No matter where your outsourced maintenance is performed, it’s important to follow some basic rules when obtaining estimates, authorizing repairs, and before issuing payment on any invoice.
“It’s fairly common for labor to run about 60% of the invoice, while parts and accessorial fees make up the other 40%,” explains Bruce Stockton, longtime fleet maintenance manager and now advising fleets as principle of Stockton Solutions. He suggests fleet managers scrutinize every repair invoice to see if percentages fall into that range.
He also cautions fleets not to focus solely on labor rates, but rather to look at the hours it takes for a repair to be completed. Insist that all bills spell out in detail how many hours were spent on each repair. “Understand what’s reasonable and customary.” Stockton also recommends that standard repair times be applied to make sure the number of hours being charged is fair.
Stockton also suggests letting your service provider acquire parts and allow them a reasonable markup — but also make sure they keep their labor rate and hours in check. “This also requires the supplier to manage any cores and the charges associated with them.”
Another area to keep a close eye on is accessorial fees. This includes things such as shop supplies, environmental fees, hazardous waste fees, fuel/oil grease charges, etc. Stockton says it’s been a common practice for suppliers to calculate shop supplies as a percentage of the total labor on the invoice. “A reasonable and acceptable shop supply percentage is 5% of total labor.” When it comes to shop supplies, make sure a fee is not added for things like a visual trailer inspection. Ask service providers for proof they are being charged for hazardous or environmental disposal before agreeing to pay those fees.
Stockton offers this list of recommendations to help fleets understand what they are paying for and to help them choose a reputable service provider partner.
Develop a process for reviewing in detail each and every invoice before it’s paid. “By dissecting each invoice, you will quickly realize whether or not you are paying too much and who your top-notch providers are,” Stockton says.
Set guidelines for maximum allowable shop supplies. “Allow no more than 5% of total labor and certainly never more than $250 per invoice/work order,” he says.
Make sure you receive core charges offsetting credits and tire casing credits when appropriate.
Never pay for diagnostic fees. Computer connections, software and downloads are the common tools technicians use everyday to determine the cause of the complaint and the correction needed, Stockton explains. “If you are forced to pay diagnostic fees, don’t double pay by allowing hourly charges for the technician’s time while doing the diagnostic work.”
Review any freight charges. Require the supplier to show proof of actual freight costs for parts shipments.
Shop or bay fees should always be disallowed, as should machine fees.
Explore automated systems and software. They can compare data and determine what is reasonable and customary.
Tap into the existing expertise in your own shops and maintenance departments. The most qualified individuals for critiquing shop charges are already working for you. Let them review invoices or offer suggestions prior to negotiating with a potential outside service provider.
The goal with any outside service provider is for them to be your ally, not your enemy, Stockton says.