Should You Accept a New Contract From Your Lift Company?
February 4, 2021
If you are offered a new lift contract at a reduced rate, should you accept it? What could possibly go wrong?
This article will provide advice to avoid an expensive mistake. If you are happy with your service provider, if they’re doing a good job and not overcharging you, then it’s quite understandable that you’d prefer to stick with them. As they say, “better the devil you know.”
But what if the lift company proposes a fancy new contract for you to sign? Maybe “Premium,” “Platinum,” or “Diamond” cover. The price might seem OK, but how does it compare to your current contract?
Let’s face it, lift contracts are complex, and it’s quite unusual to find two versions that are exactly the same (even with the same lift company). What’s even more remarkable is for a lift company to do something that actually benefits the client (rather than the lift company) without expecting more money for it.
Sadly, in most cases, the new contracts with the fancy names are too good to be true. Although the annual fee may seem competitive, when you dig below the surface, the devil is in the detail.
Many years ago, Comprehensive Maintenance Agreements from the major lift companies offered almost identical coverage levels to their competitors. They specified the number of maintenance visits to be undertaken each year, and the coverage level was indeed “Comprehensive.” Pretty much anything that failed was covered.
Around 10-15 years ago, things began to change in the lift industry. Customers were getting smarter, they no longer wanted to accept 10-year contract terms, and they were happy to shop around for the best price. Competitive pressure started pushing prices down, and faced with reduced margins; the lift companies had to develop new ways to squeeze out a profit. To allow them to offer 3-year & 5-year contracts (and meet lower market pricing), they began to tinker with the exclusions of their Comprehensive Contracts. Suddenly, they were no longer “Comprehensive.”
New names began to appear, “Standard,” “Gold,” “Platinum.” Most of these new contracts had a few things in common. No longer did the lift company specify how many preventative maintenance visits were included. Under your old contract, you may have been guaranteed 12 visits per annum, whereas, under your new “Gold” contract, you now had to trust the lift company to service the lift as often as they deemed it “necessary.” As you can imagine, this was quite attractive to the other lift companies, and before long, they all had their own new contracts to help them compete.
In addition to reduced levels of maintenance, another contract casualty was the increase of “exclusions.” Apart from reasonable exclusions such as vandalism or water damage, typical exclusions would be items such as electrical fusion (motors & drives), steel ropes, display screens, buttons, and obsolescence (which can include any superseded component). Even breakdown calls where no fault is found could now result in a $500-$1,000 charge to the lift owners. And this could occur many times over in the same year!
Previously, everything was covered, but now the owners could be one breakdown away from a huge and unbudgeted repair cost. In some circumstances, it might be possible for owners to make an insurance claim for exclusions such as electrical fusion, vandalism, or water damage (provided you have coverage in place); however, huge risks can still remain. Major repair costs can easily range between $5,000 to $25,000. Considering these risks, maybe a fancy new contract isn’t such a good idea after all?
Not necessarily, with the right advice, a properly drafted new lift contract can actually save the owner money, prolong a lift’s life cycle and improve its reliability.
A good lift consultant can provide owners with a relevant performance-based contract, including clear KPIs for maintenance visits and tasks, coverage of the right components, and removal of the potential for “unexpected charges” or inflated repair costs. The new performance-based contract can even be tendered to other lift companies to ensure you get the best service provider for your equipment at the lowest possible fees.
Making the right choice on a lift contract can be difficult. It can also be extremely expensive (for many years) if you get it wrong. We recommend contacting an industry expert to give you the right advice to suit the specific requirements for your building.
This article was contributed by Grant Caldwell – Equity Elevator Consultants
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