Disposal of obsolete capital catering assets requires planning and, when done correctly, could lead to money in the bank, says Paul Fieldhouse.
02 September 2019 | Paul Fieldhouse
Technological advances, workplace changes and wear and tear could all lead to equipment and machinery assets being replaced. But when this happens we tend to focus on what the new equipment will deliver, rather than what will happen to the obsolete items.
Firstly, we need to avoid the default 'WEEE mindset'. WEEE (waste electrical and electronic equipment) has helped to decrease scrap electrical equipment going to landfill, but it is not the only disposal option available. For instance, the MoD uses the CADMID cycle: concept, assessment, demonstration, manufacture, in-service, and disposal.
FMs should be aware of the methods for disposing of surplus assets.
Companies provide disposal services to remove or collect, refurbish and even resell working equipment.
So FMs need to identify drivers for disposal: space, time, money or compliance?
Communicate these drivers to your provider to receive a complete and compliant solution. Don't let the provider 'cherry-pick' and you end up with a disposal headache.
- Most providers offer to sell your equipment, but when items don't sell they pass the buck back to the FM.
- Be clear about responsibilities; for example, clarify before agreeing to financial terms whether a combi oven needs disconnecting or a generator needs lifting from a basement.
- FMs selling equipment themselves should compare prices to match the best market prices.
Beware the on-site sale fee
Providers will generally offer to undertake an on-site sale from the FM's premises, or wherever the equipment is lying. An FM choosing this option should not just focus on the percentage fee being charged.
For example, 'ABC Auctions' may only charge five per cent of the sale value, but does the minimum of uploading a photograph of the equipment to its website. So rather understand all the services the provider will deliver and be aware that a higher revenue percentage could result in a better disposal option.
Key considerations when selecting a service provider
1 Establish ownership
Avoid the "oh, we just scrapped it" excuse and clarify ownership of equipment. An FM might possess equipment through legacy, acquisition or a terminated rental agreement. A good provider will determine whether it's the FM's right to sell the equipment before doing so on his or her behalf.
2 Disconnect it yourself
Most FMs prefer to disconnect equipment themselves, which also suits the provider as they are likely to be unfamiliar with the site services. Also the provider has no cost to bear so the financial return is likely to be higher.
3 Check your provider's credentials
Ensure that your partner is compliant, accredited, qualified and experienced. Look at their ISO accreditations, specifically ISO 9001, 14001 and 18001.
They should provide risk assessments, method statements and industry references. And ask for a waste certificate and insurance policy, particularly if they . are working on site.
4 Agree on terms
This goes for financial terms and deciding which party will decommission, load, market and insure equipment.
If sold on site, the FM tends to cover insurance but if equipment is removed from site to be sold elsewhere, determine what insurance the provider offers. This can vary from no insurance, transit cover only, or an amount based on an estimated sale value.
5 Motivate the provider
A disposal specialist that retains a share of the sales revenue will see value in surplus. Agreeing to attractive revenue percentages will motivate your provider to engage a quality auctioneer, for instance.
6 Consider your disposal route
While not every FM has the luxury of selecting the CADMID cycle, engaging the disposal provider early on helps to ensure that equipment value is not lost through unprofessional extraction, rough handling or poor storage. For example, cutting the wires on CCTV equipment can render it useless, whereas sympathetic removal can retain most of its resale value.
Paul Fieldhouse is business growth advisor at Ramco