Elevator Maintenance Contracts

Facilities Check List
Practical, step-by-step guides for the busy FM
October 1998

ELEVATOR MAINTENANCE CONTRACTS
You’ve inherited a building undergoing extensive renovations, includingthe elevators — an important but obscure building component about whichyou know very little. In addition, you also must oversee the maintenancecontract. What should you expect? Here’s a quick summary of the criticaldetails of most elevator contracts.

Elevator Installation
On most new construction projects, the elevator contractor works as asubcontractor to the general contractor. Because of this relationship,the elevator company’s customer before the project’s completion is thegeneral contractor, to whom the turnover of elevator equipment is made.The following features are of special interest in the operation andmaintenance of new elevator installations and major renovations.

Acceptance Date
A property or facilities manager should try to set the acceptance of thenew elevator installation as close as possible to the date ofsubstantial completion and beneficial occupancy for the building itself.Setting these dates near each other ensures that the maximum possibleportion of the warranty period occurs during the time the building isoccupied, rather than before. This often-overlooked discrepancy shouldbe clarified between the owner and the general contractor. It isimportant not to use up most of the warranty period before a building isoccupied.

Guarantee
Most elevator construction contracts contain a guarantee of one yearfrom the date of acceptance. This guarantee covers all materials andlabor, exclusive of damage or misuse beyond the elevator contractor’scontrol, arising out of defective materials or workmanship of theoriginal installation. The guarantee does not cover required routinemaintenance or emergency calls. You should be aware that any maintenanceor service work performed by someone other than the manufacturer mayvoid the guarantee.

Initial Break-In
The contract specifies the term of the initial break-in periodimmediately following equipment acceptance. It is normally 3 months, 6months, or 1 year. Typically, this initial break-in period isaccompanied by free service from the installing contractor.

Free Service
The free maintenance and guarantee periods will begin in the elevatorcontractor’s records on acceptance by the general contractor unless arepresentative of the owner delays the start of the guarantee period.Without such a delay provision, it is not unusual for the free serviceperiod to expire before the building is occupied. Therefore, the periodshould not begin until the owner is ready to begin active operation ofthe building. The owner should require the general contractor to extendthe free service period and guarantee to cover the owner’s possession ofthe building.

A one-year period of free service is customary. The free service andguarantee periods expire on the same date. A maintenance contract shouldbe purchased to take effect at the end of the free service period. Youmay also be able to negotiate price concessions if a long period of lessthan full occupancy is expected, such as during the lease-up period fora new building.

Manufacturer’s Representative
As an elevator project nears final completion, there is a change ofresponsibility within most elevator companies. The constructionsuperintendent and elevator constructors who coordinated theinstallation of the new equipment are replaced by a maintenancesuperintendent and maintenance mechanics. Through this transitionperiod, the property manager may find the manufacturer’s salesrepresentative the most valuable contact for assistance.

Project and System Documentation
It is good practice to obtain copies of all construction prints,schematics, and shop drawings, as well as disk copies of proprietarysoftware used for your system, whether or not you intend to use themanufacturer for long-term maintenance. All sorts of events (such asmergers, moves or new management teams) could sever a relationship witha maintenance contractor, even if that relationship has been good.Access to system software is critical, since much of it is proprietary.Upgrades may be especially difficult to install without it. It isimportant to make these arrangements during system selection andnegotiation, before a contract is finalized.

Maintenance Providers
Selecting a qualified maintenance company is a complex decision. Thebest service provider is not automatically the company that installedyour system. Elevator maintenance can be provided by manufacturers,nonmanufacturers, or on a do-it-yourself basis.

Manufacturers
One advantage of manufacturer maintenance is that you deal with thepeople who know the equipment best — a key advantage for more complex,computer-based elevator systems. In fact, many of today’s computer-basedsystems run on proprietary software or may require specialized tools forproper maintenance that only the manufacturer can provide. Anotheradvantage is the manufacturer’s ready access to spare parts. The abilityto provide spares promptly can significantly decrease overall downtimefor repairs. For these reasons, a manufacturer’s maintenance contract isgenerally the most risk-free decision.

Nonmanufacturers
Manufacturers of elevator equipment actively pursue maintenancecontracts for equipment that they did not manufacture. Their contractsare similar to contracts you would consider with the actual manufacturerof equipment in your building. You might want to contract with anothermanufacturer to save money, to obtain better service in your area, or totake advantage of group discounts offered for contracts coveringmultiple buildings with the same owner or manager.

