Why have a maintenance contract?
There are several key reasons why you may feel it’s appropriate to invest in a service and maintenance contract to protect your business and its assets, but what are the key benefits to you and your business?
The Health & Safety at Work Act, puts a duty on all employers to protect their staff from harm, ensuing you have a regular schedule of checks by a professional. This not only helps fulfil the criteria, but also helps ensure peace of mind that you’ve taken reasonable steps to protect both your people and your premises.
Maintaining your assets helps to reduce your equipment downtime and maximises your output while maintaining quality.
With a maintenance contract you’ll frequently have a service level agreement (SLA) backing it up. This will normally identify and outline expectations around your service. At BFES, we detail response times, what stock we’ll carry and what support we offer.
This can be thought about in a number of ways. Firstly, maintaining your assets and having them run efficiently, drastically reduces your energy consumption. Secondly, having a pre-agreed arrangement with any company also offers the potential to free up your time.
At BFES, we like to find innovative solutions to make maintenance easier to manage for all manner of clients, whether it’s streamlining our work processes or working around your business. We like to give you the ability to step back and monitor from the top. Capex forecasts also ensure you’re using your capital in an effective way where you need it most.
The rise of the comprehensive contract – why pay more?
The roots of this type of contract fundamentally lay in finance and risk management. We are in a very turbulent economy at the moment, as ‘Article 50’ is processing and we don’t know what the impacts will be. However, even with that level of uncertainty, we are buying new cars on finance agreements in record numbers, even when inflation is exceeding interest rates!
So, why are we doing this? Experts believe this attitude is down to people wanting the reliability of a new car, coupled with fixed monthly costs that can be budgeted for in advance. By having this approach, you can eliminate the additional costs you would have foreseen with a second-hand car. And any intermediary issues that may occur will likely be covered under warranty for the duration of the contract.
This approach is being applied to other industries more and more. Many providers offer comprehensive contacts where the labour is totally inclusive in your contract price. You can pay monthly and whatever goes wrong in the kitchen; there aren’t any labour or callout charges to pay.
The first, most obvious, answer is you may pay more, conversely you may pay far less, but like an insurance policy you’re effectively deferring risk onto another provider or business. This gives you the benefit of having a planned fixed cost. Ultimately business doesn’t like risk and more clearly than ever, the recession has shown the need to properly assess, identify and manage risk to avoid financial catastrophes.
By placing risk with a supplier you’re also incentivising the whole service concept! The moment your provider agrees to take care of all of your labour costs, their margin is then dictated by how much resource it takes them to deliver; fundamentally if they do a bad job of maintaining your assets, their costs become higher and their margin reduces. It also goes deeper than this – the more you work with that supplier the more data they have on you, your business and your assets. Analysing this data even on a small scale, allows your provider to quantify risk (in a similar way to an insurance actuary) allowing them to ultimately provide a better price as time goes on.
What to watch out for when searching for these contracts
Fair use policy
Is there a limit on the callout numbers? What’s the incentive for your provider to perform well for you?
Spare parts pricing
Are these costs fixed? The easiest way for a provider to make up any contract shortfall is to vary this price enormously – get it agreed!
Often you’re signing up to a contract as the commitment works both ways. Can you get out of your agreement if the supplier doesn’t perform?
Service Level Agreement (SLA)
Having a good agreement in place helps both parties manage expectations and makes for a happy and healthy business relationship.