More and better systems and techniques are protecting some fleets from construction equipment thieves, but somehow the problem seems to grow as fast or faster than ever.
In 2004,
Grading & Excavation Contractor magazine reported that “the theft of heavy construction equipment continues to be a serious problem for the industry. Although the costs of this theft to the industry are not precisely known, most agree with the conclusion of the National Insurance Crime Bureau that close to $1 billion a year are lost nationwide due to the theft of construction equipment and tools. Moreover, a 2003 survey by
Equipment World magazine showed that almost 70% of the respondents had experienced equipment theft.”
Statistically, little has changed in the two years since that dour assessment was made. In fact, report after report indicates that the situation seems to have worsened. The new 2005 theft survey conducted by Equipment Today magazine revealed an increase, reporting that almost 72% of respondents experienced thefts last year. LoJack reported a 29% increase in reported thefts from 2004 to 2005. The Insurance Services Office (ISO) confirmed that insurance claims for theft still exceed those for all the other contractor risks combined. And, warns David Shillingford, president of the National Equipment Register (NER) of Washington, DC, “As little as 10% of stolen construction equipment is ever recovered.” That’s just a fraction of the national stolen auto recovery rate that has been reported in the FBI’s Uniform Crime Report.
In addition to direct losses and escalating insurance premium rates, contractors suffer substantial indirect costs such as workforce downtime, wasted management time, and penalties for cost and/or schedule overruns. Therefore, despite all the improvements in theft prevention and recovery, the estimate of billion-dollar total losses experienced by the construction industry each year is quite credible.
What attracts thieves to the construction industry? Kathy Kelleher, national sales manager for LoJack’s Commercial Division in Westwood, MA, says, “The principal reasons haven’t changed. They continue to be:
- Titling and registration of off-road vehicles and equipment is not required.
- Equipment is only identified by product identification numbers, not the standard 17-digit vehicle identification numbers used for cars and trucks.
- There is a high demand for construction equipment.
- The penalties are low if the thieves are caught.
- It’s easy. There is often poor security: remote, poorly secured work sites on private land, and “open” cab machines, and usually a single key will work on a number of pieces of equipment.”
Two years ago, Bryan Witchey, vice president of sales and marketing for The Equipment Lock Co., emphasized this latter point. “Stealing construction equipment has been made incredibly simple by the equipment manufacturers,” he said. “Each of them provides common keying in the form of a single key that fits both the cab door and the ignition of every construction vehicle they make. They do this for the convenience of their contractor customers; otherwise, if a key was mislaid, a machine could be unusable until the key was found, and it might well impede progress on the construction job during that period. However, with common keying, a thief can get a $3 key from a parts counter and with it gain access to literally millions of dollars’ worth of construction vehicles in the field.”
In 2006, he says, “The situation is exactly the same today.”
Kelleher agrees, although she points out that some equipment manufacturers now do offer unique keying options. However, she says, “It appears that few if any contractors take advantage of these options. To ensure against job interruptions, most contractors feel that they are essentially being forced to take the risk of common keying. And that risk is undeniably real. In fact, for $30, we bought a ring of keys via eBay that gave us access to virtually every construction vehicle in the country.”
Patterns of Theft
In its landmark 2005 Equipment Theft Report, the NER analyzes some of the patterns of construction-equipment theft. Based on over 5,000 theft reports submitted to the NER in 2005, the study determined that 39% of the thefts occurred in just five states: Texas, California, Florida, Missouri, and South Carolina.
LoJack’s experience was slightly different; Arizona and Georgia ranked fourth and fifth instead of Missouri and South Carolina.) The NER report explains that “[t]he overriding factor in these statistics is the amount of targets available to thieves. Theft levels closely follow the amount of equipment in a particular area—the states with the highest volume of construction, maintenance, and agriculture have the highest number of thefts. This factor is likely to be amplified because areas with high concentrations of equipment attract more thieves, particularly professional theft rings. Theft rates in areas close to land borders seem to be higher as they provide an easy route for thieves who wish to export equipment.”
Shillingford does point out an anomaly in the 2005 theft statistics. “There was a noticeable rise in theft reports to NER from states surrounding those hit by the 2005 hurricanes that caused NER to analyze this trend in the months following Hurricane Katrina,” he says. It was found that:
- Since the end of August 2005, there was a 22% increase in thefts from the Gulf region and surrounding states compared with the same region and period in 2004. As thefts from this period are still (as of January 2006) being discovered and reported, this figure is expected to rise.
