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Snuffing Out Equipment Theft

At a construction site in suburban Houston, after all the workers have gone home, a pickup truck pulls up to the poorly lit back entrance. Someone enters the site through an unlocked gate, returns to the truck with a small load of wallboard and drives off. The next day, he’ll be back—to go to work.

Thieves regularly prey on construction sites and equipment dealerships—targeting building materials, tools and large pieces of equipment. These criminals, many of whom are employees, know exactly what they want and steal it with ruthless efficiency.

Equipment and materials theft is a serious problem for the U.S. construction industry. According to the National Equipment Register’s (NER) August 2012 Equipment Theft Report, the estimated value of lost equipment in 2011 was $300 million. The report doesn’t include additional costs incurred when a piece of equipment goes missing, such as losses from business interruption, short-term rental costs or project-delay penalties. No single organization tracks the loss of building materials, but that type of theft can add millions of dollars to the total losses incurred.

In fact, theft is one of the most serious risks contractors and equipment dealers face in terms of cost and frequency, notes the NER—and that’s been true for more than a decade. The frequency and cost of equipment theft is higher than that of vandalism, fire damage, collision or water damage.

Almost 12,000 equipment theft reports were submitted to the National Crime Information Center in 2011. Nearly one-fifth of reported equipment losses were loaders, including skid steers, wheel loaders and backhoes—all relatively common pieces of construction equipment. All of the following were reported stolen in 2011: fork lifts, excavators, generators, bulldozers, trenchers and brush chippers. The theft of such large pieces of equipment might be less common than for smaller items, but when it happens, the loss is more expensive.

NER’s report also notes that certain parts of the country are more at risk of equipment theft than others. In 2011, the riskiest state for equipment theft was Texas, followed by North Carolina, Florida, California and Georgia. These areas may suffer more equipment losses than others due to being near an international border or a major port, from which equipment is more easily moved beyond the reach of U.S. law enforcement. Areas in the midst of construction booms also see equipment disappear more often.

Mitigating the Risk of Theft
Each contractor has to determine an appropriate level of protection considering the value of what might be lost, but even the smallest jobsites can take simple precautions.

  • Psychological deterrence. Contractors should make fences look secure with “No Trespassing” signs and keep sites well-lit. By themselves, these measures won’t keep out an experienced thief, but they show the less-determined thief security is taken seriously on that site.
  • Barriers to entry. A sturdy fence around the site is a good start, but a system also must be in place to ensure gates and other entry points are closed and locked so an employee cannot enter later through a gate that was “accidentally” left unlocked. Keep equipment away from fences so thieves won’t be tempted to jump over and take it, or even use it to climb down the other side of the fence.
  • Appropriate surveillance. Guards can be a solution to material and equipment theft, but surveillance cameras usually are a more cost-effective option. Another option is using geofencing technology, in which a virtual zone is drawn around a worksite. If equipment that has been tagged leaves the zone, a warning is relayed to site management. The use of tracking devices on large pieces of equipment also should be considered.
  • Audit controls. Knowing how much of a material should be used on a job—especially items like copper tubing that sell easily on the black market—and how much is actually being used is important to preventing theft. Registering large pieces of equipment with the NER also can help law enforcement identify recovered equipment.
  • Employee screening. Sometimes the most basic screening and reference checks uncover surprising information. For instance, a reference check could reveal a job applicant stole from his previous employer, but was never prosecuted.

No site is absolutely immune to material and equipment theft. Should a loss occur, a contractor’s equipment insurance policy can offer protection for equipment, tools and machinery, including spare parts and accessories that are stolen, lost or damaged. However, this policy may not protect the contractor for employee equipment theft.

Unfortunately, employee theft is much more common than many employers realize, especially during periods of economic recession. The U.S. Chamber of Commerce estimates 75 percent of all employees steal at least once, and half of them steal repeatedly. A crime insurance policy is designed to help protect companies from the costs associated with employee theft. Some policies even cover theft by part-time, seasonal or temporary employees, whom contractors often use. Contractors should consider protecting themselves with coverage obtained through their insurance agent or broker.

A construction project is complicated enough without dealing with the loss of equipment. A few safeguards can go a long way in making sure equipment and materials don’t grow legs and walk away.

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