Business Matters: Subcontracting cold planning

Specialization in construction is sometimes risky, but there’s no doubt many contractors have found the business of cold planing a gamble that’s paying off.

“Over the past 10 years this has become a subcontractor’s business,” says Larry Jack, director of marketing at Terex Roadbuilding.

The reason is simple – utilization. The machines are expensive, a half-million dollars in many cases. And since cold planing (also known as asphalt milling) is all the subcontractors do, they are going to be more efficient in their utilization.

“Paving contractors have to weigh what it costs them to buy and maintain this equipment vs. what the milling subcontractors are charging,” Jack says. “In many cases these subcontractors are in the business to reduce these prices.

Jeff Wiley, vice president of sales and marketing for Wirtgen America, estimates half of all the milling machines his company sells go to subcontractors. There are quite a few regional differences in the milling business, Wiley says. Indiana, for example, is dominated by milling subcontractors, whereas in Ohio, most of the state’s big paving companies still do a lot of their own milling work, even though that state is home to some of the largest milling subcontractors in the country. “All the major paving contractors tend to do their own small milling jobs, but when it comes to the bigger stuff, they’ll use subcontractors,” Wiley says. “The subs are the experts, and they can get the big jobs done faster and more efficiently than a prime contractor because they do it every day.”

Small and medium-size paving companies, those with a couple of pavers, also frequently use subcontracted milling to keep their equipment costs low. One of the key issues for contractors large or small is availability. Since paving contractors face so many scheduling details they are more likely to do the milling themselves if a milling subcontractor isn’t readily available. Don Lamb, national sales manager for Roadtec, says there is significant growth in sales to paving contractors using cold planers in curb and gutter reclamation, milling and patching in addition to mill and fill applications.

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Starting small and moving up
Despite the size and expense of milling machines, it’s not uncommon for milling subcontractors to start their own business on a shoestring budget. “You have to crawl before you walk,” Wiley says. “If a guy is using his own resources, he can start out with one used cold planer and have a commercial carrier transport his machine.” This keeps his start-up costs low, in the $200,000 to $300,000 range for just the machine itself.

Once a contractor starts making money he can usually afford to buy a new machine. Most keep the old one so they can mill in two different directions. At that point he’ll probably need to buy a truck and trailer to better meet scheduling demands. Given the weight of most milling machines (50,000 to 90,000 pounds for a half-lane machine) transporting one almost always requires a permit load. You’ll also need a water truck to suppress dust and keep the bits cool. Eventually a service truck, sweepers and some auxiliary equipment such as a skid steer may also be necessary, putting capital requirements in the million-dollar range.

You’ll need at least two people to start a milling subcontracting business, the machine operator and a ground person. Two people on the ground is preferred, says Jack. Often the ground person should be more experienced. Government agencies have strict guidelines on pavement smoothness, often with penalties or bonuses built into the contract, and a smooth finished product starts with a good milling job. The man on the ground helps line up matching cuts and set the machine’s depth and cross slope.

After that, though, growth is simply a matter of smart management and market potential. Many of the top milling subcontractors today own dozens of milling machines from small detail machines to full-lane-width giants.

Factor in tooth consumption
Another key cost figure is what you have to pay for milling teeth or bits. “Most guys start out with a pallet of teeth (2,500 teeth),” Wiley says. “A typical drum holds 160 to 180 teeth and you can usually get a day of work out of a set of teeth,” Wiley says. “A lot of the major subcontractors can use as many as 50 to 75 pallets of teeth a year using multiple machines.”

The type of aggregate used in the surfaces you’re milling play a big part in how fast your teeth wear out, Jack says. The hard granite aggregate used in the Northeast can wear out a set of teeth quickly. “We’ve seen jobs where they had to change their bits after just 400 feet,” he says. By contrast, the soft limestone aggregates in places like Oklahoma enable you to get three or four times the life out of a set of teeth, he says. But even with fairly soft aggregates, contractors will change teeth at the end of the day so they can start the next day with a fresh set.

“If you’re going to be in this business seriously,” Jack says, “ultimately you will spend more money on the operation of the equipment than you will on the purchase price. And bits are a large part of that.”

Staying busy
The amount of work you’ll need to justify purchasing a milling machine varies from region to region. A general rule of thumb is that a cold planer should log 700 to 1,000 hours a year to be profitable.

Profitability also depends on the type of work you’ll pursue and how well it pays. “The smaller the job, the less competition,” Wiley says. “For a parking lot or something that size you might get a bit more money per square yard. The larger the job, the more miles it has, the more competitive the bidding and the lower the prices are.”

Having a machine that adapts to work in different markets, such as those with multiple drum widths, will help subcontractors stay busy and boost utilization, Lamb says.

Matching machines to the job
In terms of numbers sold, the most popular size of cold planer today is what the industry terms a “half-lane” machine. These offer cutting drum widths of 72 to 87 inches, or enough to mill half a road’s width in a single pass. The smaller cold planers, often called utility machines, offer widths as narrow as 12 inches. These are used to cut around manholes and “key” cuts square across intersections perpendicular to the main road. The 48-inch-wide models are also popular, Wiley says, and are used extensively in milling bridge decks (which often can’t support the weight of a big machine), patch work and parking lots. Beyond 87 inches are full-lane-width machines that cut 150 inches wide.

Even with models of the same cutting width, engine horsepower varies from model to model. The higher horsepower models give you faster forward speeds. “On city streets you can’t get the trucks in and out fast, so it doesn’t matter if you’re going 10 feet a minute or 50 feet a minute,” Jack says. On highway work, you want to go as fast as the trucks can keep up.

Today’s new machines are also designed as an integrated component in a system. “The older machines always had some restriction, it could be tractive effort or conveying capacity,” Wiley says. “Today the machines are matched quite well so you have just the right amount of conveyor capacity to keep up with the trucks and the right amount of horsepower and tractive effort to keep the machine productive. Tooth wear and overall wear on the machine are down too.”

Additional advances in machine design include drum and cutter systems that cut cleaner and evacuate material quickly, load controls for efficient power utilization, quick change drums with different widths and high horsepower/lightweight machines that are easy to transport, Lamb says.

One tough business
“Milling today is a tough business,” Jack says. “A lot of people are getting into it and it has affected the pricing.” One result is some milling subcontractors have migrated to custom and specialty work – for example, rumble strip grinding and shoulder removal.

With specialty cutters, milling subcontractors can broaden their offerings to the market. “You can get finer textures with different cutter drums and cut out wheel ruts, repair pavement and create rumble strips and skid-resistant pavements,” Wiley says. “You can also cut recycled asphalt and resize material for screening.”

“Some of the specialty work pays more than cold planing,” Jack says. “But we encourage people to look at the total ownership and operating costs.”