- In the weeks immediately after each hurricane, the increase in theft was primarily in neighboring states, but as more equipment moves into the storm-damaged areas, thefts are increasing in these (storm-damaged) areas too.
- The type of equipment stolen reflects normal theft patterns.
What construction vehicles are most often stolen? Surprisingly, it is not the very-high-value equipment. As shown in Figure 1, LoJack found that just four types of construction equipment accounted for 56% of the industry’s losses in 2005, primarily because they are versatile and multifunctional and are the most easily transported.
The NER’s 2005 study of construction equipment theft generally concurs with these statistics, except that the LoJack study revealed a new pattern: Generators and air compressors have become the third and fourth most stolen construction equipment, making up 11% of all the thefts reported. “Generators and air compressors are versatile pieces of equipment, have high rental costs, and are easily attached to any trailer hitch,” the report explains. “Generators are useful in the private as well as the commercial sector and with the high cost of energy today, they are prime targets for theft. Air compressors are attractive to thieves looking to use them on another job or resell them below market value.”
The Industry Responds
With a problem of this magnitude, it was inevitable that the construction industry and its suppliers would devise ways to at least limit losses from equipment theft. Currently there are at least four different approaches:
- Deter the theft and increase the probability of recovery by registering the equipment.
- Prevent the theft by mechanical means.
- Track the equipment after a theft is discovered.
- Prevent the theft by electronic lockdown.
Registering the Equipment
The NER operates on the premise that a capable thief will be able to steal equipment however well it is protected. Hence, its service to contractors is to register the vehicles before they are stolen. The registration consists of entering a machine’s serial number, engine number, transmission number, and other selected identification numbers into an NER database, which can be accessed by law enforcement to assist in the recovery of a machine in the case of a theft. In addition, a contractor can apply an NER-provided decal to inform would-be thieves that this vehicle is registered and therefore more difficult to dispose of.
“It only costs a contractor a few dollars per vehicle per year to register an entire fleet,” Shillingford says, “and there are seven clear benefits to be gained:
As soon as a theft is detected, the NER can be notified and a full loss report will be added to the NER database, ensuring the speed and accuracy of the loss report. Regional theft alerts are then sent out to alert area law enforcement of the new theft.
Figure 1. Industry Losses, 2005
A theft may not be discovered for days, or even weeks, during which time law enforcement may have investigated the equipment with no success. The NER will be able to identify the owner of registered equipment if it is found in suspicious circumstances—even before the theft has been discovered.
Thieves will be deterred where equipment and premises have been marked with NER decals due to the increased likelihood of detection while moving, storing, or selling the equipment.
Even if the decal is removed, the item will still be registered—and the thief knows this.
Owners can record component and owner-applied numbers on the NER’s HELPtech database, which not only gives law enforcement an added identification tool but also helps prove ownership. The NER will be able to help law enforcement identify the true owner of any registered equipment through its 24-hour hotline used by officers investigating suspicious equipment.
Theft deterrence and the increased chance of recovery will improve loss experience and will help control the cost of risk whether the owner is insured or self-insured.
If a contractor is offered a second-hand vehicle for sale, he can, for a small fee, have the NER run a search to see if that vehicle is listed as stolen, thereby saving him thousands of dollars if the vehicle is stolen and is only identified as being stolen after he has purchased it.
In 2006, Shillingford says, the NER increased its number of ownership records to 13,420,076, increased the number of law enforcement users to 1,400, and increased the number of fleets listing their inventory with the NER to 175. “In addition,” he adds, “an important development in 2005 was gaining the acceptance and participation of the rental industry, where many non-insured losses occur. The NER is now capturing loss data from the five largest rental fleets in North America and hundreds of smaller fleets through a partnership with the American Rental Association. By the end of 2005, 1,985 rental stores or branches were using our services. In addition, we are encouraging citizens to alert us via the Internet when they see what they suspect is a stolen vehicle. In 2005, we began to see a growing number of recoveries resulting from this TIP program.”
