Equipment

Charging equipment to jobs: internal rates, rentals, standby and change orders

Updated November 4, 2026 · 4 min read

Equipment is a major cost on civil and site work, yet many contractors charge it to jobs loosely or not at all. An owned excavator that "costs nothing" because it is paid off still costs fuel, repairs, insurance and replacement. If jobs do not carry those costs, your estimates will be wrong and your yard will subsidize your bids.

This guide explains the common ways to charge equipment to jobs. It is general information, not accounting or tax advice.

Owned equipment: build an internal rate

An internal rate charges each job for the equipment it used, usually per hour or per day. It has two parts:

Ownership cost: what you pay whether the machine runs or not: depreciation (purchase price less expected resale, over its useful life), interest on the money tied up, insurance, registration, storage and major overhauls.
Operating cost: what you pay because it runs: fuel, lubricants, filters, tires or tracks, wear parts and routine repairs.

Divide each by the hours you expect the machine to work in a year. Be realistic: a rate built on 1,500 hours a year when the machine works 800 under-recovers by almost half.

Tax depreciation is a different calculation. For tax, construction equipment is generally 5-year property, and recent law changes have allowed much faster write-offs. That helps with tax but tells you little about what a machine really costs to own per hour.

Rented equipment

Rentals are simpler: the rental invoice is the cost. The traps are in timing:

Call it off rent. A machine sitting idle on rent is the most avoidable equipment cost there is. Record the off-rent call and its date so you can dispute charges after it.
Charge the job it was on. If a rented unit moves between jobs, split the rent by the days on each.
Watch utilization. Dealers and manufacturers commonly suggest renting when a machine will be used less than roughly 40% of the time and buying when it will be used much more, but these are rules of thumb. Your own hours per machine, tracked over a year, are a better guide.

Spreading equipment cost over cost codes

Charging a machine to the job is good; charging it to the work it did is better. If the daily log records which cost code the machine worked on, and for how long, equipment cost can be spread the same way as labor and compared with the estimate. See Tracking crew time by cost code.

Extra work, change orders and force account

When you are paid for extra work at cost, the owner will want equipment rates they can check. Public owners often require a published rate book:

Federal work: federal acquisition rules say actual ownership and operating costs should be used where they can be determined; otherwise an agency may require a predetermined schedule such as the U.S. Army Corps of Engineers' Construction Equipment Ownership and Operating Expense Schedule (EP 1110-1-8), published in regional volumes.
State transportation work: many state DOTs specify a rate book, such as Caltrans' Labor Surcharge and Equipment Rental Rates in California or the commercial Rental Rate Blue Book, with the state's own adjustments.
Private work: the contract decides. If it is silent, agree the rates, or the rate book, before the extra work starts.

Standby time

When a machine is held on site but cannot work because of the owner (waiting on a design decision or access, for example), you may be entitled to standby. Because operating costs stop when the machine is not running, standby is usually a fraction of the full rate. Federal highway guidance has accepted 50% of the ownership rate, and many state DOTs use a similar approach with limits, such as a cap on standby hours per day or no standby when the delay is the contractor's own fault. Check the contract and the specified rate book.

Standby is only payable if you can show the machine was on site and idle because of the owner. Record it daily: the machine, the hours, the reason, and who you notified.

Make the records do the work

The same records serve job costing, change orders and claims:

equipment on the daily log, with hours and the cost code it worked on;
meter readings, ideally from telematics, to back up the hours;
off-rent calls and transfers between jobs, dated;
standby recorded the day it happens, with the reason.