Why Managed Maintenance is the HMO of Laboratory Instrumentation Repair and Maintenance

Posted on by Mark

Our industry has undergone some dramatic changes in the past few years. Managed maintenance developed as a way for universities and large laboratories to save money on the annual maintenance of their laboratory equipment. While this is an admirable goal and one that resonates with us all in these times of increasing costs and decreasing budgets, it has some of the same design flaws as the HMO model for health care.

Managed maintenance companies (MMCs) usually fall into two categories. Company A claims it has the technical knowledge to save clients “excessive charges.” An account manager is assigned to oversee the institution’s equipment maintenance program and to act as a liaison between the researcher and the maintenance contractor. Company B assigns technicians to the account full-time. They perform front-line maintenance and work closely with the service providers.

Company A markets its service to the institution’s decision-maker, who is persuaded by the argument that last year’s costs can be cut by 20%. Company A’s fee comes from what it can retain from the remaining 80%. Purchasing receives the directive to “make this work.” Researchers are told that “nothing will change” and that they can call any service company they choose when they need instruments serviced. Preventive maintenance will be carried out just the same as usual, only now it will be a time and material call. This is where the plan falls apart.

Now the researcher is responsible for tracking each piece of equipment’s preventive maintenance contract (PMC) schedule and then scheduling visits as appropriate. With the breadth of instrumentation in use in today’s laboratories, this is no small task. This is not the researcher’s primary responsibility and most researchers feel saddled with a maintenance administrative issue that they do not have the time or tools to handle.

Is it in the best interest of the asset management company to make sure that PMCs are completed? Of course not—the fewer service calls placed, the more money the management company makes.

Unintended consequence no. 1. Because they are not being regularly maintained, instruments become unreliable. After one or two years of this, depending on the age and type of equipment, some sort of costly repair is needed. The management company recommends replacing the unit rather than repairing it. The cost of this new equipment comes out of the capital equipment budget and there is now one less instrument to draw against the maintenance fund. The excess funds go right to the bottom line of the management company’s P&L. Because a new instrument usually comes with a one-year warranty, it does not appear in the maintenance budget for the next year. It looks like maintenance costs are decreasing, on paper.

Unintended consequence no. 2. The quality of service provided diminishes. Both the independent service provider (ISO) and the original equipment manufacturer (OEM) employ a staff of service personnel large enough to handle their contract base plus about 20%. No service company can afford to keep service personnel on hand just in case they are asked to perform a time and material call for an institution with which they do not have a long-term relationship.

A service provider stocks the parts and manpower to keep contract customers’ equipment in optimum condition on an as-needed basis. The primary responsibility is to those clients who commit for at least one year and pay in advance. In return, the service provider ensures they receive properly scheduled PMCs, quick response time, quality work, and a budgeted maintenance charge that does not result in hidden capital equipment replacement costs.

That is the downside of Company A’s customer “savings.” As for Company B, it provides a slightly different approach to managed maintenance with on-site technical staff to manage the account. The company also forms relationships with ISOs and OEMs prior to contracting with an institution that should ask to see those written agreements before signing on the dotted line. On-site technicians generally have a good understanding of what it takes to maintain the equipment. They schedule and track PMs for the researchers and maintain good relationships with the contractors by not second-guessing the parts they provide and by paying their bills on time. This method of managed maintenance can work if it is implemented properly.

But the devil is in the details. Most ISOs offer service agreements that are an excellent value. Over a several-year period, they should save the institution money. A managed maintenance company that is doing its job properly will look at each contract individually and make a decision whether to keep it or not.

The first year with an MMC should go just fine. But managed maintenance makes its money from the service not provided and the calls not made. After about a year, instruments begin to experience more problems and more costly repairs. This poor performance is blamed on the age of the equipment or the shoddy job done by the service provider. This author is aware of a few instances in which an unprincipled MMC pillaged a budget, disappeared after 2–3 years, and then started up again under a new name selling the same old shell game.

This happened to the author’s company, which had to refund all the monies paid to it by the MMC during the past 90 days so that the bankruptcy judge could redistribute it as he saw fit. The company provided quality work done correctly at a major teaching institution. Because the institution had paid its bill to the MMC, it was not possible to go back to it for reimbursement. The MMC was in bankruptcy—no recourse there. The author’s company was out the money for parts and labor.

The piece missing from both MMC service models is the technician with in-depth knowledge and ready access to parts when the repair requires more than a simple reset or fuse change. The biggest problem in these modes of service is the long-term effect on the actual service providers, whether they are ISOs or OEMs. Destabilizing the workload causes talented service personnel to find work in another, more consistent market segment such as homeland security or process instrumentation. It is just bad business for an ISO or OEM to stock parts for equipment they are not under contract to service. In the end, an experienced technician must be there to turn the screwdriver and replace the part. Otherwise, not much shine will be left on that 20% savings from the first-year maintenance contract, and the scarcity of parts and talent will ultimately drive the price of service through the roof.

Instruments that are maintained properly give the researcher many years of quality operation. Premature obsolescence is avoided and the capital equipment budget can be used to purchase new instrumentation that expands the laboratory’s capabilities. Institutions need to understand that proper equipment maintenance cannot be shortchanged and that, in the end, it is less expensive and more time efficient to manage their service needs independently and deal directly with the service providers.