In 1966 the Associated Construction Equipment Lessors, Inc. (ACEL) was incorporated to provide some solutions to the problems that beset the construction industry at that time. ACEL introduced the system of equipment leasing which is accepted as the best possible alternative to acquiring heavy equipment for immediate use, where outright purchase may not be possible because of the huge capital outlay involved.
Related to this also, one of the more pressing issues of the time was to come up with a general and standardized guide on equipment rental rates. One of the first order of the day for the incorporators was the resolution calling for the standardization of rental rates covering all ACEL members who have the same equipment. Records detail the dedication and hard work that made the first and succeeding editions a reality. From its humble beginnings, ACEL has managed to secure its place in the industry and to date has come up with the 22nd edition of the ACEL Equipment Guidebook.
The rental rates as contained in the Guidebook are realistic and reflective of prevailing trends and have taken into account the nuances of the market. The rates are as low as possible while allowing the lessors to make a reasonable return on investment taking into consideration all prevailing economic conditions. Factors relating to ownership costs such as acquisition, depreciation, insurance, taxes, as well as operating costs such as POL, maintenance, repairs and overhead costs such as labor, fuel costs, administrative expenses, building, yard facilities and spare parts inventory have been carefully considered.
Generally the rates are based on five year old equipment. The rates are mere guides and in actual practice, rates may vary depending on the equipment’s operating condition, age and availability. Rates of new equipment shall equal the prevailing rates multiplied by factors listed as follows:
EQUIPMENT AGE FACTOR
- 1 year old 1.32
- 2 year old 1.24
- 3 year old 1.16
- 4 year old 1.08
Through the years the rates have been revised and updated. Terms and conditions were better defined and broadened to cover all aspects of typical leasing contracts. Equipment Rental Requisition forms was standardized and became the basis for rental contracts. Through discussions among members, problems were given solutions and a system for handling equipment inquiries on rentals, sales and/or purchases was set up. In 1967 ACEL came up with various schemes to provide incentives and entice more clients, among which are to give a special discount of 3% for clients with up to date payments and the decision to absorb the payment of repairs for bare rentals for the first 100 hours or ten days, whichever comes first. In the case of equipment use for more than one shift a day, the succeeding shift shall be charged the minimum hours of operation for the equipment exclusive of operators’ wages. The members also agreed on a minimum operation of equipment rented on a bare rental basis of 200 hours per month and it was agreed that a courtesy 10% discount be given to ACEL members only. Daily rentals were charged on the basis of a minimum of ten hours per day operating and standby time except in cases of equipment breakdown. The 1970 edition followed faithfully the terms and conditions of the earlier edition but provided provisions regarding the non-usage of equipment due to standby or waiting time requiring the lessee to pay the lessor the minimum daily or monthly rate and for inclement weather the lessee is required to pay P50 per unit per day. The 1971 edition was revised and published owing to the heavy restrictions on dollar remittances used for purchasing machineries and equipment. In the 1972 edition the “horse power” capacities of equipment were included to serve as basis of computing rental rates. The ACEL Equipment Rental Rates, Edition No. 7 which came out in 1973 stipulated a 5% increase on the rental rates for all new equipment with serial numbers from 1968 and up. The green card served as the basis for determining the year of manufacture of any equipment. The 1973, 1974 and 1975 editions came out with generally the same terms and conditions and only updated the equipment listing. The 1976 edition , on the other hand, took into account the increases in fuel and lubricants, as well as the 13th month pay for labor and recent wage increases, the increased cost of tires and rubber products and the increase in cost of spare parts. Stipulated in the 1977 edition is a provision that calls for an automatic 1% increase in rates in the event that prices of oil, lubricants and labor foes up by 5%. In 1979, a definite formula which approximates a lessors’ owning and operating costs was accepted by the General Membership and is now being applied. The support and invaluable comments and suggestions of representatives of various government agencies like the Bureau of Equipment , National Power Corporation, Ministry of Public Works, etc. were also given due recognition in its 1980 edition.
Updating and revision of the rates are on a continuing basis. In 1981, ACEL published an expanded guide to include equipment specifications and profiles to guide users of the guidebook. In coordination with the DPWH and the BOE it has published the latest available technical data on equipment specifications. The Guidebooks 15 and 16 served as a comprehensive and reliable source of information on equipment specifications and will enable the lessee to check whether the equipment contracted is the right equipment as specified. It is also a reliable source of information for those who are not familiar with equipment.
In 1984, ACEL published Guidebook No. 17 which was basically a revision of the rental rates with an automatic escalation formula. Guidebook No., 18 increased the coverage to include allied services and products that are related to the equipment leasing industry. These additions in scope should be able to help in determining sources for services, spare parts, machineries and supplies needed in equipment operation. Guidebook No. 19 included some ports handling equipment in response to the request of various users in establishing orders for special equipment not included in earlier publications. For the 21st edition, all brand new and current models listed in the Guidebook are equipped with internationally accepted safety devices in accordance with the requirements of the Department of Labor and Employment Order No. 13 on guidelines governing occupational safety and health in the construction industry. For the 22nd edition, it was important to incorporate provisions to consider the impact of dollar rates on labor and fuel; equipment rating, testing and standardization cost and other triggers of economic activity, as well as the inclusion of a separate formula for light and medium equipment. Basic reference to the average utilization per year per type of equipment has been incorporated and useful features such as economic life, tire and undercarriage and salvage factor were considered and included in the formula. This gives a more realistic approach in the estimation of recovery investments.
Presently, the updating and revisions to the latest edition are underway. As per practice, a review of existing rates are done every six (6) months to ensure that realistic and consistent rates are used. For the new edition, the Committee will come out with the operated dry rates and the dollar value of existing and new equipment which will serve as basis for the computation of rates. Target release date for this edition will be November 2006 or first quarter 2007.
Today, the ACEL Equipment Guidebook is used as basis by almost all contractors in the estimate and eventual submission of bids for their respective projects. The guidebook is also used by contractors to justify cost of escalation relating to the equipment component of projects under evaluation and those affected by sudden price movement of materials. The DPWH has issued DO No. 146, DO No. 11, 5-96 & 81, 5-97 which endorsed the ACEL Guidebook with the directive that such rates should be used as basis for estimates for all government projects.
The hard work and initiative shown by the people behind this worthwhile project which was started in 1966 and continues to this day should not be overlooked because their collective contribution will already be a part of ACEL’s legacy to the industry.