# Service contract



## Larry007 (Feb 5, 2006)

Looking to provide commercial service contracts. Have a lot of customers that we service normally, but some want to make it a monthly fee instead of the fee that is incured normally. Not thinking a full service contract, but not sure how to go about it? Thanks for your time. 
Larry


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## mdshunk (Mar 13, 2005)

I've been thinking about an answer to this question for several hours now, and I still don't have one. 

Bidding a service conctract is a scary thing. You need to have equipment data and historical age data on most of the stuff in the facility. Since you are already servicing these customers, you might already have a good handle on this. 

I know that most of commercial service work involves lamp changes and ballast changes. You could go by your historical data and figure out how many of these you do in a customer's facility per year. BUT... you know that there comes a point in the age of the installed equipment that they all start to fail, one right after the other, in the span of a year or two. 

One approach to service contracts is simply a defined response time (in hours) and a negotiated labor rate. Of the few service contracts that I have, this is the way I've got it set up. I've negotiated an 8 hour response time, certain amount for electricians, certain amount for helpers, and certain amount for bucket truck. 

Another approach is to list the type of work that you'll do for the monthly fee. Lamps, ballasts, breaker replacements, device replacements, yearly PM of gear and xfmrs, etc. Like I say, I believe this approach is risky if you don't have a good handle on when things are likely to fail. 

You're in the best position right now. You're (presumably) doing the work on a T&M basis, as is the custom for most service work. I havn't personally figured out how to make service contracts profitable, and therefore don't push them. It does put you in the customer's facility on a monthly basis to try to upsell them things... if your guys know how to do that. If I was in your position, I might just drag my feet on the service contract matter until the customer barks for it again. That's just me talking, though.

I'm not sure if this random series of disconnected thoughts on service contracts helps at all...


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## mdshunk (Mar 13, 2005)

Here's one I dug up:

ELECTRICAL MAINTENANCE SERVICE CONTRACT
PRICING STRUCTURE
RATE INCLUDES TRUCK, TOOLS, EQUIPEMENT, ETC.
(All rates based on an 8 hour response time. Emergency, 1 hour response time rates are 25% higher)
YEAR 1
September 1, 2001 - June 30, 2002
1. Rate per hour, Monday through Friday, from 7:00 AM to 5:00 PM
Journeyman per hour_________
Apprentice per hour__________
2. Parts and/or materials cost
Contractor cost plus % mark up_____
3. Rate per hour, all other hours including Saturday and Sunday, and all legal
holidays.
Journeyman per hour________
Apprentice per hour_________
4. Bucket Truck Including Operator_____
YEAR 2
July 1, 2002 - June 30, 2003
1. Rate per hour, Monday through Friday, from 7:00 AM to 5:00 PM
Journeyman per hour_____
Apprentice per hour______
2. Parts and/or materials cost
Contractor cost plus % mark up________
3. Rate per hour, all other hours including Saturday and Sunday, and all legal
holidays.
Journeyman per hour_______
Apprentice per hour________
4. Bucket Truck Including Operator______
YEAR 3
July 1, 2003- June 30, 2004
1. Rate per hour, Monday through Friday, from 7:00AM to 5:00PM
Journeyman per hour___
Apprentice per hour______
2. Parts and/or materials cost.
Contractor cost plus % mark up______
3. Rate per hour, all other hours including Saturday and Sunday, and all legal
holidays.
Journeyman per hour____
Apprentice per hour________
4. Bucket Truck Including Operator______
________________________________________________________________________________________
Signature of Authorized Representative Title Date


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