Contract Insights from Auditmate’s CEO
COVID-19 has greatly impacted our lives, personally and professionally. With Shelter in Place orders, many buildings are closed or operating at low occupancy rates. What does this mean for your elevator contract?
On March 23rd, the Elevator Union signed a temporary agreement due to COVID-19. This agreement allows Elevator Companies to offer furloughs and modified schedules, reducing mechanic hours by 25-50%. In many cases, the elevator companies may not have enough technicians to complete all of the required maintenance and repairs. A local IUEC mechanic explains, “Most service mechanics have had their hours cut from 40+ hours a week to 20-32 hours. 30-40% of positions have been cut and repairs have been restricted to paid upgrades only. Contractually obligated repairs are not being executed unless a national level executive intervenes or a consultant becomes involved.”
At AuditMate, we understand that managing your elevator contract is just one requirement in a long list of responsibilities. Here are a few tips to getting the full value of your elevator contract during COVID-19:
1. Track your service
- Determine your elevator maintenance requirements
- Review your elevator maintenance records
- Compare your frequency to actual completion
- Document any deficiencies
Your elevator service contract will state the service frequency requirement. If you do not have a copy of your contract, request it from your vendor. Generally, if you have a service contract issued by the manufacturer, this will be listed on the first page, with common frequencies being “weekly, monthly or quarterly”. For contracts issued by a consultant, this may be specified on an appendix with duration and tasking requirements. If your contract states “periodically”, “systematically”, or is mute on frequency, your vendor is not required to maintain your equipment on a specified frequency. During COVID-19, you will likely not receive preventative maintenance due to labor shortage.
Once you have determined your frequency requirement, review maintenance records. This will be available on major elevator company online portals or by requesting records from independent elevator companies. If you do not have access, email your elevator sales representative. Elevator maintenance records belong to you according to code, and the company must provide them to you. If you’re getting pushback while obtaining a copy of your contract or records, be diligent.
When reviewing your records, check for maintenance visits and compare them to frequency requirements in the contract. Category 1 tests and Category 5 tests are considered maintenance. Customer visits, callbacks, and repairs are not considered preventative maintenance.
2. Track your response times & call backs
- Determine if you have a response time requirement
- Review your callbacks and response times
- Record all missed response times and liquidated damages
Callback response time is defined as the time it takes a vendor to arrive onsite after you have requested service on a malfunctioning unit. If you are on a manufacturers contract, it is likely your callback response requirement is vague or mute. On a consultant issued contract, it’s likely specified with a 1-4-hour response time. A consultant agreement may also list liquidated damages due to missing response time, meaning your building can collect damages due to contract breach. Record all breaches for your records.
Review your callbacks and response times on the vendor portal. You many need to click into each record to access call times and more details about the call. If your building is being properly maintained, your building should only see 2 equipment related callbacks per year. Your callback records are an easy way to review the health of your equipment.
3. Check your force majeure language
Force majeure protects both parties when unforeseeable circumstances prevent someone from fulfilling a contract — and COVID-19 is absolutely categorized as unforeseen circumstances. If the vendor cannot access your building or cannot perform contractual obligations, you should not be paying for the service!
4. Check your expiration date
Rule of thumb for vendors is contracts with less than one year to expiration will get preferential treatment if you intend on extending the contract. Contracts with more than three years remaining will have to play hardball. Check your contract expiration date prior to reaching out to your vendor, as this could give you some negotiation power. Especially if you’re satisfied with your vendor and are willing to extend your contract.
5. Ask for a discount
Once you’re armed with contract and service knowledge, reach out to your vendor and request a discount!
If your building is closed or you’re not receiving proper maintenance, you should be getting at least an 50-80% discount on your monthly price. The additional 20% allows for covered repairs and callbacks that may arise during the discount period. In general discounts are only provided to those who ask. The more informed the customer, the better discount you will receive.
Depending on your frequency requirement and expiration date, this negotiation may be more difficult to obtain and the vendor may request a contract extension. If you are not satisfied with the vendor, be leery of an extension. In this case refer to your cure clause language (usually in the terms and conditions section), which allows you to cite the vendor for contract breach. They must resolve the breach within a certain number of days or you may be able to cancel the contract. Continue to monitor your service and be diligent. The squeaky wheel gets the oil!
Though no one truly knows what a post-COVID-19 world will look like, one thing is certain — businesses will take a hit. The elevator industry will see significant revenue loss and will be focused on recovering these losses. Technicians will likely return to full capacity according to revenue, not based on building occupancy. It’s very important to continue to regularly monitor your service in accordance with your contract. In addition to monitoring service, go through all invoices and repair proposals with a fine-tooth comb. We expect to see an increase in billable callbacks and repair proposals, post-COVID-19.
Managing your building is a hard job, but managing your contract doesn’t have to be.
Let us do the heavy lifting.