we need for 24 months, then we may lease instead of rent,” he says. Most of the time, the firm rents about 5 percent of its total equipment fleet. During its work on Boston’s Big Dig project, however, that percentage shot up to around 20 percent. All equipment — owned, leased, loaned or rented — is assigned a number and tracked by the company’s computer software program. “If someone needs to know the location of a manlift,” McGreavy says, “we just need to know the machine’s serial number and we’ve got all the information in front of us.” McGreavy also keeps handy several three-ring binders listing each rental company’s services, inventory and list pricing. “We’d love to have all this computerized,” he says, “but not all vendors are there yet.” The asset manager sums up his rental philosophy like this: “Rent and rent and rent. Contractors are benefiting from the war that is going on between rental companies and it’s driving rates into the ground. If you’re not renting, you’re missing the boat.” Lee Ruff Equipment manager Q & D Construction Reno, Nevada
“I like to establish a trust with the rental companies I work with,” Ruff says. “I want them to trust me not to hide anything. For example, if we break something, I let them know. And I want the same level of trust back from them.” Right now, Q & D Construction has about 70 major pieces of equipment out on rent, representing 28 percent of the entire equipment fleet Ruff oversees. “Our rentals are a little above normal this year,” he says, “primarily because we had so much more business and we knew we didn’t want to buy everything we needed to meet the increased demand.” Q & D is diversified across a broad spectrum of markets. The firm builds everything from roads to parks to commercial buildings to multi-million dollar estate homes on the shores of nearby Lake Tahoe. “I haven’t found the piece of equipment yet that we won’t rent,” Ruff says. This includes a tower crane the company used to build a house on a 45-degree hillside at Lake Tahoe. Every Thursday at 8 a.m., Ruff gets together with Q & D’s engineering, paving, concrete, dirt and pipe superintendents, plus his field maintenance supervisor and the company’s head superintendent, to go over their equipment and labor needs. “This is so we’re all on the same page,” he says. “We know what’s on each job, what’s needed the next week and what should be called off rent.” The list they go over — which Ruff updates daily — details each rented machine, the date it was rented, its serial number, the insured value of the machine, its number of hours, whether it’s on a rental purchase option and the company it’s rented from. Although Q & D has a blanket insurance policy for its equipment, the company also makes sure each piece — whether owned or rented — is specifically insured by serial number and value. “We think this makes sense because the values are so high on large equipment,” Ruff says. Admittedly, keeping the insurance company informed about the on/off rents is time consuming, so the firm only does this with major rental machines. Q & D has come up with a solution to a superintendent’s natural tendency to horde equipment: If there’s any extra money in the rental budget at the end of the project, it’s credited to the job. “This prompts them to get rid of equipment when it’s just sitting,” Ruff says. Equipment, both owned and rented, gets another scrutiny at a monthly meeting attended by several company departments. “This helps us know right away if we’re making money or not,” Ruff says. “We’ve had jobs that were in trouble and we were able to turn them around because we were on top of it.” Ruff makes full use of the rental purchase option, converting around 15 machines last year. “We really enjoy the RPO,” he says. “It’s allowed us to increase our fleet. You get to a point, however, when you have to decide how big you want to get.” Douglas Nash Equipment administrator Granite Construction, Sparks Branch Sparks, Nevada
In fact, once rented, a machine is treated just like a piece of Granite-owned equipment, according to Nash. “We assign it a number, and it goes into our tracking system and gets fueled and serviced just like our own equipment,” he says. One practice is essential to keeping track of what’s where on the more than 25 jobs the Granite branch has in its jurisdiction: a daily dispatch meeting. At this meeting — attended by Nash and his dispatcher, plus Granite’s dirt, carpentry, general, paving and trucking foremen —participants discuss what equipment they need and whether it has to be rented or obtained from other Granite branches, what should be called off rent and what machines could be transferred to another job. “You have to know if a machine is going to be working or sitting,” Nash says. “If it’s going to sit, then you need to move it or get it returned.” If a machine is not being used, it’s questioned in the dispatch meeting. “There might be a day that we don’t use a piece,” he says, “but that’s about as far as it will go.” If a machine is called off rent, Granite personnel transport it to their shop for cleaning and fueling. Because it offers them more control over when it happens, Granite handles all of its rental pickup and delivery. Nash says Granite rents from all the major dealers in his area, plus the national rental outfits. “I get good service from all of them,” he says. “Rental is so competitive that they all jump through hoops to service their accounts.” The Sparks branch of Granite Construction does a variety of work throughout Nevada and eastern California, including roads, airports, utility work and bridges. Nash estimates the branch rents between 20 and 25 percent of its total fleet, concentrating on high maintenance items, such as vibratory compaction rollers and low utilization machines, including skip loaders. Making note of any rental machines that get high utilization, he converts about eight RPOs per year into owned machines. His 40-plus years in the equipment business have given Nash a bird’s eye perspective of rental. “I can remember when the only choice you had was to own equipment, and I still favor owning,” he says. “But I’m also a big believer in rental equipment. With it, you’re only responsible for minor maintenance, fuel, damages and of course, the rental rate. Rental is here to stay.” Jim Lafferty Manager of Corporate Equipment and Tools Henkels & McCoy Blue Bell, Pennsylvania
Henkels & McCoy’s rental expenditures follow the company’s peaks and valleys, ranging from a low of $2 million per year to a high of $4 million, according to Jim Lafferty. The company, which serves the communication, information technology and utility industries, currently has approximately 6,000 of these types of units in its fleet. Lafferty’s philosophy on RPOs has changed as his firm has ridden the telecom upheaval. “I will now walk away from an RPO, even though we maybe eight months into the rental,” he says. “I didn’t use to do that, but now I feel it has served it’s purpose if we just rent it.” Common rental machines include digger derricks, backhoes and air compressors. “But we rent everything, including big trenchers, dozers and large material cranes,” Lafferty says. Lafferty uses about eight rental vendors, and has seen the industry evolve during the past decade. “I look for rental companies that don’t change the way they do business with us even when times are bad,” he says. “For example, one vendor gave us a very cheap price, and then two to three months into the deal said they couldn’t service us because of the low price. I told them, ‘Hey, the price wasn’t my idea.’ I tend to go with those who will benefit us in the long run.” Although rental decisions are made by supervisors at each job, Lafferty and his staff oversee the process as much as possible. “We want to take a look at the broad picture,” he says, “and always know what our options are.” Lafferty has a rare insider’s view of the rental market, since he helped manage a 1,500-machine, in-house rental firm for the company along with his father, who retired in 2001. “During the 1980s,” he says, “some railroads were in financial difficulty and not allowed to own equipment. Plus, they only wanted it for nine months at a time.” So Henkels & McCoy rented it to them. “We were an early version of a Hertz,” Lafferty says. “But when we started to look at increasing our fleet, we had to come to a decision whether we were a contractor or a rental company.” The rental division disbanded in 1994. Working in a business that sometimes experiences great swings, Lafferty says the best thing about rentals is that you don’t have to plan for them. “After all, that’s what rental machines are there for.” |