by Rolly Mechler, Sales & Marketing Manager
Last month’s blog was called Elevator Tendering – An Avenue of Abuse, and Part 1 focused on construction tendering. I focused on the challenges that exist in a system which is set up to find the “lowest initial price”, but one which rarely ensures the greatest overall value to the customer, certainly in the elevator industry. Some of the challenges include: the customer getting proprietary elevator equipment (meaning they are stuck in a monopoly situation for subsequent maintenance contracts), and also installation of cheap equipment, since tenders rarely get as granular as specifying the thickness of the steel in the equipment, or the quality of the components. The bottom line is that the end customer is rarely best served with tenders and therefore many customers are moving to Request for Proposals (RFPs) where price is only a portion of the decision criteria.
This is Part 2 of the blog series regarding Elevator Tendering, and I specifically address Maintenance tenders and Modernization (upgrading of existing elevators) tenders.
While the specific challenges are different for maintenance and modernization tendering, the basic issue is the same as with construction tendering – the end client is rarely getting the highest value and is often getting extremely shoddy service and product. In the case of new construction, if you are the end-customer you are often not even involved in choosing the various subcontractors, however in the case of elevator maintenance and modernization, you the end-customer (or your agent) have power to choose the best contractor, so why not set up a system which works for you, not against you?
What is Elevator Tendering?
As a review, tendering “is the process of choosing the best or cheapest company to supply goods or do a job by asking several companies to make offers for supplying the goods or doing the work.” In an ideal world, the created tender document is sufficiently detailed, the contractors bidding on the job have integrity and intend to meet the specifics of the tender document, and finally the end customer has the resources, time and desire to do post-award inspections to ensure that the tender document requirements are met. From our experience with tendered maintenance and modernization projects (most notably maintenance contracts), it is rare to see that level of accountability placed on the contractors who win the tender.
The Challenge with Maintenance Contracting
I’m not sure why I am continually surprised by the results of elevator maintenance surveys that our staff undertake of potential elevator maintenance, since poor results are far more prevalent than good ones. I suppose I just can’t understand the serious lack of integrity that exists in the elevator industry today. When we are invited to sites to undertake elevator surveys, usually as part of a maintenance tender, we do a visual inspection, primarily of the hoistway, elevator cartop and the machine room (the things that the public do not see). A lack of housekeeping is typical (i.e. dust, dirt, spilled oil, debris etc.), but what is far more concerning is found in a review of the log (MCP) in the machine room.
As required by code, and monitored by the TSSA, a Maintenance Control Program (MCP) must be present for each elevating device in the respective machine room. The MCP is specific to the type of elevator and it specifies what the specific minimum maintenance procedures and frequencies are for the respective elevators. The main pages usually have sign-off sections for the route mechanic for required maintenance and safety tasks (including 1-year and 5-year tests) and the required monthly or quarterly maintenance. While our team is far from perfect, when you go to one of our sites where a monthly elevator contract is in place with a customer, you will see signatures of the elevator technician every month (outside of very extenuating circumstances). Where a quarterly contract is in place, you will normally find their signature every three months. It seems like a simple concept and certainly a reasonable expectation on the part of the client, but what I have just described is not the norm; in fact, it has become an extreme exception. As our team undertakes surveys, I would say that 80% to 90% of the time the elevator contractor has not met the “contractual obligations” of elevator maintenance frequency (i.e. if a monthly contract is in place, the contractor has been there completing maintenance and signing off every month). While that is troubling enough in our books, more shocking, we would conservatively estimate that 50% of the time, the maintaining elevator contractor has not even met the minimum legally required maintenance intervals.
One survey, in particular this past year, stuck out for me. I was there as part of a tender walk-through with a group of other elevator contractors and we were surveying on behalf of a police organization. I looked at the log book for the “prison elevator”, the one used to transport criminals from booking to the temporary jail facility. Not only had the elevator contractor not met the monthly maintenance requirement, they had only been there three times in the year, so they were not meeting the minimum legally required maintenance intervals. The elevator contractor was breaking the law with the cops! It made me realize that no one is exempt from this chronic abuse.
How do we Compete in a Tender Situation?
As a company, we have made the decision to quote as per the tender documents. For example, if the tender document specifies the level of due diligence required and the frequency of maintenance visits, we will quote accordingly. The problem, however, is that we will rarely or ever win a tendered maintenance project when we quote the hours necessary to uphold our end of the contract. The prices quoted that win these contracts are often half the amount we are quoting, and this is despite the fact that our charge-our rates are often 20% less than those winning the project. How is this possible? It is quite simple; those winning the tendered projects have no intention of meeting the requirements of the tender, and the end-customer either does not have the due diligence in place to hold them accountable, or they do, and they spend the next years in legal wrangling until they are able to rid themselves of the contractor.
Signs of Good Elevator RFPs
There is a better way of awarding Elevator Maintenance and Modernization projects, that being Request for Proposals (RFP), and many public organizations (i.e. school boards, municipalities etc.) and private organizations have made the move to RFPs in the past few years. While this was the exception a few years ago, we are probably encountering RFPs half the time now. While they are more work to set up and also to evaluate than a Request for Tender (RFT), the amount of time and money saved by the customer post award, and the greater value they receive is substantial. The customer on the ground (i.e. the maintenance managers, and others who have to deal with the elevator complaints) know which contractors provide poor service and those which provide excellent service. We have heard many of them cursing the name of their contractor (where awarded on low price alone), knowing that the owners and riders of the elevators are not being best served. An RFP allows the owner to evaluate other considerations such as: references (how satisfied are their other customers, or even themselves if they are a returning vendor?); availability of technicians (it doesn’t matter if the company has 300 technicians; how many are dedicated to this project in this region?); strength of the office staff (can you reach supervisors if there are issues?) etc. In RFPs, pricing is often only a 30% or 40% weighting. This ensures that an inferior company cannot simply win a job based on a “low initial price” and this approach is quickly changing how elevator maintenance and modernization projects are being awarded.
Since we are not willing to decrease our level of service, we have declined almost all recent requests to bid RFTs and we will continue to take this approach and continue to encourage customers to make the switch to RFPs to avoid abuse and ensure the greatest value to the owners, and the public who ride their elevating devices.
Rolly has been in the elevator industry for nearly 20 years in both a sales role and running an Operations Department. He works hard to help implement methods to provide superior service to Elevator One clients.