Preventing Theft by Mechanical Means
Both Pit Bull Tire Lock Corp. of Gladstone, NJ, and The Equipment Lock Co. of Hedgesville, WV, manufacture mechanical locking devices designed to immobilize construction vehicles when not in use. Not only are they theft deterrents, but they are also adaptable both to site safety in general and to OSHA lockout/tagout regulations designed to prevent operation of dangerous equipment in need of repair.
According to Corey Marchasin, Pit Bull’s president, his company continues to manufacture a tire lock that clamps onto a tire and two models of a lug blocker that prevent thieves from removing and replacing a locked tire. The products are extremely strong. Constructed of an aluminum alloy reinforced with 0.5-inch hardened steel rebar, the tire lock fits any wheel from 2 inches wide to 16 inches wide. List-priced at $320, the tire lock functions like a wheel boot device, but it can be attached in under 10 seconds without any tools required. As a result, a fleet lockdown at the end of the day can be a practical strategy.
“Although our primary market is the construction industry, we are also making thousands of sales to private contractors in Iraq and elsewhere in the Mideast,” Marchasin says. “In a war zone, our heavy-duty equipment with its hard Rockport steel is as applicable as it is on a construction job site here.”
The Equipment Lock Co. manufactures a family of steel mechanical locking devices designed specifically for skid-steers, skid-steer attachments, backhoes, excavators, and trailers. These anti-theft locking devices, which list from $89.50 to $189.50 (before quantity discounts), are built with barrel-style key locks that are pick-resistant, Freon-resistant, and corrosion-resistant. Each locking device is an assembly capable of withstanding thousands of pounds of force, and each is designed to immobilize the particular vehicle when it is installed.
“We actually have three different types of locking devices for skid-steer loaders,” Witchey says, “and they fit on every skid-steer loader on the market. The top-of-the-line unit immobilizes both drive controls and makes it nearly impossible to gain access to the driver’s seat. Our E-Series skid-steer locking mechanism immobilizes just one drive control, but it too renders the vehicle useless since with it in place, the thief can only drive in circles. Our backhoe lock, our excavator lock, and our ball-and-ring hitch lock are equally effective in protecting all backhoes, excavators, and trailers.
“And just last year, we introduced a changeable combination lock option that provides a partial solution to the common-keyed vehicle dilemma. No keys are needed for any of our vehicle or property locks outfitted with this $20 option.”
Tracking Vehicles After a Theft
LoJack’s system for construction equipment is designed specifically to get stolen off-road vehicles back to their owners. Its ruggedized third-generation version of the original LoJack is designed specifically for use at job sites and other difficult environments. When the owner discovers the vehicle is missing and calls the police to report the theft, the LoJack system automatically becomes activated. The police can then track the vehicle’s transmitted signals and recover the vehicle. “It is the only stolen-vehicle recovery system used by the police,” Kelleher claims.“The new system employs the same radio-frequency technology that has maintained more than a 90% successful recovery rate during the 19 years it has been on the market,” she adds.
Certified technicians install the LoJack system covertly in one of many possible locations on an individual piece of equipment. There is no external antenna or aerial to give away its presence or location. The system is powered by the equipment’s electrical system with an additional backup battery.
“If a piece of heavy equipment that has LoJack installed is stolen, the owner files a stolen-vehicle report with the police to automatically begin the activation process. A silent radio signal is sent directly to the equipment to activate the hidden LoJack transponder. Unlike GPS-based solutions, LoJack’s radio frequency signals can penetrate dense trees, underground locations, garages, and other obstructions like steel shipping containers.
“The silent radio-frequency signal is picked up by LoJack Police Tracking Computers that are actually installed in law enforcement vehicles [police cruisers and aviation units], enabling them to quickly track and recover the stolen vehicle. The signals pinpoint the location and lead police to a rapid recovery.
