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I DA U N I V E R S A L Au g u s t - S e p te m b e r 2 0 2 3 13 Story continued on page 15 " ere was a time where the price of diesel fuel might not change 40-50 cents over many years," says Brett Ames, district president with SEMA Construc- tion, a nationwide, full-service contractor that operates 1,000 pieces of equipment. Back then, contractors paid more atten- tion to fuel consumption factors than to the price per gallon of fuel. But skyrocketing fuel prices are now complicating the situation, Ames says. And because fuel plays a major role across all aspects of a construction project, fuel price increases have a much bigger impact on contractors than on businesses in many other industries, notes Ken Simonson, chief economist with the Associ- ated General Contractors of America. Diesel prices have increased 74 percent over the last year, with fuel now making up more than 40 percent of equipment operating costs. And fuel prices are only part of the story. Ames says SEMA's overall equipment costs have gone up 33 percent. "We're attributing it to a combi- nation of factors including infl a- tion," he says. e good news is, that if you're smart about how you manage your equipment, experts say you can make money in this volatile market. at starts with taking a hard look at costs, Ames says. "We use Equipment- Watch consumption factors as a basis," he says. When SEMA's costs exceed those benchmarks, "we look at things diff erently." Contractors face a big jump in operating costs — driven primarily by fuel prices e EquipmentWatch Internal Charge Rate Calculator helps contractors understand in advance what fuel price increases will do to their profi t margin. Equipment- Watch, owned by Equipment World's parent company, Randall Reilly, off ers a calculator that helps contrac- tors accurately calculate their internal charge rate: the amount they charge themselves to own and operate an asset with cost estimates and trends based on data collected from hundreds of thousands of models monthly. Contractors can measure the impact each variable cost factor – fuel, hours, fi eld repair, tires, etc. – has on ownership and operating costs by adjusting the costs and the rate in real-time. In the current environment, the calculator can help contractors understand in advance exactly what fuel price increases will do to their project profi t margin, including the cost of idling. "If you're not keeping up with your rates, you could overcharge and lose a bid and if you're not keeping up with your rates you could undercharge and lose money," says Nick Holsinger, with EquipmentWatch. Knowing that the rates you are charging accurately refl ect your costs is especially critical in the current infl ationary environment. "We talk to big contractors who haven't updated their rates in 10 years, despite huge changes in costs, such as fuel," Holsinger says. Ames's company histori- cally sets rates every 2-3 years. "Now we're looking at it almost on a monthly basis," he says. Rising prices have "driven us to rethink our processes on a more demanding schedule. We have recently developed more sophisticated tools where a data analyst monitors cost. ese new tools and monitoring allow us to adjust our internal equipment rates much quicker," he says. SEMA is largely in the DOT market, "so the established contractual fuel escalation terms do not cover the actual cost." On the private side, SEMA tries to negotiate and share with the owner the risk of fuel prices. "During these negotia- tions we develop a risk matrix showing the current price of fuel and including a specifi c trigger that would implement a method of payment," Ames says. "Depending on the risk tolerance of the owner at times is is Part 3 of a four-part series on managing fuel costs as part of the Fuel Cost Volatility Survival Guide. How to Manage Your Rising Fuel Costs TRENDS AND TIDBITS

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