Every day a $300,000 excavator sits in the yard, depreciation and financing keep running. Most civil contractors absorb this silently into overhead. Here is how to see it and fix it.
A $300,000 excavator costs approximately $5,500–$7,000 per month to own — financing or depreciation, insurance, maintenance reserve. That cost runs whether the machine is working or sitting in the yard. At 80% utilization that cost is covered by 128 hours of billable work per month. At 60% utilization you have 96 billable hours — and $1,100–$1,400 per month in unrecovered cost absorbed into overhead.
Depreciation, insurance, financing, and maintenance reserves run 24/7 regardless of utilization. The overhead rate on a civil fleet is a fixed cost that needs to be recovered through billable hours. Every idle hour is a cost the business absorbs without corresponding revenue.
Equipment not allocated to a specific job lands in overhead. When the overhead rate in bids does not reflect actual fleet costs, idle time is funded by what you thought was profit. Most civil contractors have an overhead rate 3–6 points below actual partly because fleet costs are not fully included.
Most civil contractors know their total fleet cost. Almost none know cost per machine per month and what utilization rate each machine needs to break even. Without that visibility, decisions about which equipment to keep, rent out, or sell are made on gut feel.
For each piece of owned equipment: financing or depreciation + insurance allocation + maintenance reserve (1–2% of purchase price annually ÷ 12) + licensing. That is the fixed monthly cost regardless of utilization. Divide by available billable hours per month to get break-even cost per hour. That number goes into every job estimate that uses that machine.
SPM creates a cost code for each major piece of equipment. When the excavator works on Job A, the daily cost posts to Job A's equipment budget. Equipment in the yard charges to an overhead cost code that shows idle cost in real time — not blended into general overhead where it disappears.
Total hours billed to jobs ÷ available hours = utilization rate. For each machine. Every month. When a machine drops below break-even utilization for two consecutive months, the decision is clear: find work for it, rent it out, or sell it.
Equipment costs not allocated to jobs belong in overhead. Once fleet costs are properly quantified and included in the overhead rate calculation, the rate in bids reflects the true cost of running the business. Most civil contractors find their overhead rate increases 3–6 points — and their bids become more accurate and more profitable.
A free call with Josh takes 30 minutes. Bring your last P&L and current bank balance.
Schedule a Free Call →