Some 70% of the LoJack-equipped construction equipment was recovered in less than 24 hours after being reported to the police, with 20% recovered in less than an hour, Kelleher reports. This quick recovery has resulted in minimal damage for equipment managers who have outfitted their fleet with LoJack. Conversely, a 2005 survey done by Equipment Today showed that 55% of the responders who lost equipment due to theft didn’t recover it until one week later (or longer), and it was returned damaged 65% of the time. The LoJack System only operates in 26 states and the District of Columbia, but Kelleher points out that these represent the areas with the greatest population density and the highest numbers of new vehicle sales and incidents of vehicle theft. The main drawback to LoJack’s system for construction equipment would seem to be the fact that it does not become operative until the theft is discovered and reported to the police. Since many heavy-equipment thefts occur on weekends, thieves have a two- or three-day lead that could enable them to dispose of the vehicle before LoJack even starts to track it. It must be remembered, however, that the primary purpose of LoJack is to recover stolen vehicles; catching the thieves is secondary. Hence, this delay is disastrous only if the thieves get the stolen vehicle to a fast-moving chop shop or across a national border.
“Our record bears out the effectiveness of this system,” Kelleher says. “During the 12-month period from January through December 2005, LoJack tracked recovery reports in 21 states where equipment theft was reported and where construction equipment outfitted with LoJack led police to recover the stolen assets. In those 21 states, police reported that after tracking stolen equipment with a LoJack device, eight theft rings and three chop chops were disbanded with an approximate value of $3,000,000 of additional equipment recovered. Overall, over $15,700,000 worth of assets were recovered in 2005 as a direct result of LoJack, and since 2000 more than $46,500,000 worth of stolen assets have been recovered with LoJack.”
Prevent Theft by Electronic Lockdown
Because of the often remote location of construction job sites, several system suppliers have developed capabilities to alert contractors and/or the police when a theft is in process at night or over weekends. The most basic of these systems is one just introduced by Baltimore-based DeWalt. This new system, called SITELOCK, relies on cellular technology and programmable remote sensors to monitor key assets and areas at a job site. If an intruder tries to enter a secured area or to disturb a piece of protected equipment or to remove a sensor, an alarm sounds. Simultaneously, using wireless technology, a signal is sent in less than a second to a 24/7 professional third-party monitoring service center that in turn alerts the appropriate law enforcement facility.
According to Bill Pugh, DeWalt’s group marketing manager, “SITELOCK is not a tracking system but a rapid response alarm system. Alerted by its instant notification capability, the police can respond without delay before the stolen equipment is moved very far. The system is not designed specifically for protection of vehicles, but rather for the protection of equipment and tools, the loss of which are a significant concern of many contractors. The base system retails for $1,000, the sensors range in price from $99 to $199, and the capability to alert police costs $40 per month. SITELOCK is readily portable and can be easily moved without roaming fees or location change costs.
Calgary-based Longview Advantage markets several systems, but the one currently most cost-effective for contractors seeking just theft protection is the vShepherd, which incorporates the benefits of GPS, cellular, and Internet technologies to deliver reliable theft protection and recovery. According to Mel Baillie, vice president of marketing, the core of the system is its Fence feature that lets a contractor preset an invisible security perimeter around his assets. Once the contractor activates the vFence via telephone or computer, the system will detect any attempted theft. “The instant a vehicle or other asset travels outside the perimeter, an alarm is immediately sent to our 24/7/365 Alarm and Recovery Center,” Baillie explains. “We are one of the few companies that proactively get involved from the moment the theft is detected until the moment the equipment is recovered. Our highly skilled personnel work closely with police to locate the stolen equipment via continuous GPS tracking and to return it quickly. Most stolen assets are recovered in less than an hour from the time the vFence generates the alarm. In fact, our current average recovery time is 43 minutes and our recovery success is 98%.
“We have minimized the cost of the hardware and made it as flexible as possible, and we use monthly cell rates to maximize the level of value we can provide. That explains our unusually low prices of $600 per vehicle and our extremely low service charge of $6 per month. We now have more than 5,000 equipments covered, and project that we expect to have 5,000 more covered by the end of 2006.”
Alan Day, president of San Antonio-based HeavyTrack.com Inc., insists that theft protection is not the primary value of his HeavyTrack System, saying, “The time and money savings for each HeavyTrack system pays for [the system] many times over through reduced number of trips for personnel/trucks, increased utilization of fleet/personnel, lower insurance rates, recovered stolen equipment, increased work time, unused insurance deductible, and rental overuse. We present the anti-theft capability as just a valuable adjunct of these fleet management capabilities.
