Understanding Contracts for Fleet Maintenance and Repair

Fleet maintenance can be outsourced or in-house. Some fleets choose to perform all maintenance and non-warrantable repairs in-house, while others may choose an outsourced fleet maintenance option where maintenance and repairs are handled by a third party. Below, we will discuss the various options of contract maintenance, the pros and cons, and what to expect with each option.  

What is contract maintenance?

Contract maintenance includes any agreement between a service provider and a fleet manager that covers some type of repairs. This could be as basic as an agreement to perform periodic fleet maintenance at a pre-established rate, all the way to a full-service agreement where all repairs are covered including breakdowns and maintenance. 

Key Components of a Fleet Maintenance and Service Contract

To quote a fleet maintenance contract, the fleet manager will need to provide details on all the assets to be included on the agreement. This would include make, year, model, asset number/VIN, and current mileage/hours. The contract should state where the work is to be performed. If you are quoting a complete repair agreement that would include breakdowns, the agreement should state whether after-hours or road calls are included, and if they are not, what the additional charge for these services should be. A full-service repair agreement is usually billed on usage (miles/hours per month) with an established billing minimum. These full-service repair agreements will outline any exclusions and typically will not cover any damage due to accidents or negligence on the part of the operator/owner. If the equipment to be included on the repair agreement is not new, the repair facility may request that an inspection be performed on the equipment either prior to the quote or at the start of the contract to identify any major issues with the equipment. The contract may renew every year with a limited cost increase. Most contracts will also establish a maximum equipment age (years/miles/hours) where the assets will expire off the contract and no longer be covered.

Should you outsource your fleet maintenance?

Fleet managers have several options for handling their fleet maintenance. Here are a few options and the pros/cons of each:

Hire a Mechanic to Handle the Fleet:

A fleet manager can hire their own mechanic to perform the maintenance. This technician could be limited to just performing maintenance or could be tasked with larger repairs as well.

Pros: For a large size fleet, this option could be the lowest cost to the fleet. Having a dedicated fleet mechanic gives you the flexibility to fix things on your time and enables you to make sure the work is done the way you want it done.

Cons: For a smaller fleet, this option could be cost-prohibitive. Someone should be tasked with ensuring that the technician stays productive and maintains quality work. It becomes hard to manage the ebbs and flows of work, so a fleet will still likely need to outsource some of the work. Many road calls would need to be performed by a third party. You would need to consider any training needed to fill any gaps in the technician’s skillset. Finally, anytime you are adding a person to your headcount, you expose the company to potential HR headaches.

Outsource the Basic Maintenance

If you are looking to minimize the bulk of your fleet management, outsourcing the maintenance would be a good option. This option would include hiring a company to manage PMs for your fleet. They would establish a schedule where they would go through your fleet and complete any PMs that are due.

Pros: This option is a great way to reduce the overall workload of managing your fleet’s maintenance. A third-party would track and perform all maintenance tasks that are due for your equipment, freeing up the fleet managers time to concentrate on other things. While this option might be more expensive than doing the PMs yourself, you would know your maintenance costs up front and can use them to budget for the year. You would not have to worry about leveling out the amount of work throughout the year to keep your technician(s) busy. Finally, most service contracts will be set up for the work to be performed at a location that is convenient to you, reducing the logistics of moving equipment around.

Cons: Whenever you are hiring an outside vendor, you need to make sure they have reputable mechanics on staff, ensuring your equipment is serviced properly and timely. Maintenance contracts might only be valid for a year, or they will likely include a yearly increase to compensate for rising costs. These maintenance contracts would be limited to maintenance, and you will still need to pay for additional repairs.

Full-Service Maintenance and Repair

A full-service maintenance and repair agreement is the highest level of asset protection. This will include all maintenance and most repairs outside of specific incidents such as driver/owner damage or negligence. These agreements can even be structured to cover repairs out on the road or after-hours service calls.

Pros: This is the highest level of asset contract agreement. Since maintenance and repairs are covered by the agreement, assets will likely be maintained in excellent condition in order to minimize the chances of future repairs. Nearly all the costs incurred for asset maintenance and servicing will be included in the contract, allowing the fleet manager to budget for their fleet with certainty. These agreements can be structured to cover for the life of an asset in a fleet so that as the assets age out, they are replaced by newer assets.

Cons: These full-service agreements are the highest-priced options. Because the service provider is covering all the risk of equipment failure, the monthly premium will be higher. There still isn’t an option that would cover all repairs. For example, if a driver damages the equipment, the fleet owner would be liable for the cost of the repair. With this full-service contract, it is very important that you choose a reputable vendor that you can trust.

What to look for in a contract fleet maintenance vendor:

Reputation and trust are the keys to successful service from a contract maintenance provider. Since the health of your equipment is determined by how well it’s maintained, it’s important to choose a vendor that you can trust to perform the work correctly. When considering a full-service maintenance and repair agreement that may span several years, it is critical to select a vendor that has a long history of providing service for your particular type of equipment. Many of these long-term contracts are structured similar to an insurance model, where funds for larger repairs are banked at the beginning of the contract when the equipment is still new. Later in the contract, repairs will pull from these banked funds, knowing that the probability of a repair increases as the equipment ages and is no-longer covered under warranty. You don’t want to get into the 3rd year of a 5-year contract and find out that your vendor will not continue to support your equipment per your understanding of the contract. 

Finally, when looking for a contract maintenance vendor, consider a manufacturer backed vendor. This will streamline the process while your equipment is under warranty, with many of the repairs being completed without any hassle to you. Also, a manufacturer backed vendor will have factory trained technicians who are better able to identify issues before they cause your equipment to be put out of service.

For more information about maintenance and repair contracts, or if you are wondering what a contract would cost for your reefer fleet, contact us.