Patriot Construction recently won a contract for the upgrades and improvements of the parks and waterways in Springfield Mass. In preparing the bid for the job, Bill Flagg, Patriots founder and the president of Patriot, estimated that it would take four months to perform the work. Because the City of Springfield received a federal grant, EPA standards and protocols must be adhered to strictly. To comply with the federal mandates special equipment must be use in the construction and follow up procedures. Bill thinks that 10, 12, 14, and 8 pieces of the special equipment would be needed in months 1 through 4, respectively.

The firm currently has 20 pieces of the special equipment of the type needed to perform the work on the new project. These pieces were obtained last year when Bill signed a long-term rental contract with Heavy Duty Rentals. Although most of these are currently being used on existing similar projects that have a longer time line. Bill estimates that one these previously rented special pieces of equipment will be available in month 1, two special pieces of equipment will be available in month 2, three special piece of equipment will be available in month 3, and one special piece of equipment will be available in month 4. Thus, to complete the project, Bill will have to rent additional special piece of equipment.

The long-term rental agreement with Heavy Duty charges a monthly cost of $600 per special piece of equipment Patriot Construction pays its drivers $20 an hour and daily fuel cost are billed $100 per special piece of equipment. All Maintenance cost are paid by Heavy Duty Rentals. For planning purposes, Bill estimates that each special piece of equipment used on the new project will be operating 8 hours a day, five days a week for approximately four weeks each month.

Bill does not think that current business conditions justify committing the firm to additional long-term rentals. In discussing the short-term rental possibilities with Heavy Duty Rental, Bill learned that he can obtain short-term rents of one to four months. Short-term rents differ from long-term rentals in that they include the cost of both a special piece of equipment and driver as well as maintenance cost. The cost plan for short-term rentals are as follows:

Months of Rent	Cost per Month
1	$5000
2	$4440
3	$3870
4	$3648

Patriot would like to enter a rental agreement that minimizes the cost of meeting the monthly special piece of equipment requirements for his new project, but he takes pride in the fact that his company has never laid off employees. Bill is committed to maintaining his no-layoff policy, which means he will use his own drivers even if the cost are higher.

Bill has asked your team to conduct an analysis and issue a report for this situation. Be sure to address the following items:

1. The optimal rental agreement
2. The cost associated with the optimum plan
3. The cost for Patriot construction to keep its current policy of no layoffs.