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Understanding Maintenance Contracts

Posted on: January 22nd, 2012 by AEadmin

How to select an elevator maintenance provider.

Every day many people depend on the safe and reliable operations of your building’s vertical transportation system. It is of critical importance to the owners and ultimately to the tenants and visitors who travel throughout these buildings each day.  Deciding on a competent maintenance company is a complicated decision. The best service provider is not automatically the company that installed your system. Elevator maintenance can be provided by manufacturers, Independents, or on a self-maintained basis.

OEM Manufacturer Elevator Maintenance

Today, many new elevators run on proprietary computer-based software that requires specialized tools for proper maintenance that only the manufacturer can provide. If your building has proprietary equipment you will have limited maintenance service options and generally will have to pay a premium for elevator maintenance.

Manufacturer Elevator Maintenance

Other elevator manufacturing companies actively pursue maintenance contracts for elevator equipment they did not manufacturer. The service contracts they offer are comparable to service contracts you would consider with the actual OEM manufacturer of equipment in your building. An advantage of using another manufacturer may be to save money or obtain better service in a specific geographic area. Most manufacturers also offer a variety of discounts for contracts covering multiple buildings with the same owner or property manager.

Independent Elevator Maintenance

Independent elevator maintenance companies are located in most areas of the country. Independents often charge less for their maintenance programs than manufacturers. When considering an independent you will want to investigate the company’s level of technical expertise and ability to provide spare parts to avoid extended downtimes.

Self Maintained

Today, many large facilities such as universities and medical facilities provide in-house maintenance for elevator equipment to reduce overall maintenance costs. Your decision to self maintain elevator equipment should be based on economics and the availability of skilled labor. Other factors to consider include your ability to obtain spare parts and manage major components repairs.  In addition, you will also need the necessary infrastructure to process  and react to customer questions or complaints. Due to the increased liability exposure and technical expertise needed to maintain the elevator equipment properly, we recommend using other maintenance options for most customers. Many elevator companies will not service elevator equipment that is being maintained by non-certified elevator mechanics due to increased exposure to lawsuits.  Most jurisdictions require elevator work to be performed by certified technicians.

What type of maintenance agreement will work best for your elevators?

Knowing the different types of elevator contract options can greatly increase your chances of saving money and finding a maintenance agreement that meets your building’s requirements. The more risk you are willing to assume, the lower the cost of services will be. Most elevator companies offer four types of elevator maintenance contracts. These contracts offer you a range of coverage options and discount opportunities.

What is a Full Maintenance Contract? (FM)

A full maintenance contract is written to allow an elevator service company to take total responsibility for the elevator equipment identified in the maintenance agreement. This contract acts like an insurance policy and allows the manager to budget total yearly costs and eliminate concerns relating to elevator liability and exposure to claims in the event of accidents or injuries. Liability is limited because the maintenance contractor assumes all responsibility and determines the amount of service visits required to keep the elevator system operating safely. If an accident should occur, the elevator maintenance company may be responsible for defending itself against accident claims and will exhaust every effort to ensure safe operating condition.

What is a Parts, Oil, and Grease Contract? (POG)

A POG contract lists specific items of equipment that are not covered in the contract, such as controllers, elevator machines, motor-generator sets, and cables, etc. A POG contract will only have value if the contract clearly stipulates the work to be covered and the parts to be supplied including frequency of examinations and trouble calls to be answered. POG agreements also generate additional paper work and the property manager must coordinate with the maintenance provider on what is covered in the contract and what will be done under repair orders at a later date. Many maintenance companies are no longer offering this type of contract due to the increase costs of solid state components. Usually, maintenance companies offering this type of agreement will provide your property with lower monthly charges than the price of a full maintenance contract but the coverage will also be proportionately less.

What is an Oil and Grease (OG) or Examination & Lubrication Contract?

OG contracts include lubrication of moving parts and minor adjustment on a regularly scheduled basis. When additional services are needed, the mechanic reports potential problems to the property manager who then schedules all repairs to be paid by the building owner. The cost for the OG contract is relatively low but when you include repairs, the entire yearly cost is usually much higher and more complicated to budget. OG agreements also generate additional paper work, as the property manager must coordinate with the maintenance provider on all repairs. Liability exposure to claims in the event of accidents or injuries are even greater than a POG contract because the owner is responsible for having parts repaired and replaced.  Customer satisfaction with this type of agreement is usually very low.

What is a Survey and Report Contract?

Coverage under a survey and report contract consists of quarterly, semi-annual or annual inspection of all major equipment components. The inspection does not include maintenance, repair work or dismantling equipment that necessitate elevator mechanics. Maintenance or replacement recommendations may be completed by the owner or by selected contractors under the property manager’s coordination. This type of contract also makes it extremely difficult for a building owner to avoid liability if an accident should occur.

What you don’t know could cost you a bundle: Understanding maintenance contract terms and conditions.

Understanding maintenance contract terms and conditions.

