Rental Outsourcing: An Economic Model For Businesses

The rental model is becoming an economic necessity, as its adoption can be seen in several institutions across the U.S.
From: Alex Summers
February 11th, 2014 | 0 Comments

The U.S. government has been known for capitulating to the business community since long ago: this can actually be dated back to the start of the Silicon Valley, when IT companies were given legislative and infrastructural support to expand their growth. Likewise, economic circumstances have led to increased government support for certain business trends.

The current administration has looked towards affordable housing in light of the ’08 recession. The notion of affordability has been targeted through efficient usage of resources. The existence of incentives, certifications and tax credits for green businesses in the status quo is a testament to this.

The American Rental Association is another government sanctioned body that is looking to promote the trend of outsourcing rental equipment within the construction industry. In collaboration with the U.S. General Services Administration, they are encouraging businesses to adopt this philosophy and reduce their environmental footprints.

A model of necessity

The rental model is becoming an economic necessity, as its adoption can be seen in several institutions across the U.S. Quite recently, Fowler Park, which is part of the University of San Diego, has been awarded a Silver Certification from LEED. The focus point is that the construction model makes usage of outsourcing to great advantage. The view of construction operations optimized for environmental and human health performance is the recommended model by the U.S. green building council (USGBC).

The fundamental advantage is that within this model, the enterprise is saved from costs such as warranties, insurance, maintenance, storage and transportation.

El Camino Rental, an acknowledged member of the California Rental Association, also points out that the availability of a technically sound construction staff is a major advantage. Since the staff is exclusive and comprehensively well-versed in maintenance and repair, the company is spared additional costs.

This idea of outsourcing can also be well understood with a case study done by IBM Global Services. The case study focused on the cost effectiveness of the service. It determined that companies who used rental services were able to increase their annual growth by an effective 4.5 points.

Another important point to be discussed with respect to outsourcing and using rental construction is related to the shift of ownership. During construction projects, ownership leads to a larger capital investment because of the direct cost. The cost of ownership not only includes the owning costs, but also the operating and administrative costs.

Shifting the burden of ownership

The ownership model suits rental companies since they make significant annual investments in the most advanced equipment on the market. In other words, enterprises that hire these companies can make use of state-of-the-art equipment without having to make a major capital investment.

So shifting the burden of ownership can translate into sustainable cooperative construction whereby the rental construction sector can help businesses lower their energy costs.

Currently, nearly 40 percent of the construction equipment within U.S. is acquired through rental companies. These businesses tend to adapt to the trends of the market to survive longer and enjoy greater profitability. With government based backing, tasks that reduce the enterprise’s footprint should be prioritized.

The rental model described above is complete in the sense that it not only provides economic benefit, it lowers the net environmental cost being incurred by consumption of natural resources.