having a cost of less than $1,000 may be rented with the approval of the head of the procuring activity. Whenever it is practical, cost and other factors considered, contractor-owned equipment shall be rented in preference to renting third-party-owned equipment.

(c) To pay rental for construction equipment at rates not higher than those prevailing in the locality, except under unusual circumstances, and at as low a rate as is consistent with securing modern equipment in good operating condition. Costs of repair, job interruption due to poor equipment, transportation and in-transit rental may well offset any apparent savings in rental rates. Rental paid shall be subject to any Government price ceiling regulations that may be in effect.

The terms and conditions governing rental by ERDA of construction equipment from a prime cost-type construction contractor are set forth in $9-16.5002-2, outline of agreement for rental of contractor-owned construction equipment. This form of agreement is designed for use as an appendix to a ERDA cost-type construction contract. It may be modified for rental of equipment under other contractual arrangements, such as an operating contractor renting from a cost-type construction subcontractor, and it may be modified for use as a separate contract or as an attachment to a subcontract. Some of the aspects of this agreement to which particular attention should be given are set forth in $9-18.5002-2 and $9-18.5002-3.

$9-18.5002-2 Rental period.

The base rental period shall extend from the time the equipment is accepted at the job site until the contractor is notified in writing by ERDA's representative that the equipment is no longer required. Subject to applicable limitations covered in the rental agreement form, the contractor shall be paid rental during the in-transit time and during the time required for equipment repair or replacement prior to return to the contractor.

$9-18.5002-3

(a)

Rental rates.

Rates for rental of contractor-owned equipment shall be fair and equitable. The rental rates contemplate that ERDA will pay incoming and outgoing transportation costs and rental during in-transit time for both inbound and outbound transportation of equipment; however, terms more favorable to ERDA may be negotiated where appropriate. The rental rates to be paid for the use of contractor-owned

E

equipment under normal conditions should not exceed 65 percent of the rates quoted in the latest edition of the Associated Equipment Distributor's "Complilation of Averaged Rental Rates for Construction Equipment." However, heads of procuring activities may approve rates in excess of 65 percent of the current A.E.D. schedule when local conditions require higher rates. When it becomes necessary as a general practice to exceed 65 percent of the current A.E.D. schedule, heads of the procuring activities shall be advised.

(b) For items of equipment that are not covered by the A.E.D. schedule, use the latest edition of "Contractors' Equipment Ownership Expense" document published by The Associated General Contractors of America, Inc., and information on prevailing local rates for developing rates that would be consistent with the 35 percent reduction in the A.E.D. rates (i.e., taking into consideration the expenses paid by the Government under the rental agreement).

$9-18.5002-4 Application of rates.

The rental rates shall be applied in accordance with the following rules:

(a) Basis of rates. The rates shall be based upon one shift of 8 hours per day, 40 hours per week, or 176 hours per month of a 30-consecutive-day period.

(b) Apportionment of rates. The monthly rate and its pro rata shall apply to all rental periods of 1 month or more. The weekly rate and its pro rata shall apply to all rental periods of 1 week or more up to 1 month. The daily rate and its pro rata shall apply to all rental periods up to 1 week.

(c) Overtime. Inasmuch as there are certain elements of cost to an equipment owner which do not change even though the equipment is used on more than one shift per day, it is believed equitable to pay a lower rental rate during a second and third shift than would be paid during a single shift. Therefore, the rental agreement form provides for payment for overtime at a rate equal to one-half the rate for the first shift.

(a) Generally, rental rates should include the cost of insurance or self-insurance covering loss of or damage to the equipment during rental periods. The rental agreement for contractor-owned equipment

is so worded.

(b) However, if the contracting officer determines that it is not practical to include the cost of such insurance in the rental

rates, paragraphs 3(d) and 7(a) shall be amended as indicated in the applicable notes following these paragraphs in §9-16.5002-2.

$9-18.5002-6 Rental limitation.

The rental agreement form provides that when the total amount of rental paid to the contractor for any one unit of equipment equals 75 percent of the mutually agreed value of that unit as set forth in the initial inspection report, the equipment is to remain available for the work under the construction contract as long as it will be required without any further rental payments to the contractor. The rental ceiling of 75 percent of the agreed-upon value of the equipment applies to all rental paid including rental paid during intransit time to and from the site of the work and down time for any operating repairs or restoring of the equipment after it is no longer needed at the site. The purpose of this provision is to prevent the Government from paying rental in excess of the contractor's investment, and it is included in lieu of an "option to purchase" clause. Once a particular piece of equipment has been released, the contractor will be required to return it to the job under the original rental period.

