Horaces Blockades -- To Rent or Buy - Case Study Example

Horace’s Blockades -- To Rent or Buy This report analyses the dilemma faced with the Horace Company on matters concerning theirBlockades. The dilemma is faced after the Horace Company made a bid for the provision of barricades for the new stretch of Interstate 752 that is planned to replace the FL highway 103 out of Prescott. Barricades are required to provide blockage for a 10 mile length road that is to be built along one side of the highway and shall require shutting down one lane of the road so as to enable its construction per lane.

Horace is therefore required, as the constructor, to provide the stop and go lights at the ends or at junctions of the road to alert cars at the safe times that they can use the lane. Horace makes the bid but he is faced with the dilemma on whether to sell rent the contract, lease it or to buy more barricades since his barricades were already on another construction contract. The report compares benefits of renting the contracting to buying more barricades. After looking at the problem which causes the dilemma, the report provided some recommendations that.

Horace should purchase new barricades to complete the contract by himself (Migliaccio, 2011).Horace’s dilemma on whether to purchase barricades or to rent the contract seeks for critical considerations. The main idea in this case is to avoid incurring loses while the company’s goal is to make profits. Table 2. Rent versus lease or purchase of the BarricadesOptionCost per BarricadeAnnual Cost per BarricadeTotal cost for 850 barricadesCost to install and remove barricades 4 times during the 2.

5 yearsRepair/Replacement costs (if any) based on percentages from above for all 850 barricades for 2.5 yearsTotal Project Cost (2.5 yrs.) for 850 barricadesRent Barricades$3.00$1,095$930,750$992,800N/A$992,800Lease Barricades$2.05$748.25$636,012.5$992,800$223,125$1,215,925Purchase Barricades$145.00$52,925$44,986,250$992,800$116,875$1,109,675Horace estimates that the participating team takes five days to remove the barricades. After that, they should reset the barricades at the next construction site.

If Horace charges $85 per hour for his team that is comprised of eight people, and with a working rate of 8 hours each day, his total payments would be $992,800 for the total period of construction. While the total expenditure for the project is above this, he should chose to avoid much expenditure by choosing to either rent or purchase (Migliaccio, 2011). The total cost for the project after purchasing is $1,109,675 while the cost after renting amounts to $992,800. The correct bid for Horace should be placed with a profit of 7% on the cost of purchase.

This will make a total profit of $77,677.95. The total pay therefore shall be; $77,677.95 + $1,109,675 = $1,187,352.95After placing the bid and qualifying for the contract, Horace should now consider renting the barricades. Since the rental costs include replacement and repair for the damaged barricades during the rental period, Horace shall therefore have much profit; gotten from, the total pay minus the total expenditure on renting; $1,187,352.95- $992,800 = $194,552.95ReferencesMigliaccio, G. C., National Research Council (U.S.).

, National Cooperative Highway Research Program., American Association of State Highway and Transportation Officials., United States., & University of New Mexico. (2011). A guidebook for successful communication, cooperation, and coordination strategies between transportation agencies and tribal communities. Washington, D.C: Transportation Research Board.