Third-party maintenance companies can be found in most areas of thecountry. Frequently, they charge less than manufacturers charge fortheir maintenance programs. However, they may not have the same level oftechnical expertise as the manufacturer or have the same access to spareparts.

Do-It-Yourself
In today’s economy, do-it-yourself elevator maintenance may be anoption. The decision is usually based on economics and the availabilityof skilled labor. To provide in-house maintenance for elevators, themanager must increase the payroll, provide worker’s compensation andliability insurance, purchase parts and supplies, and providespecialized training and supervision for the additional personnel.

Any prospects should be evaluated in terms of a company’scapabilitiesin the following areas:

• Technical Expertise: The technical expertise needed tomaintain theelevator equipment properly; training and experience of its fieldpersonnel, especially with your specific equipment. Check references ofclients with the same equipment.
• Workforce: Sufficient workforce to make regular maintenance calls asoften as needed; appropriate emergency response times; and a sufficientdepth of workforce coverage to perform special services, such asperiodic safety tests.
• Facilities: Type of inventory system and ability to obtain spare andspecial parts; what provisions they make for major component repairs andwhat capabilities they have in-house.
• Support: The level of support they provide for their fieldpersonnel;how their supervisory structure ensures that standards of quality areconsistently met; how they handle emergency service calls and respond tocustomer questions or complaints.
• Financial Soundness: The company’s financial rating, corporatebacking, and liability coverage.

Maintenance Contracts
Four major types of elevator maintenance contracts offer you a range ofcoverage options. The more risk you are willing to assume, the lower thecost of services will be.

Full Maintenance
Under a full maintenance contract, the manager contracts with anelevator service company to take total responsibility for the elevatorequipment identified in the contract. This service is sold as insurance,intended to eliminate all of the manager’s concerns relating to elevatorproblems. It also minimizes a company’s liability to claims in the eventof accidents or injuries. If there is an elevator problem, regardless ofsize, it is covered under the contract. Since the maintenance contractorassumes all responsibility, it determines the frequency of servicevisits to the building.

Under a full maintenance contract, an elevator maintenance companymaybe responsible for defending itself against accident claims. Aresponsible contractor will thus expend every effort to guarantee safeoperation. Problems associated with vandalism or misuse of equipment,however, are the property owner’s responsibilities.

Parts, Oil, and Grease (POG)
A POG contract may be a desirable solution for companies with largespace holdings, extensive elevator systems, a skilled in-house staff ofelevator mechanics, and the financial resources to self-insure itselevator system liability. A building owner must also be willing toassume the burden of coordination between what is covered in thecontract and what is done by in-house staff.

A POG contract lists specific items of equipment that are notcovered inthe contract, such as elevator machines, motor-generator sets, andrecabling. The contract stipulates the frequency of examinations andtrouble calls to be answered. To be effective, the POG contract mustclearly state the work to be covered and the parts to be supplied. Thecontractor is only responsible for the items covered under the contract.The elevator contractor usually charges less than the price of a fullmaintenance contract, and the coverage is proportionately less.

Oil and Grease (OG)
The original theory behind the oil and grease (OG) contract was that aknowledgeable in-house mechanic inspects the elevator equipment on aregularly scheduled basis, lubricates moving parts and reports anypotential problems to the property manager. The property manager paysfor required repairs. The cost for the OG contract is relatively low;however, when you include repairs, the total cost is usually much higherand more difficult to budget. The burden of coordination betweencontracted and in-house efforts — and the possibility of jurisdictionaldisputes — are even greater than for a POG contract.

Survey and Report
Coverage under a survey and report contract includes inspection andsurvey of all major equipment components. The inspection does notinclude dismantling equipment or any maintenance or repair work thatrequires elevator mechanics. Recommended maintenance or replacements maybe completed by the owner or by contract at the owner’s direction.

Contract Terms
Once you have reached an agreement with an elevator maintenance company,a contract specifies the services to be provided and how those serviceswill be billed. The contract addresses a number of key issues discussedbelow.

Proration
When a maintenance company takes over an existing elevator system, itmay want to include a list of proration items. This list detailselevator components that the maintenance company believes will soon needreplacement and for which it is unwilling to bear the full cost. Inessence, the company and the building owner agree to share the costburden of components likely to wear out. In addition, some vendors willoffer occupancy discounts if a large portion of a building will bevacant for an extended period of time.

