Negotiating Laboratory Service Contracts

The complex variety of laboratory instrumentation requires a strategic approach to maintenance contracts

By Brandoch Cook, PhD

Negotiationg Laboratory Service Contracts

Did you just purchase a new $180,000 confocal microscope? Congratulations, your lab’s images are going to look amazing. But be ready to keep paying for it for years to come. And if your lab is like most others, every time you purchase a major piece of instrumentation, maintenance costs need to be built into laboratory budgets, such that adequate funds can be accounted for in active grants.

There are three primary ways to spend money on maintenance and repair. First, you can wait for equipment to break, fail, or become inconsistent, and then react by purchasing parts and services a la carte. Surprisingly, this can be an effective solution for equipment that is less expensive, and less sensitive to wear and tear. For example, the cost of purchase and maintenance for micropipettes is a far cry from that of a confocal microscope or a flow cytometer, and the cost of replacement for a broken one is usually in the range of hundreds of dollars rather than hundreds of thousands. An effective solution for many laboratories is to hire periodical pipette repairs on a perunit basis, which often cost around $20 each. This may be preferable to extended warranties or service contracts with longer-term costs and obligations.

Secondly, manufacturer’s warranties cover many equipment and parts failures and breakages. Although most warranty periods only cover one or two years, extended warranties are available for many types of equipment. These can be especially useful for the more expensive and sensitive instruments with highly engineered parts and advanced software interfaces, especially for refurbished equipment, or instrumentation that you expect to replace within less than five years. Not only will your laboratory avoid having to replace parts, but you also will avoid experimental downtime associated with malfunction. It is much easier to borrow your neighbor’s Pipetman than it is to hunt down an available confocal microscope while a part is on a two-month backorder, or you don’t have the funds ready to cover it.

Finally, a service contract for equipment maintenance and repair is, ideally, the most hassle-free solution, usually with the most comprehensive coverage and rapid response time. For instance, if you examine the range of options offered by a big supplier such as Thermo Fisher Scientific, there is service contract coverage for an abundance of equipment, a partial list of which includes: autoclaves, centrifuges, biosafety cabinets, incubators, refrigerators and freezers, microplate readers, pipettes, shakers, flow cytometers, mass spectrometers, PCR and qPCR thermal cyclers, next-gen sequencers, and water baths. In other words, there is a range, from comparatively simple everyday use mechanical equipment for which you may want to take your chances, to very sensitive and specialized instrumentation shared by departments under program-level grants for which service contracts are often a necessity. The Thermo Fisher Scientific service provider, Unity Lab Services, offers tiered contracts including a package called the Total Care Plan, which provides unlimited access to phone and email tech support, and unlimited coverage of parts, travel, and labor costs. Although this package is essentially identical to their Extended Warranty Plus plan, even extended warranties don’t often go very far beyond original manufacturer’s warranties, whereas service contracts may be renewable ad infinitum. Additionally, service contracts on new and complicated instrumentation often include initial installation and complete, full-day training sessions.

Related Article: Negotiating Service Contracts

Where this process gets bewildering is in the sheer number of items that must be covered in one way or another, which way to cover them, and finally, how to pay for it. Although the following observations may seem hackneyed, they are no less true for being so. Without further ado, here they are: 1) information is power, and 2) organization is key.

1. Information is power

  • You must realize that when you sign a service contract, you are entering into a legally binding agreement for which your laboratory or institution is financially responsible. Educate yourself on contract language, ask questions of your supplier, and read draft contracts thoroughly before signing them so that you are not surprised by their caveats, inclusions, exclusions, and fine print. For instance, service contract renewals sometimes follow an opt-out format, in which you have to actively terminate a contract for a machine you no longer want to maintain, or in favor of a more advantageous service deal, because the contract includes automatic renewal language. For your own benefit, it is best to link purchase order expirations to service contract end dates. In this and similar cases, you should try whenever possible to negotiate language into a more straightforward, and less misleading, format.
  • Even service contracts that cover “everything” won’t always cover everything. The best way to be prepared for this eventuality is to know your equipment in detail, and try to negotiate the language of your contracts so that the parts that are covered are itemized. If anything is missing, or has stated limits of repair, then you can surmise that it is the part most likely to break down and reduce your provider’s profit margin. In negotiations, you can try to get it included, perhaps with a minimal increase in cost. Additionally, you should realize that services covered may not automatically include labor, travel, or other obscure costs. These outlays can add up, especially if your contracted field technician works with a partner. You should negotiate these coverages into any contract where they are not explicitly itemized.
  • The corollary to the above is that lab managers don’t often bother trying to negotiate contracts in the first place, or know that they can. Negotiation, however, is implicit in the process and should be at least attempted. In the way Mitch Marner seemed to get everything he wanted out of his new contract with the Toronto Maple Leafs hockey team, service providers need your continued business at least as much as you need their expertise and availability, and working in your favor is the fact that there are always competitors in the market. Just like an athlete, you can always hold out a little bit, especially if there are third-party contractors available.
  • Lastly, know your lab’s finances and how your grants’ lifespans or departmental budgets may impact your ability or willingness to spend. The expense and complexity of a given machine roughly correlates to the cost of service, and instruments such as flow cytometers or high-end microscopes carry significant service costs, often in the tens of thousands of dollars per year, because of the unpredictable ways in which people use them and the corresponding frequency with which they must be adjusted and repaired by professional technicians. Even with expensive equipment, however, it may be advantageous to sign a five-year service contract to spend down a grant that is expiring and still has significant funds left.

2. Organization is key

  • The acquisition of information must be married to a strategy for keeping track of it. You should keep a detailed spreadsheet of all major purchases with their manufacturer’s warranty expiration dates so that you are not taken unaware when malfunctions occur, resulting in impromptu purchases of replacement parts and labor. This planner should include, at minimum: all expiration dates for original manufacturers, and extended warranties; expiration dates, and programmed renewal reminders for service contracts; costs of equipment and per annum costs of maintenance; and a log of any extra and unplanned costs incurred, so that the next contract you sign can be negotiated accordingly.
  • There should be a freer flow of information and a greater level of organization, communication, and transparency, especially among colleagues. Share your information and your concerns with other lab managers or administrators in your department and institution. It may be that they are paying different rates for what amounts to the same level of service, or obtaining more satisfactory service using a means you had not considered.

The process of choosing maintenance strategies for precious instrumentation can sometimes hover on a continuum between mere convolution and graphic nightmare. However, with a focus on information and organization, and a will to negotiate, you can not only choose the best plan for each instrument, but also save money and long-term frustration for your laboratory.

Categories: Business Management

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Managing Resources

Published: November 14, 2019

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