Accidents occurred because drivers couldn't clearly see where a lane was going to end, where a detour was leading them or warnings of obstructions.
With $218 billion in federal grants available for highway construction thanks to the Transportation Equity Act for the 21st Century, this should be a booming time for the rental of arrow boards, barrels, barricades and barrier walls as well as the many kinds of construction equipment used in road building. Although the money has come through more slowly than expected, partly because of foot-dragging on the state level, rental companies are hopeful that this summer will mark a breakthrough.
Although many kinds of construction equipment are used in highway construction, no one is more eager for the windfall than United Rentals and National Equipment Services, the two largest players in the roughly $4 billion traffic safety rental arena.
Evanston, Ill.-based NES was the first national rental company to take an interest in the traffic safety rental market, when it purchased Worksafe, Grand Rapids, Mich., in January 1998. NES has since acquired nine more traffic safety companies, which accounts for about $125 million in annual revenue, 20 percent of its total.
Greenwich, Conn.-based United Rentals entered the market in June 1999, and has, to date, acquired 41 companies, accounting for about $320 million in 2000 revenue. United expects to earn about $400 million in revenue this year from its 98 traffic safety locations.
The traffic safety rental business involves much more than simply renting traffic safety equipment. Last year, there were 286 traffic fatalities in work zones in the United States, according to the Federal Highway Administration. Many of the accidents were caused by people falling asleep at the wheel or driving while intoxicated. Other accidents occurred because drivers couldn't clearly see where a lane was going to end, where a detour was leading them or warnings of obstructions.
When traffic is diverted because of a construction project, the contractor is responsible for submitting a traffic diversion plan to the governmental authority over that stretch of road. Highway construction contractors, generally, are experts at the various tasks involved in building highways, just as building contractors know how to make buildings. But traffic diversion is a highly specialized field. Few contractors are experts in planning traffic diversion, and the potential liability is very high. Although there are significant liability issues wherever there is construction, the dangers are far greater where vehicles are being driven at high speeds and the potential for confusion is tangible.
The staffs at the government agencies that must approve the traffic diversion plans are not usually equipped to plan diversions, much less carry them out, according to John Milne, chief acquisitions officer, United Rentals.
“There are risks involved in having those staffs put the plans together,” says Milne. “We have the experience, we have the training, and we know how many cones, arrows and signs it takes. We are equipped to do the nuts and bolts outsourcing of the project.”
When rental companies perform this service, it significantly reduces the liability risk for contractors. “If you can prove that you planned the traffic control properly and legally according to state standards, you lower the level of exposure for the contractor,” Milne says. “If traffic control is not provided professionally, the exposure is very material. Contractors have performance bonds, they are working with narrow margins, so efficiency and safety is important to them. If they don't have an excellent service provider that can put the traffic controls in place efficiently and effectively, they face much greater costs.”
In addition to planning traffic diversion, traffic safety rental companies usually supply the labor and do the work themselves.
“We typically have two- to three-hour time frames to set up thousands of barricades on a mile-long strip,” Milne says. “So how we manage the labor force is very important, as is the quality of people we have on the job crews. Our employees have to be trained properly to understand safety standards.”
“You don't just put the barrels up,” adds Paul Ingersoll, senior vice president of NES. “If you're going to close a lane, over how many feet do you close it? How many barrels per square foot? We do drawings for something as simple as closing a highway lane, specifying the location for every barrel.”
In addition to the increase in highway construction because of the TEA-21 legislation, national rental companies were attracted to the traffic safety market because it was even more fragmented than the equipment rental market. “There was no national, well-capitalized provider who could go to construction companies and provide safe traffic-control in work zones,” adds Milne. “With such high levels of exposure, it's hard for a large contractor to look at small companies with little capital and trust them to do it. Therefore many customers did it themselves, which increased their exposure because they didn't do it well. That's a reason we saw it as an attractive market.”
Equipment provided by traffic safety rental companies includes barricades, barrels, cones, message and arrow boards, light towers, crash attenuators, signage, line-striping equipment, and temporary and permanent barrier walls, all items that demand little maintenance. United Rentals manufactures its own concrete barrier walls, plastic safety cages, specialty signs, flashing lights on barricades and plastic barricades. United has six traffic safety districts, each with their own service center to construct the type of barricades they use in that area. NES' traffic companies also assemble and manufacture a variety of products.
“If you can prove that you planned the traffic control properly and legally according to state standards, you lower the level of exposure for the contractor.”
— John Milne, United Rentals
United is also advancing traffic safety technology with a system that allows the company to control the messages on message boards from a central location by computer. “We are pushing forward the technology in a lot of areas,” says Dan Imig, United's vice president of traffic safety. “This is becoming a high tech business.”
