The Origin of Owning & Operating Cost Methodology
In the mid-twentieth century, the U.S. Army Corps of Engineers faced a deceptively simple problem: how do you fairly compensate a contractor for the use of heavy equipment on a federal construction project? The answer required a rigorous, transparent framework that could account for every dollar of cost — from the moment a machine was purchased to the hour it was retired. The result was the Equipment Ownership and Operating Expense Schedule, published as EP 1110-1-8. For more than 70 years, this document has served as the gold standard for calculating the true cost of owning and operating construction equipment — and it remains the foundation used by the federal government, the Associated General Contractors of America (AGC), Caterpillar's Performance Handbook, the AED Rental Rate Blue Book, and AACE International cost engineering standards.
What Are Owning Costs — and Why Do They Matter?
Owning costs represent the fixed financial burden of simply having a machine in your fleet, whether it runs one hour or one thousand. These include depreciation (the systematic loss of value over the machine's useful life), cost of money or financing charges, insurance premiums, taxes, and storage. Most owner-operators instinctively understand their monthly payment — but a monthly payment is not the same as an owning cost. Depreciation, for instance, continues even after a loan is paid off. If you ignore owning costs, you are pricing work below your true break-even point and slowly liquidating your own equity without realizing it.
What Are Operating Costs — and Why Do They Matter?
Operating costs are the variable expenses incurred every time the machine runs. Fuel, lubricants, filters, ground-engaging tools (GET), tires or tracks, and routine maintenance all fall into this category. The Corps of Engineers methodology breaks these down by component so that nothing is overlooked. Many contractors estimate fuel and forget everything else — or they lump repairs into a vague annual guess. The O&O framework forces precision: cost per hour for each category, based on manufacturer data, historical maintenance records, and utilization assumptions. The result is a defensible, auditable number — not a gut feeling.
Overhead Allocation: The Missing Piece Most Contractors Ignore
Even contractors who track owning and operating costs often miss the third pillar: overhead. Your business has expenses that don't belong to any single machine — accounting, permits, vehicle expenses, office costs, phone bills, insurance beyond equipment, and your own salary or draw. If these costs aren't allocated across your revenue-generating machines, your hourly rate will cover your equipment but starve your business. Overhead allocation is what separates a contractor who "stays busy" from one who actually builds wealth. The professional methodology has always included it. Most small operators have not — until now.
How Large Construction Companies Have Used This for Decades
For the largest contractors in America — firms running hundreds or thousands of machines — the O&O framework is not optional. It is how they bid federal work, set internal rental rates, evaluate fleet performance, and decide when to replace aging equipment. These companies employ dedicated cost engineers and invest in enterprise fleet management software costing tens of thousands of dollars per year. The methodology is proven, trusted, and battle-tested across every type of heavy civil, highway, utility, and earthwork project in the country. It works because it accounts for every dollar.
Why Every Owner-Operator Deserves the Same Professional Tool
The economics of equipment ownership do not change based on the size of your fleet. A skid steer owned by a solo landscaper depreciates by the same rules as one owned by a national contractor. Fuel costs the same. Maintenance doesn't get cheaper because you're small. The only difference is access: large companies have always had the tools and expertise to calculate their true cost, while owner-operators have been left to guess, copy competitors, or rely on fragile spreadsheets. That disparity is exactly what TRUEHOUR was built to eliminate.
TRUEHOUR: The Professional Standard, Now in Your Pocket
TRUEHOUR is the mobile implementation of the Owning & Operating cost methodology — purpose-built for owner-operators and small fleet owners. It walks you through every cost category the Corps of Engineers identified, allocates your business overhead, and calculates your true cost per hour. No spreadsheets. No enterprise software. No cost engineer required. Just the same professional-grade framework that has powered the construction industry for over 70 years — now available to everyone on your phone — with 30 days of full access, no credit card required.
Know Your True Number
Download TRUEHOUR and calculate your true equipment cost per hour — free for 30 days.