Eiffel Trading 101: Opportunity Cost in Construction – Part 2: Buying Used Sheet Pile vs. Rental
On my last Opportunity Cost blog post we covered Equipment Rent vs. Purchase. To recap: Opportunity Cost is loosely defined as the loss of a potential gain from other alternatives when one alternative is chosen. What are you giving up when choosing between two options. This time we are going to explore the opportunity cost between buying used material vs. renting material.
Used Sheet Pile Rent vs. Purchase
After you are officially awarded a project, everyone shifts into overdrive to get the project material procured. It’s important not to let the rush of procuring everything skew your decision making to miss out on potential cost savings. If you are building a bridge where sheet pile is needed for a cofferdam, you have 3 options: purchase new sheet pile, purchase used sheet pile or rent sheet pile.
For example, let’s say you are needing 300 wall feet of PZ-27 sheet pile at 40’ lengths. The cofferdam work on your project will last approximately 6 months. You have narrowed it down to either renting the sheet pile or purchasing the used sheet pile option your friends at Eiffel Trading located for you. You have also decided that when you are done with your sheet pile, you’re going to have Eiffel Trading help you sell them, if you decide to buy the used sheet pile option.
300 wall feet of PZ-27 at 40’ lengths weighs 324,000 LBS.
On the rental here are the approximate costs:
Mobilization: 7 loads at $2500/load = $17,500.00
1st Month’s Rent: $0.20/LB x 324,000 LBS = $64,800
Next 5 Month’s Rent: $0.02/LB x 324,000LBS x 5 Months = $32,400
Total estimated cost for renting sheet pile: $132,200.00
Keep in mind when you rent sheet pile, you are liable for any damage or cut-off that happens. For this example we aren’t even counting those costs. If you’ve ever rented sheet pile, you know there’s always some sort of damage/loss that you will have to pay.
Before we get to the used option, it hardly ever works out where you will find the exact length and quantity of used sheet pile extremely close to your project. To give a more accurate example, we will increase the trucking costs and assume 300 wall feet of PZ-27 at 45’ = 364,500 LBS
Mobilization: 8 loads at $3000/load = $24,000
Purchase Price: $0.40/LB x 364,500 LBS = $145,800
Sale Price: $0.35/LB x 364,500 LBS = <$127,575>
Total estimated cost for purchasing used sheet pile and reselling them: $42,225.00
Based on this estimate we are talking almost a 70% savings when you purchase and resell used sheet pile!
As you can see, if you buy used sheet pile and resell them at the end of the project, you will be able to save tens of thousands of dollars when compared to renting or buying new sheet pile. When you sell the used sheet pile at the end of the project, you are eliminating any demobilization costs associated with that line item. By planning ahead and thinking about Smart Demobilization at the start of your project, you can save your budget thousands of dollars. If you would like to learn more or have any questions buying or selling used equipment and material please call us at 1-800-541-7998 or email email@example.com.
Andrew Norman is one of the co-founders of Eiffel Trading. His background is in Heavy-Civil and Marine Construction in Project Management and Procurement. His experience working on multiple projects left him frustrated with the previous options out there to help contractors buy and sell equipment and material. He has helped contractors save millions of dollars by helping them implement Smart Demobilization practices.