Exclusions
In addition to items to be covered and items to be prorated by themaintenance company, a maintenance contract also contains a list ofexclusions: a list of components that will not be covered by themaintenance contract. Such incidents, which happen regularly, canincrease billings as much as 15% for an elevator service company. Aresponsible manager can control these costs by insisting that eachcomplaint be investigated by building personnel before the elevatormaintenance contractor is called. The following are some examples ofitems that result in extra charges:

• Time differential for overtime callbacks
• Doors knocked off their tracks by movers or vandals
• Car overloaded beyond its rated capacity by movers or, in someinstances, mischievous individuals seeing how many people they can jamin the car, one on top of the other (not unusual in colleges and hotels)
• Car left keyed off by movers, security guards, building engineer,resident manager
• Debris in car or hall door sill tracks (owner’s responsibility)
• Carpet tacks, coins, and other foreign objects caught or wedgedundercar or hall doors
• Stuck buttons that were pushed in by passengers with umbrellas on arainy day
• Safety edge broken or held back with a foreign object
• Flooded machine room, top of car, or pit
• Fire in elevator cab set by vandals
• Car button burned by vandals with a lighter
• Keys dropped in the pit
• Power off in building (callback placed for service even though noemergency power feature exists to run the elevator)

Liability
Establishing who has responsibility for accidents is important. Ownersare responsible for the acts of their employees and for the safeoperation of equipment under their control. Any contract other thanfull-maintenance puts the owner in a position where it is difficult todemonstrate that the system is not under his or her control. Mostinsurance programs cover this risk. The owner should be careful,however, to avoid inheriting a legal responsibility to defend the actsof others through contractual hold-harmless clauses. Allowing theinclusion of these clauses in a contract may result in a lowermaintenance price, but the price reduction may not be a bargain becauseof increased responsibility. The organizational structure of manycompanies makes it all too easy to finalize such a contract without theinsurance or legal staffs being aware that such clauses are included.

Elevator service companies are responsible only for componentsspecifically identified in their service contracts. Unless an accidentor injury can be specifically linked to a component the maintenancecompany serviced (or failed to), it will be exceedingly difficult for abuilding owner to avoid liability for accidents that occur.

Pricing
Elevator companies bill in advance, at the beginning of each month. Thisis especially true with full maintenance contracts, because they protectyour equipment in a manner not unlike insurance, in addition toproviding preventive maintenance.

Usually, elevator contracts cover a 5-year term, with a terminationclause requiring 90-days prior written notice. These terms can bemodified as needed, as can the automatic renewal clause. The trade-offto a building owner is cost vs. flexibility: the shorter a contractperiod, the more flexibility you have to re-bid and switch to anothercontractor, but the higher the rates on a shorter contract are likely tobe.

Most contracts are subdivided into material costs and labor costs.Thepricing under full maintenance contracts is typically divided into apercentage for materials and the remainder for labor. For example,pricing under a full maintenance contract may be 25% for materials and75% for labor.

Companies have different procedures for annual price adjustment. Aproblem with the annual price adjustment approach occurs when cumulativeincreases are applied; after several years, the adjusted price mayexceed the price which the contractor would bid to get the job.

Managers should understand the circumstances under which they will beinvoiced for costs in addition to the contract price. They should knowthe answers to the following questions:

• When does overtime apply under the contract?
• What are the differences between overtime trouble calls and overtimerepairs as they relate to the contract?
• Is travel time a consideration because of location or unionagreement?

Union elevator mechanics are generally paid time and a half for workperformed before 8:00 a.m. and after 4:30 p.m. Monday through Friday andall day on Saturdays, and they are paid double time on Sundays andholidays. Unless overtime callbacks are included in your servicecontract, you may be charged the overtime-differential portion, for timedoor-to-door (generally 3 hours) plus mileage, for overtime repairs.

Typical contracts do not require elevator companies to maketwo-personor major repairs on overtime. If the elevator mechanic finds that arepair is major, it will be held for regular hours. You will be billedfor the time differential for a double-time hour if a breakdown occurson a Sunday or a holiday. When possible, hold these calls for the nextmorning; call the company’s answering service and ask to be scheduledfirst. Furthermore, if a breakdown is caused by misuse or vandalism,which is not covered under most contracts, you will be charged doubletime for the overtime callback on Sunday that could be repaired onMonday morning at normal labor rates.

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This check list is adapted from BOMI Institute’s Design, Operation, andMaintenance of Building Systems, Part II, a required course in theFMAand RPA designation programs.