“However, theft [prevention] is a very important issue for contractors. Frequently, this is the capability that leads to the system sale. Our HeavyTrack system is quite effective in theft recovery. The system has a geofence capability that generates an alert if a vehicle leaves a permitted area or enters a prohibited area, such as a port or a border. The system can also define a secure period (usually at night) and generate an alert if a vehicle moves or is moved more than a short distance during that period. With GPS tracking, recovery rates are sure to be very high.”
Since the system was first introduced in 2000, it has been instrumental in recovering 127 vehicles worth a total of $6,220,000. Day used to send out a news release every time his system recovered a vehicle. But then, starting in late October 2005, a curious thing happened. Recoveries stopped. His customers haven’t experienced a single theft (and therefore recovery) in the six months since.
“The only way I can think to explain this is that we have created a very effective deterrent for our contractor customers. We sell to a relatively few fleets, and we have concluded that once a thief attempts to steal a vehicle from one of those fleets and the theft fails (as it almost invariably does), the word gets around that that fleet is too well protected. Combine that with the fact that in over half of the recoveries of vehicles protected by HeavyTrack, the thieves have been apprehended, and it’s no wonder thieves are staying away.”
Another inherent capability of a GPS-based system is the use of software to electronically disable vehicles so they cannot be illicitly moved. With it, a contractor can remotely disable or enable equipment ignition, monitor vehicle condition, and have an alarm sent to him if the equipment moves outside of predetermined boundaries. In case of emergency, the contractor can use the frequent-track mode to locate and recover his equipment quickly.
DPL America’s Titan Anti-Theft System takes this concept one step further. It creates an electronic curfew. Tony Nicoletti, director of sales for the Mountain View, CA‚ based firm, explains: “Hidden on heavy construction equipment vehicles, which can be of any make or model, the Titan receivers can receive signals that cause them to automatically disable the vehicles on any or all job sites every night so that they cannot be started until the crews arrive the next day. Even hot-wiring and universal keys are useless. And the best part for many contractors is that this capability doesn’t require any special programming, special keys, or manual locks. Titan also monitors a handful of different conditions on the vehicles after nightfall. This results in an immediate call to the contractor if any tampering occurs. And, of course, GPS tracking is included to locate any Titan-equipped vehicle during daylight hours. A simple click plots the location and direction of any vehicle on a street-map display.”
Insurance
One of the complaints among contractors that may be holding them back from investing in theft protection is the cost of liability insurance. A contractor may well be convinced that an investment in theft protection systems and measures is a good idea, but doesn’t see the high cost of insurance premiums coming down. Since ISO statistics show that theft loss has consistently represented more than 50% of liability insurance claims by contractors, it seems reasonable that significantly reducing the risk of theft should cause a significant reduction in premium costs.
However, Nicoletti complains, the underwriters with whom he has talked are resisting discounting premium costs based on the theft protection systems and measures a contractor adopts. “They’ll say, ‘We don’t give premium discounts up front, but if a contractor installs theft protection and it results in a good record for several years, we’ll consider lowering his rates.’ And they won’t extend those back-end discounts to other contractors who are considering installing the same or equal protection measures until they too have built a good record.”
At last, there does seem to be some movement on the part of insurance companies to recognize the actuarial value of theft protection equipment and measures. For example, the Chubb Group of Insurance Companies of Warren, NJ, is making it easier for policyholders to register heavy contractors’ equipment with the NER before a theft occurs. Chubb will pay the cost of registering the first 10 pieces of equipment, and NER registration fees for items over the initial 10 will be reduced by 20% for Chubb policyholders. Also, Chubb will waive insurance deductibles of up to $10,000 for stolen equipment registered with the NER not recovered within 30 days of being reported stolen to law enforcement authorities.
“Combating commercial equipment theft is one of our toughest challenges,” says Pat Stoik, vice president of Chubb & Son and Global Inland Marine Manager for Chubb Commercial Insurance. “NER has been pivotal in helping Chubb and its customers recover stolen equipment. We are giving our policyholders incentives to take an active role in combating equipment theft and reduce their risk.”
Well, that’s a start. But DPL America has negotiated a much more sweeping program. On January 17, 2006, DPL America and the Leavitt Group announced “the industry’s first insurance reduction program for equipment owners that utilize the Titan Equipment Monitoring System. Companies that use the Titan system automatically qualify for premium reductions, ranging from 20%-50% below industry standard rates, depending on their fleet replacement value.
