Contractors not making efforts to combat equipment theft could risk losing a lot of money — almost $1 billion worth of machinery and lost profit disappeared industry wide last year, according to the National Equipment Register’s 2004 Equipment Theft Report.
NER, which began its national equipment-registering service in 2001, produced the report with theft records and statistics from the Insurance Services Office. The report provides a detailed study and analysis of construction and farm equipment losses and recoveries.
Glen Sider, spokesman for NER, said the aim of the study is to provide equipment owners, member insurance companies and law enforcement with information to help focus risk management and investigation resources in the most effective manner.
“We look at what [data] we have and base assumptions on it,” Sider said.
Sider said despite the massive financial loss incurred by equipment owners in 2004, NER’s report doesn’t account for every theft. “We don’t know about it all,” he said.
The report puts annual losses from equipment theft in 2004 at $300 million to $1 billion. The large gap in the estimation is to account for indirect losses such as business interruption, short-term rentals, project delay penalties and wasted workforce and management time.
The insurance factor
Despite this open estimation, Sider said there is no single place where every loss is recorded. Much of the report’s assumptions are also based only on insurance reports from ISO — but not every equipment theft is reported to an insurance company.
Susan Black, an agent with the ISO division American Insurance Services Group, said equipment theft is still a small insurance issue when compared to other services. Black said the issue pales in comparison to automobile theft and doesn’t appear to be increasing substantially. “In absolute terms, I don’t see it growing,” she said.
The NER report cites thefts representing more than 50 percent of total insurance claims from equipment owners since 1996. Sider said many equipment thefts are not reported to insurance companies because some owners fear their insurance rates will rise.
The growing number of equipment theft prevention methods like NER’s service does mean equipment owners are taking steps to address the problem, Black said.
“The creation of the service is in response to a need,” she said.
Location, location, location
The NER report provides statistics on thefts in 2004 by state, type of location and the most commonly stolen equipment.
The top five states for equipment theft in 2004 were Texas, North Carolina, California, Florida and Pennsylvania. Those states account for 38 percent of all thefts, according to the report.
“Logic would have it that if you do have a larger state, it stands to reason there is going to be more concentration [of theft] there,” Sider said. Texas, California and Florida are unique in terms of theft because they are near borders and ports, where stolen equipment is often impossible to recover, he said.
The overriding factor for equipment theft is the amount of “targets” available to thieves — states with a higher concentration of construction sites tend to attract professional theft rings, according to the report. Apart from these “hotspots,” the report said the risk of theft of an individual machine is no greater in one state than in any other.
Other factors for equipment theft include the ease of mobilization or transportation. This provides reason for the substantial number of skid steers stolen — 31 percent of all stolen machines, according to the report.
Jeff Buckmaster, equipment manager for Southern California-based Yeager Skanska, said equipment theft is a huge problem that is difficult to tackle. He said Southern California “is pretty bad” in terms of equipment theft.
“You can’t have security for every job,” Buckmaster said. “It [equipment security] is a hard consideration when we look at potential jobs.”
Buckmaster said he has GPS locators installed on random machines, but it’s an expensive way to prevent theft.
However, “it’s cheaper than paying deductibles,” he said.
Equipment rental companies are also particularly hard hit in terms of theft. “It’s almost become an expected part of business for them,” Sider said.
Mike Abbruzzese, director of information technology for the American Rental Association, said while equipment theft isn’t the biggest issue his organization’s members face — finding employees and high insurance rates are larger issues — it is a problem for some members.
ARA partnered with NER 10 months ago to provide its members free equipment registration with the national database.
Abbruzzese said knowing your customer is the best way for rental companies to prevent theft. Securing the property with fences and lighting is also effective for homeowners, who might not be knowledgeable of other theft-prevention methods.
A notable aspect of the NER report’s findings centers on how much equipment is being recovered — often as little as 10 percent. This percentage has remained stagnant since 1990.
Sider said the reasons for this low recovery rate varies, but the most common are inaccurate or non-existent owner records and limited law enforcement resources able to be devoted to recovery efforts.
“Honestly, it’s [equipment theft] not in the same level of a physical crime, so police focus on other crimes,” Sider said. Small police departments also lack personnel knowledgeable about recording and spotting stolen equipment, he said.
Sider said a lot of police reports [for stolen equipment] have errors in numbers. He said there is often little consistency — some thefts being classified as property, and some as vehicles — to help when and if that equipment is recovered.
“When they [police] see a machine, they have to know how to identify it using data that is available to them,” he said. By using only manufacturer numbers, which often vary substantially from other manufacturers, matching stolen vehicles with their owners can become a confusing process.
GPS tracking systems have proven effective in equipment theft recovery.
DPL America, a manufacturer of wireless and GPS products for the construction industry, produces the TITAN Equipment Monitoring System. The manufacturer bills the device as a complete, affordable solution to reducing the costs of equipment theft, inconsistent maintenance and operational inefficiencies.
“We focus on pro-action versus reaction,” said Tony Nicoletti, director of sales for DPL. His company’s TITAN product is discreetly installed on the equipment — DPL doesn’t even list TITAN photos on its Web site — and allows owners to monitor a machine’s whereabouts from a remote computer.
Nicoletti said there is little chance of the TITAN being disengaged from equipment. “It’s a possibility if they [thieves] know what to look for,” he said. But if the device is removed, the machine will shut down automatically.
Nicoletti said the entire system ($700) and subscription fee ($5 per month) pays for itself with lowered insurance rates provided by some insurance companies.
Patrick Beeson can be contacted at [email protected].