An annual maintenance contract is an agreement between a company and a provider that sets expectations for the ongoing maintenance of machinery or property that the company purchases from the provider. The annual maintenance contract ensures that the service provider will repair or replace equipment or products sold to the customer either when they are not functioning or as otherwise agreed between the two so as to minimize the consequent impact on downtime or irregularities in ensuring business continuity.
Annual maintenance services can apply to buildings, landscaping, computers, machinery, technicallyenhanced furniture, and any other technology or business systems that require post-purchase service and maintenance. In specific industries, AMCs are certainly more prevalent than others. For instance: manufacturing, food service providers, healthcare, and retail have more annual maintenance needs
than, say, an office.
For example, an office building may enact an AMC with the HVAC company that built their HVAC system. The contract would detail information like which equipment was covered, how often maintenance would be done, and what the costs of maintenance would be.
While an annual maintenance contract is a great way to cover basic service on products, a
comprehensive service contract (CMC) covers any additional spare parts, labor, or transportation costs
that come up for techs while servicing those products. A non-comprehensive agreement will only cover
the services themselves—any other expenses that might come up during the process are the business’s
responsibility.
Given this breadth of coverage, comprehensive contracts often cost more than an AMC would. CMCs are
typically good for a year after signing, but occasionally both parties agree to extend the range up to
between three and five years. To get maximum coverage, many businesses will choose CMCs over
AMCs, though AMCs require less commitment on the service provider side.
How does pricing for annual maintenance services work?
Time-based
Contracts set an hourly rate or rate for specific time units (weeks, months, days, etc.). A fixed unit of
price is associated with each hour of work, which is calculated annually for the total number of hours.
This pricing model is usually used in situations where man-hours are the most important resource for
maintenance.
Per Device
Contracts add a line-item cost for each device or piece of equipment that will be covered under the
contract. This type of pricing is useful when the criticality of sourcing or repairing parts is high.
Based on the life-of-equipment
Contacts can include a prorated cost based on the expected lifetime of the device or equipment that is
covered. For instance, if something is coming close to the end of its lifetime, the AMC could be more
expensive.
Replacement vs. Repair
Contracts may differentiate based on the type of service offered. For example, an AMC may include
different criteria for replacement and repairs of broken machines or components, with replacement
traditionally being more expensive.
Additional Services
Contracts can include additional conditions based on services you provide to your customers. Several
extraneous offerings can be covered under the contract, such as transportation of replacement parts.
The business could choose to pay more to have transportation and replacement parts included within
the contract, rather than separately billed.
Benefits of having an annual maintenance contract
Regardless of the terms and conditions of an AMC, the service provider and their clients can benefit
greatly from it. Here are some other benefits for companies for having an annual maintenance contract:
For Service providers:
Easier annual planning
Drawing up AMCs makes your annual planning and budgeting easier. Both customers and service
providers can use cost estimates from AMCs to calculate service requirements, estimated downtime,
hours of operation, and much more. Customers also benefit from eliminating unexpected maintenance
and repair costs, and the service provider has a picture of what types of jobs they can expect.
Informed scheduling
Create a deeper understanding of your scheduling and hiring needs. With AMCs, you get an overview of
your year, and can have a better handle on how many techs you’ll need, how much support backup your
contracts will require, and be able to pre-arrange your technicians’ schedules.
Deeper client knowledge
Service providers gain a deeper understanding of their client’s ongoing support requirements.
Companies build better, longer-lasting relationships and create better contracts when service techs
know how often equipment downtimes occur, how many visits they have to do on average, and what
kind of needs the client has.
For customers
Higher Quality of work
Agreeing upon an annual maintenance contract allows clients to ensure the quality of work is
standardized across that time period and ensure the service provider adheres to the terms agreed upon.
Efficient & planned timelines
Customers will benefit from knowing that they always have emergency support and their needs
covered. They’ll never need to worry about how they will get something repaired or when it will happen.
Regular maintenance plans
Both service providers and customers benefit from having regular maintenance planned for ahead of
time. Well-maintained things break less frequently, resulting in less work for your techs and less
downtime for clients.
Get started with AMCs today.
There are so many benefits to implementing annual maintenance contracts or Comprehensive
maintenance contracts. Here are two significant ones:
Customer benefit:
Using the templates above, gain the commitment you need to guarantee continuous uptime for your
company.