Preparing Solid Preventive Maintenance Contracts

Establishing maintenance contracts with customers is a good way to gain consistent work, but as with any contract, you’ll want to be sure you have everything properly covered from a legal standpoint

Preparing Solid Preventive Maintenance Contracts

O'Connor Plumbing of Germantown, Maryland

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Maintenance contracts were key for Greg Beall in the early years of his business, G&B Services Plumbing and Drain Cleaning of Bowie, Maryland, which is featured in the November 2020 issue. He eventually established contracts to handle work for nearly 500 Pizza Hut and Wendy’s restaurants in the Washington metropolitan area.

“If you do a great job and they know you provide other services, you’ve got your foot in the door,” Beall says. “All of a sudden you have most of their work. And it all started with a drain call.” 

“You can’t run a business by counting on emergency stoppages every day,” says Kevin Walker, manager of the drain division for O’Connor Plumbing in Germantown, Maryland, which has preventive maintenance contract clients that include big-box retailers and property management firms. “Preventive maintenance helps fill the gaps between emergency calls. We also like them because they offer us steady, recurring work and help us better plan our finances.” 

There are plenty of benefits to maintenance contracts — from providing ongoing work for crews during slow times of the year to regularly scheduled inspections revealing problems that lead to more work for you and fewer emergency calls from unhappy customers.

But it’s important to also be familiar with the legalities of such arrangements. 

“Anytime you have a contract, it’s always an exchange of promises,” says Devin Shanley, a Wisconsin attorney. “If you draft this as a standart

Always use clear and understandable terms.

“On the contract, make sure it’s laid out so everybody knows what their responsibilities are so you don’t get, ‘I thought you were doing this,’” Johnson says. 

For example, the property owner is responsible for contacting the contractor if any problems arise. Likewise, the contractor is responsible for providing the services outlined in the contract within the specified time frame. 

To reduce the upfront expense when drafting its initial maintenance contracts, Effluential Technologies started with a manufacturer’s template.

Shanley says a template or something similar can be a good starting point, but be aware of what you’re trying to protect yourself from and how things can go wrong.

“The best option is to contact a lawyer — if possible, someone who’s had experience drafting service agreements like this or someone in the construction law field. They can anticipate the issues that you might not even see and have provisions and contingencies already lined up,” he says.

A template made it easy for Effluential Technologies to create cookie-cutter contracts for similar systems. An attorney reviewed the legal language before the agreements were presented to clients.

“On all of our contracts, the general knowledge is the same, other than what we’re going to do or not do,” Johnson says.

Shanley says every contract should answer important questions: How and when are you going to get paid? How will you notify the client when services are completed? How does the client communicate with you?

Additionally, every contract should include a certain amount of boilerplate language — the legal terminology that often largely goes unnoticed. Some of this terminology deals with important issues if a conflict arises. To resolve a conflict, do you go to a court of law or some sort of arbitration? What laws are going to be used? Where will the disagreement be resolved? 

“It’s probably going to be the state you’re residing in, but maybe if you’re working in two or three different states, that might be an issue,” Shanley says.

A contractor might want to specify a local jurisdiction to avoid traveling far from home to reach a settlement.

The length of time a contract covers is something else to consider. Shanley recommends checking with the state’s consumer protection agency or secretary of state for any applicable government regulations. Secondly, he recommends a contract length that makes the best business sense. It’s time to draft a fresh contract when terms or prices change. 

“If you’re going to have the contract automatically renew, you need to have the provision built in,” he says.

Pipe Masters of Honolulu, Hawaii
Pipe Masters of Honolulu, Hawaii

Pipe Masters, based in Honolulu, Hawaii, prefers to negotiate three- to five-year agreements.

“Not everybody likes to get into a multiyear contract at first, but we educate our customers on the value in doing so,” says Jason Koran, owner of Pipe Masters.

The company’s contracts describe the routine maintenance to be performed and offer clients a discount on subsequent cleaning and repair.

Pipe Masters uses individualized maintenance contracts for commercial and municipal customers based on the system covered. The company has select contracts for sewer drains, storm drains, backflow preventers, grease drains at shopping centers and the like. For example, the company’s maintenance contract for drains includes drain cleaning, inspection and leak detection with a thermal camera.

By having a team of attorneys on retainer, Pipe Masters can access legal advice when questions pop up. Generally, Koran does his own contract negotiations and review.

“It helps that I know what I’m looking at nowadays,” he says. “I’ve been doing it long enough that I can easily spot the things I won’t agree to, and I just line out anything like that. If a contract is created by the customer and presented to me, it’s never something I feel forced to sign. It’s just a negotiation. They put on paper what they prefer. I tell them what I’m not willing to agree to.”

In his experience, municipal and commercial customers prefer to draw up their own contracts.

“Not much responsibility is on us to create a final version,” Koran says.

However, the company takes a different approach with residential customers who sign membership agreements for plumbing system maintenance. Beginning in July 2019, Pipe Masters started selling memberships to residential customers, offering an annual plumbing inspection and 10% discount on services within a one-year time frame. 

“The initial walk-through and aboveground inspection are done as a courtesy. If we think something looks bad enough above ground that we need to understand what’s going on belowground, those are chargeable services,” Koran says.

He says it took several years for Pipe Masters to develop a smooth transition into residential contracts. The company put three things in place before marketing them:

  • Personnel — Pipe Masters doubled its office staff from two to four employees.
  • Sales training — Technicians learned how to present memberships to customers on digital tablets. Using images, they show customers the cost of services and explain how memberships can save them money.
  • Software — Pipe Masters invested in a program created for plumbing companies.

“Each is a big-ticket item, and there are no shortcuts,” Koran says. “If you don’t have your systems in place, don’t rush to have contracts.”



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