Whenever a seller sells an equipment or products to buyers for which periodic servicing or maintenance is necessary for proper functioning, it is advisable to agree with the parties regarding the terms of that product’s servicing. In formalizing this process, annual maintenance agreements (AMCs) are essential. The benefit of an AMC is that it protects customers’ investments in products and services, ensures against unplanned downtime, and assures that they will always have a service professional at their disposal. Service providers have access to AMCs to help them plan out the year’s service schedule, estimate how many technicians they need, and maintain positive, long-term relationships with customers
What is an Annual Maintenance Contract (AMC)?
An annual maintenance contract sets expectations between a company and a provider about how the company wants its machinery or property to be maintained over time. An annual maintenance agreement will provide the service provider with the right to repair or replace any equipment or products sold to the customer when they malfunction or as otherwise agreed between the parties to minimize downtime or other irregularities in the operation of the business.
You can get annual maintenance services for buildings, landscaping, computers, machinery, technically-advanced furniture, and any other technology or business system that requires post-purchase service and maintenance. AMCs are more common in certain industries than others. Industry sectors such as manufacturing, food service, healthcare, and retail require more maintenance annually than offices, for example.
A building with an HVAC system built by the company that operates their AMC, for example. In the contract, it would be specified which equipment would be covered, how often maintenance would be performed, and how much maintenance would cost.
Typical Annual Maintenance Contracts Include:
- Names and addresses of the parties involved, usually a business and the company providing the service
- Contract price
- Contractual terms for annual maintenance
- Penalties for breaching the contract or terminating the contract
- Maintenance expectations for your technicians
- A comprehensive maintenance contract (CMC) is or is not a comprehensive maintenance contract
- A detailed listing of the equipment covered
- Duration of service and time it typically takes
- Date and signatures of both parties
AMC vs CMC: What’s the Difference?
Annual maintenance contracts are a great way to cover basic services on products. However, comprehensive service contracts (CMCs) cover any additional labor, materials, or transportation costs that arise while techs service those products. Business owners are responsible for any additional costs incurred during the process as a result of a non-compliant agreement.
Comprehensive contracts typically cost more than AMCs because of the breadth of coverage they provide. CMCs usually last for a year after signing, but they may occasionally be extended for three or five years by both parties.
What Is the Cost of Annual Maintenance Services?
Annual and comprehensive maintenance agreements are structured in a variety of ways by companies and service providers. Both the business and the service provider negotiate them according to what works best for them.
Time-Based:
Hourly rates are set in contracts, or rates are set for specific periods (weeks, months, days, etc.). Each hour of work is assigned a fixed price which is calculated yearly for the total number of hours worked. For maintenance, it is common to use this model where manpower is the most critical resource.
Per Device:
Each piece of equipment or device covered under the contract will have its own line item cost. When a part is in high demand or needs to be repaired, this type of pricing is useful.
Based on Equipment Life-Cycle:
Prorated costs can be included in contracts based on the expected lifetime of the device or equipment covered. Depending on how close something is to the end of its life, the AMC could be more expensive.
Repair vs. Replacement:
Depending on the type of service, contract terms may differ. In an AMC, for instance, replacement is typically more expensive than repairs, so machine or component replacement is included in the AMC’s criteria.
Other Services
Additional conditions may be included in a contract based on the services you provide to the customer. A contract may cover the transportation of replacement parts, among other extraneous benefits. Rather than being charged separately, a business could choose to include transportation and replacement parts within the contract.
Need for an Annual Maintenance Contract
Service providers and clients alike can benefit greatly from an AMC, regardless of its terms and conditions. AMCs also offer the following benefits to companies:
As a Service Provider:
A Simpler Annual Planning Process:
AMC cost estimates can be used by customers and service providers to calculate service requirements, estimated downtime, and hours of operation, among many other things. In addition to eliminating unexpected maintenance and repair costs, service providers know what types of jobs they can anticipate.
Informative Schedules:
Enable you to understand your scheduling and hiring needs better. With AMCs, you can determine how many technicians you will need, how much support backup your contracts require, and plan your technicians’ schedules.
An In-depth Understanding of Clients:
Through ongoing client support, providers gain a deeper understanding of their clients’ needs. Knowing the frequency of equipment downtimes, how many visits are required on average, and what kind of needs the client has helps companies build better, longer-lasting relationships and create better contracts.
For Customers:
A Higher Standard of Work:
With an annual maintenance contract, clients can be assured that the work will be standardized over that period as well as that the service provider will follow the terms of the contract.
Planned and Efficient Timelines:
Knowing that they will always have emergency support will provide customers with peace of mind. With us, they won’t have to worry about how something will be repaired or when it will happen.
Maintaining a Regular Schedule:
It is beneficial for both service providers and customers to plan regular maintenance. Things that are well-maintained break less frequently, resulting in less work for your techs and fewer downtimes for your clients.
Learn more about AMCs today.
The implementation of annual maintenance contracts or comprehensive maintenance contracts has many benefits. Some of most important ones:
Benefit to the customer: Gain the commitment your business needs to guarantee continuous uptime.
Vendor Benefit: Make sure the terms and pricing you use align with the value you provide: don’t undersell yourself.
CMCs will be the best option for some customers. As a result, you should consider the involvement and costs of CMCs when writing the contract. An AMC or CMC will help you secure ongoing work for your team and ensure the longevity of your business.
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