Can You Charge Clients on Service Contracts for Extra Expenses Incurred on a Service Call?
Integrators with service contracts must include clear language or an addendum in their agreements to specify whether extra expenses, such as equipment rentals needed during service calls, can be charged to clients, as failure to do so may result in absorbing those unexpected costs.
Most integrators are recognizing the increased importance of getting their clients on an ongoing service agreement. It ensures the customer’s system will be up to date, boosts client satisfaction, and creates a stream of recurring revenue for the integration company. But what happens when you perform a service call for a customer on contract that requires you to incur additional expenses? Without the proper language in your service agreement to accommodate those possible unexpected costs, you are likely going to eat those costs.
This scenario recently came up in a question from an integrator to noted industry legal expert Ken Kirschenbaum of Kirschenbaum & Kirschenbaum. The integrator realized that to perform the service call properly, it was going to require renting a construction lift – such as a scissor lift, articulating lift or cherry picker lift – to fix the problem. Can the cost of that equipment rental be passed along to the client who is paying a fixed fee for their service agreement? It depends, according to Kirschenbaum.
“That is a great question and of course covers more than lifts; it might cover many different types of gear needed to perform a service call,” he says. “Keep in mind that it's your service plan; you can word it any way you want. While the printed contract form does have many conditions and limitations it won't cover every situation you may face out in the field.”
"You need to price the repair service properly. For older accounts you may be able to rely on the service history; for new accounts you need to consider the warranty, newer equipment and anticipate what servicing the system looks like over the term of the service plan." — Ken Kirschenbaum
He advises that integrators’ service plans should have a Schedule of Equipment and Services addendum to change or explain items not clear in the printed form contract. Kirschenbaum cites obsolete equipment as a prime example of items that would be cited in the addendum as not covered under the service agreement.
“When you agree to provide repair service to a system (and I suppose inspection service would have similar issues) presumably you have surveyed the system and know what you are committing to. You can't, for example, agree to a service plan covering all labor and material for $30 a month only to end up having to service a system with 100 cameras and loads of other components. You need to price the repair service properly. For older accounts you may be able to rely on the service history; for new accounts you need to consider the warranty, newer equipment and anticipate what servicing the system looks like over the term of the service plan,” advises Kirschenbaum.
One simple provision to include in your Schedule of Equipment and Services addendum would be that the service plan does not apply to components that are more than 10 feet from the ground. That provision would enable an integrator to charge for the expense to rent even a tall ladder, not to mention a construction lift.
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