Once you have decided which maintenance contract will work best for your property you will need to find an elevator company.  The company you select will then perform maintenance services under the type of contract you have specified. But here’s where your troubles can begin. You must understand what is not covered and how those services will be billed and what steps can be taken to control overall maintenance costs.

Important questions to ask potential maintenance provider.

Managers should understand the circumstances under which they will be invoiced for costs in addition to the contract price. Before you accept any maintenance agreement your service company should answer the following questions:

  • When does overtime apply under the contract?
  • What are the differences between overtime trouble calls and overtime repairs as they relate to the contract?
  • Is travel time a consideration because of location or union agreement?
  • If maintenance is missed or incomplete are you entitled to a refund for that month?
  • Do trouble calls count as a regular monthly service call?
  • What is the response time for a trapped passenger?
  • What is the availability of spare parts?

Important facts on maintenance term years and automatic renewal clauses.

Elevator companies bill in advance, at the beginning of each month. Full Maintenance Contracts are also similar to insurance policies protecting you from unexpected major repair bills. Owners will also be required to pay in advance at the beginning of each month. Some maintenance providers are even going as far as requiring payment for 90 days in advance via electronic funds transfer.  The standard elevator contract usually covers a 5-year term with a termination clause requiring 90-days prior written notice. These terms can be modified by reducing the length of the  contract and eliminating automatic renewal clauses. Typically shorter-term contracts will provide the building owner with the ease of re-biding or switching maintenance contractors. The trade-off is that the cost of a shorter-term contract will most likely be at a higher rate.

Keys to pricing and annual price adjustment.

Material costs and labor costs are subdivided in most contracts. Pricing under full maintenance contracts is normally divided into a percentage for materials and labor. Each elevator company has a different way of calculating the percentage of labor and percentage of materials. Under full maintenance agreements you can usually expect costs for labor to be around 80% and materials around 20 %.  Every elevator company also has a different procedure for annual price adjustment. Owners need to be aware that a price adjustment will occur every year. One problem with the annual price adjustment approach occurs when cumulative increases are applied over many years. This yearly price adjustment may increase the contract price to a level that exceeds the price the current contractor would charge if the maintenance contract were put out to re-bid.

Union elevator mechanics regular working hours are 8:00 a.m. to 4:30 p.m. Monday through Friday. Wages for work performed outside these hours during regular working days is normally paid at time and a half including Saturdays. On Sundays and holidays union mechanics are paid double time.

If you select a maintenance agreement that does not include callbacks you most likely will be charge the full overtime portion. Usual maintenance contracts do not require elevator companies to perform two-person (crew) or major repairs on overtime unless specified by the owner to proceed with the work. For a slightly higher monthly fee maintenance contracts can be structured so the owner will be charged only for the overtime-differential portion on callbacks services and reduce overtime costs. These overtime charges usually include more than just the time spent on the job, such as door-to-door travel time plus mileage for overtime repairs. You should budget for these calls and estimate a minimum of 3 hours per trouble call to be safe.

What is typically not covered under maintenance agreements.

  • All service contracts include a list of exclusions that will not be covered under the maintenance contract. Unfortunately, these exclusions can happen regularly and may increase your overall maintenance cost by as much as fifteen percent. Here are some common examples of items that can result in extra charges:
  • Overtime callbacks / trouble calls
  • Doors knocked off tracks by movers.
  • Keys dropped in the pit (you may be surprised at how often this happens)
  • Car left “keyed off” or left on “independent” by building personnel, movers or security guards.
  • Debris in car or hall door sill tracks.
  • Foreign objects caught or wedged under car or hall doors such as carpet tacks, small rocks and coins.
  • Stuck buttons and broken safety edges.
  • Flooded machine room, top of car, or pit
  • Vandalism: doors kicked off tracks, fire in elevator cab set by vandals and burned car buttons.
  • Calls placed for service resulting from building power even though no emergency power feature exists to run the elevator equipment.
  • Elevator telephones and phone monitoring.

Prorating

In addition to items excluded by the maintenance company, a contract will also include a list of prorating. Many maintenance companies never list any item under prorating if you are willing to sign a standard five-year agreement. Occasionally, the company may list elevator components that the maintenance company believes will soon need replacement and for which it is unwilling to bear the full cost. Common items prorated include cable, bearings and motors. These item are typically prorated over a five year period (and no longer than ten years) in which the building owner agrees to share the cost of components that are likely to wear out.

How to avoid legal responsibility should an accident occur.

Liability

Over 20,000 elevator accidents occur every year in the U.S. One of the most important details in any elevator maintenance contract is establishing who assumes liability for accidents. Elevator service companies are typically responsible only for components specifically identified in their service contracts.

Know your risk

Owners are accountable for the safe operation of equipment under their control. If you select any contract other than full-maintenance you risk putting the owner in a position where it is complicated to prove that the elevator system is not under management control. When signing any agreement check with your insurance to confirm they cover this risk. Review all legally binding documents with your insurance and legal advisor before you finalize any contract.