“The patent pending program applies to all equipment owners, even those with a previous loss history, and the policy coverage is equal to that of any existing inland marine policy. Rate reductions are effective immediately upon installation of the Titan Equipment Monitoring System. The program is underwritten by a Best rated A carrier and offered solely through The Leavitt Group Agents Assoc. LLC and it’s 90+ agency locations.”
“This is Inland Marine insurance,” Nicoletti explains, “so the coverage ‘floats’ with each piece of equipment. Therefore, contractors and rental companies can insure their vehicles piecemeal without a need for blanket coverage of all their vehicles. They provide an inventory of their vehicles with their current and ending values. For any Titan-equipped vehicle the owner selects, he cancels any other liability insurance on that vehicle and covers it under the master Titan-based policy at the reduced premium rate for that vehicle. Since each fleet owner is just one certificate holder in the nationwide Titan-based Master Policy that covers all the usual risks, contractors don’t have to worry about policy cancellation. That’s a boon for contractors who in the past have been reluctant to make some claims for fear of premium escalation or policy cancellation.
“This approach is ideal for rental companies too, since the coverage floats with the machine, not the owner or the renter. Hence, each vehicle is covered whether it is in the rental yard or at a job site.”
“Equipment owners have been looking for a way to curb their insurance costs, which have been rising across the industry in response to the approximately $1 billion lost annually to theft,” says Troy Baldwin, vice president for the Leavitt Group–APPS division in Cedar City, UT. “By taking a proactive approach with the proven, reliable Titan solution, those owners are being rewarded with an immediate premium cost savings.”
Will other insurance carriers adopt this approach? It is certainly too soon to tell. Insurance is not an industry that moves quickly. For DPL America, however, it certainly has been a winner. Its sales of the Titan system skyrocketed from the moment the new policy was announced at the World of Concrete show in Las Vegas. It is not unreasonable to predict that DPL America’s competitors will pressure other insurance companies to offer similar deals to enable them to penetrate a waiting market.
Recovery Rate Still Just 10%
The industry certainly needs such a stimulus even though the technology is here and improving every year. All of the suppliers interviewed for this article insisted that the number of stolen vehicles being recovered through the use of their equipment is increasing each year. Perhaps the most successful recovery program is LoJack’s. The company now reports recoveries in terms of millions of dollars rather than just equipment units. And in the past five years that dollar value has grown to $46,500,000. The NER reports an average recovery of 100 pieces of equipment in each recent year, but that now adds up to $7,500,000. HeavyTrack’s total value of recoveries passed $6,000,000 in 2005.
One cannot denigrate the value of recoveries measured in tens of millions of dollars, and owners who benefited from these recoveries are undoubtedly well pleased with their investments in their theft-prevention systems. However, overall, this rate of recovery is just scratching the surface. Only a tiny fraction of heavy construction vehicles are being adequately protected.
Clearly, the construction industry is not taking enough precautions or investing enough money to protect its fleets. The Equipment Lock Co. encourages proactive equipment security, by controlling access to equipment and by locking down equipment when it is not in use. And both LoJack and the NER have attempted to educate contractors on how to better secure their job sites and equipment to make theft more difficult. Their recommendations for procedural changes of securing job sites and equipment make good sense, and cost little other than taking some care at nightly shutdowns.
Theft-detection and recovery systems are another matter. They do cost money, although not much money per vehicle protected. The NER charges $7 to $10 per year per vehicle; LoJack charges just a one-time fee of $795 per vehicle; the typical mechanical locking devices cost $100 to $300 per vehicle; and the typical GPS costs less than $1,000 plus an annual service fee of $200 or less. Although the leverage of protecting a $100,000 machine for $1,000 or less would seem to make the investment decision a no-brainer, the costs of outfitting an entire fleet can add up to a daunting amount for contractors and rental houses.
However, the savings and economies of scale that should result as system suppliers and their installed bases grow should have incentive value for contractors. And there is a reasonable possibility that the insurance companies may follow suit and significantly cut liability insurance premiums. The industry can only hope that these trends will cause more and more contractors to invest in theft prevention and that this in turn will serve as a deterrent to thieves who today find theft of heavy construction equipment such an easy and profitable enterprise.