Contractors have not tended to take the structured approach to hiring road vehicles that they take to site equipment. Paul Howard finds a hire firm determined to change all that
THE CONSTRUCTION industry could be forgiven for thinking it knows everything there is to know about hire.With more than 80 per cent of many types of tools and equipment provided by hire companies, the relationship between contractors and hirers is already highly developed.
But vehicle rental is a different matter.Of course, almost all companies will have hired vehicles at one time or another. But the hiring of cars and vans - especially vans - by contractors on a regular and pre-planned basis is still in its infancy compared to the 60-year tradition of plant hire.
There are clear reasons for this, most notably the relatively low capital cost and the widespread use of vehicles compared to construction plant.
But now the hiring of commercial vehicles in the industry is on the up, especially for periods shorter than the standard contract hire arrangement.
'Contract hire tends to be arranged on a three to four-year or 60,000 mile basis, ' says Tony Francis, UK sales manager at Enterprise Rent-a-Car.
'The majority of hire in construction is for short-period contracts.'
Nevertheless, the term 'short' is relative.
'Short-term can mean one month, six months, 12 months - even up to two or three years, ' says Mr Francis.'In fact, anything less than the duration of contract hire, where an asset has to be shown on the balance sheet.This means any period of time not long enough to justify the cost of writing down that asset.
'You often get a construction company which has a short-term contract - say a few months - and needs an extra 30 light commercial vehicles.Ad hoc hire can do this and does exist, but is mainly used by smaller builders, shopfitters and the like. Larger contractors look for something in the longer term - for larger projects, the longer-term cost of transport provision has to be factored in to the price quoted for a job.'
The certainty that the contractor requires when tendering for this kind of work is reflected in the hire service offered by Enterprise.
'If a construction firm says it wants 28 days' hire or more on a guaranteed basis, then there are extra savings and benefits that go along with that, ' says Mr Francis.
Thus, although a contractor may want to be certain of the bottom line for its transport costs at tender stage, it will almost certainly want to be flexible in terms of the actual number and nature of vehicles on hire at any one time once the project is up and running.
Mr Francis is keen to point out that such flexibility can be accommodated.He says: 'As long as the rental agreement is guaranteed to be more than 28 days, changes can be made to what's on hire within the hire period: vans can be swapped, changed or just returned, and there is no penalty.
'The degree of flexibility required would be talked about at the negotiation stage of the contract.There is a full fact-finding stage so that we can manage the demand.Then, during the hire, changes can be managed by calling a national number, or by calling into the local branch, or online - the customer can choose.'
In general, contract needs are assessed on a monthly basis by one of the depots designated to deal with this type of hire.
Mr Francis says: 'There are 250 locations for picking up vans but contracts lasting longer than one month are only managed from certain specialist depots - there are four in the London and south-east region, for example.'
Another aspect of the service offered by the specialist depots is fleet management.
'If we're going to have the opportunity to put this many vehicles on hire to one company for more than one month, then we'll manage what's on hire, ' says Mr Francis.'This means that, if a vehicle has a problem, they can bring it in and we'll replace it - the downtime is negligible. Servicing arrangements can be by agreement with the customer.Also, we can help fleet managers with their duty of care by ensuring the provision of vans that are fit for service.'
In a rugged environment like construction, the state of the vans at the beginning of a hire, as well as at the end, is an important issue.
'Roadworks seem to be particularly intense, ' says Mr Francis.'But construction isn't unduly antagonistic.We have a system of very thorough checks, which both parties sign off at the start of the hire and any additional damage is paid for by the customer.We try to eliminate the potential for conflict.'
One way of doing this is a new service to pick up the person hiring the vehicle from his or her site.
'This saves the need to get a lift to our depot to pick up the van. It's proving popular in London, where there's the congestion charge.The vehicle must still be returned to the depot, however, ' says Mr Francis.
In addition to these arrangements, typical of what might be called traditional construction, Mr Francis says Enterprise has also identified a demand among companies involved in facilities management.
'This is often arranged around 24-month renewable contracts, with the aim of providing a virtual vehicle pool, ' he says.'Hire is on an 'ad-hoc ongoing' basis, and this can mean daily changes. It saves a company from having to run a pool of cars.They don't need to carry spare units just in case there is a breakdown - they just come to us. It's a huge cost to have spare vehicles sitting in the yard.'
Even the most well established plant hirer would be impressed with such logistical achievements, although it does have an impact on rates of utilisation.
'We have to plan carefully and monitor demand closely, ' says Mr Francis.'We usually operate at between 80 and 90 per cent utilisation - this is lower than cars, but we need to make sure we have the vehicles available.
'Even when we're operating at 90 per cent utilisation, this still leaves us with spare capacity of 400 vehicles nationally. Plus, we have the financial muscle to go out and buy more if necessary.
'Over the next six months we're going to continue to invest in this fleet.
We see a tremendous opportunity in commercial vehicle markets and construction is obviously a large part of this.'
ENTERPRISE Rent-a-Car currently has 250 branches and aims to have 300 by July 2005.
It has 3,000 employees and 30,000 vehicles, including a 4,000-strong commercial vehicle fleet.
The range of commercial vehicles available runs from Ford Escort-style vans to long-wheelbase, high-roof models and features most vehicle manufacturers: Vauxhall (a significant partner in the UK), Ford, Iveco, Renault and Volkswagen.
'We need to offer choice to our customers; a 100 per cent branded fleet wouldn't be attractive, ' says sales director Tony Francis. For bigger and more specialist vehicles, Enterprise has links with other companies to be able to meet customers' needs.There is also a fleet of 4x4 vehicles, from Toyota Hilux flatbeds to Toyota Land Cruisers.