Engineering Economic Analysis
Construction industry -- Economic aspects, Andersen Construction -- Management, Engineering -- Management -- Economic aspects, Lease or buy decisions -- Effect on construction industry
It is one of the fastest growing areas in the greater Portland area. The Pearl District has become one of the most desirable places in Portland to live and the construction industry is reaping the benefits with an abundance of condominium construction projects to choose between. Andersen Construction is one such company who has been able to cash in on the demand of the condominium market with their employees working round the clock on project after project. The demand is forecasted to stay strong and therefore Andersen Construction is taking a step back and looking at ways to choose the most economical and profitable model for their construction projects going forward.
To save costs, Andersen Construction is analyzing the rental of concrete slabs. Concrete slabs (similar to those shown in Figure 1) are used by Andersen Construction repeatedly for high-rise construction projects. With so many current and future projects requiring concrete slabs for construction, the obvious question is whether the rental of formwork is the most profitable model. Since one of the largest expenses in most projects is the rental of these slabs, Andersen Construction would like to know whether it could save money by building and purchasing the slabs rather than renting them.
One of the areas an up and coming young Senior Project Manager, Brian, at Andersen feels he can save money through the purchase of formwork for high rise construction projects. By owning their own formwork, the company could possibly have a competitive advantage over other construction companies because of lower production costs. Also, because the formwork would be on hand, the company would reap the benefits of a constant supply. On the other hand, the “men and muscles” tough guy Concrete Superintendent Mark feels that buying is a waste of time and another headache. He would much rather just continue with the status quo and continue to rent. There are pros and cons to both models however both need data to make the best decision for their company. That is where Team Baldwin comes in.
This paper will analyze the rent versus buy debate through the methodology as explained in the next section. We will conduct a literature review, document our assumptions and then illustrate our model comparisons. We will conclude the paper with our recommendations and conclusions
Ambalam, Chudamani; Banga, Balbinder; Brigham, Jason; and Brown, Neil, "Buy Versus Rent Analysis: An Analysis of the Purchase or Rental of Concrete Forms for Andersen Construction" (2004). Engineering and Technology Management Student Projects. 1354.