$9-18.5002-7 Record of negotiation.

The record of negotiation shall set forth the information used to determine the reasonableness of the rental rates, including a breakdown of the contractor's equipment ownership expense similar to that itemized in The Associated General Contractors of America's document, "Contractors' Equipment Ownership Expense."

$9-18.5002-8 Responsibility for repair and replacement

The rental agreement describes the responsibilities of the parties with respect to maintenance and repair necessary to the operation of the rented equipment, or replacement of such equipment. ERDA's responsibility includes repairs resulting from normal wear and tear, provided they were necessary in order to continue the equipment in service. However, when the equipment is no longer required on the job, the extent of ERDA's obligation is only to return the equipment to the contractor in as good operating condition as when received less normal wear and tear.

$9-18.5002-9 Equipment condition and inspection.

(a) Inspection. Construction equipment shall be given a rigid and detailed inspection by representatives of ERDA and, at the contractor's option, by representatives of the contractor, before its shipment and acceptance or use on the job. Equipment shall be inspected under actual workloads insofar as practicable. In cases where

it is not practical to inspect equipment prior to its shipment to the jobsite, the contractor should be informed of the extent of inspection and the expected condition of his equipment in the event the equipment does not meet required standards, the transportation, rental, or any other expenses shall be paid by ERDA unless at contractor's expense the equipment is repaired to acceptable standards in a reasonable length of time. A similar inspection shall be made immediately prior to scheduled return shipment of an item of equipment.

(b) Inspection report. The detailed inspection report shall follow in general $9-16.5002-4--Outline of inspection report of equipment, and shall be signed by each representative inspecting. The initial-inspection report shall be used at the time of release as a basis of determining the repairs necessary to place the equipment in as good operating condition as when accepted, less normal wear and tear. After necessary repairs are completed, a final inspection report shall be completed by representatives of ERDA and, at his option, the contractor.

(c) Trial period and defects. If initialed detailed inspection discloses that the condition of the equipment is doubtful, arrangements should be made with the contractor for a trial period of operation to prove the equipment, with provision that if equipment is found unacceptable in the trial period, no rental, transportation, or other expenses will be due the contractor. Repairs to equipment which falls in service due to defects not reasonably ascertainable on initial inspection shall be at the contractor's expense.

$9-18.5003 Rental of third-party-owned equipment.

$9-18.5003-1 Rental agreement.

The terms and conditions governing rental of construction equipment without operators from a third party are in accordance with §§9-18.5002-2, 9-18.5002-4, 9-18.5002-8, and 9-18.5002-9, and are set forth in $9-16.5002-3--Outline of agreement for rental of thirdparty-owned construction equipment. Heads of procuring activities shall assure that these terms and conditions are used by ERDA costtype construction contracts and that similar terms and conditions are used by other ERDA cost-type contractors or subcontractors in renting construction equipment from a third party. These terms and conditions may be suitably modified to provide for rental of equipment with operators. Some of the aspects of this agreement to which particular attention should be given are set forth in the next three subparts.

$9-18.5003-2 Rental rates.

Third-party equipment shall be rented on the basis of competitive bids, rental rates, transportation costs, and other factors

being considered. The rental specifications shall be based on the circumstances of a particular case, including the length of rental period, the availability of equipment in certain localities, and the work requirements.

The provisions of $9-18.5002-5(a) also apply to the rental of construction equipment from a third party. However, if the contracting officer determines that the rental rates are not to include the cost of insurance or self-insurance covering loss of or damage to the equipment, Articles III(d) and VII(a) of the rental agreement shall be amended as indicated in the applicable notes following these articles in §9-16.5002-3--Outline of agreement for rental of thirdparty-owned construction equipment.

$9-18.5003-4 Option to purchase equipment.

When accrued rentals on a particular item of equipment will likely approximate the appraised value of equipment and a decision has been made not to purchase in accordance with §9-18.5001(b), consideration shall be given to including in the rental agreement an option to purchase the equipment.