How to Calculate Standby Rates

Standby refers to the situation where equipment is on the job and available for work, but is not put into operation until needed. Under certain circumstances, for example during forced or legal standby, contractors may be entitled to payments for their equipment on standby. These payments are meant to reimburse the contractor for fixed costs such as depreciation, cost of facilities capital, and indirect equipment costs.

Some DOT’s have certain ways of reimbursing contractors for their equipment on standby, but overall no industry standard exists regarding how to calculate standby rates. However, we have one suggested way to calculate standby rates when using a cost recovery tool such as the Rental Rate Blue Book. The Rate Element Table provides critical information such as percentages for depreciation, overhaul, cost of facilities capital, indirect costs, and fuel that vary for each type of equipment. We suggest you add the percentages for depreciation, cost of facilities capital, and indirect costs in order to obtain a total percentage of the Blue Book rate applicable for standby allowance.

Calculate Standby Rates

A Caterpillar 216B Series 3 has a monthly ownership rate of $2,380.00. The depreciation percentage is 23% of the monthly rate, the cost of facilities capital (CFC) is 3% of the monthly rate and the indirect costs are 8% of the monthly rate.