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When to Purchase a Service Contract

Before investing in a service contract, assess your equipment, contract options, staff skills, and backup scenarios

Paula McDaniel, PhD

Paula McDaniel, PhD, spent 23 years in corporate analytical and product development groups at Air Products after receiving her PhD in Physical Chemistry (University of Illinois, 1988). In 2011, she...

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Equipment is the lifeblood of most technical organizations. A well-oiled operation can increase capacity, reduce errors, and motivate a team. Problematic instrumentation, extended downtime, and repeated troubleshooting will frustrate an organization faster than almost anything. Customer needs, project timelines, and workload don’t slow down with an instrument outage, and your team will feel the pressure from the growing mountain of work and additional time needed to get an instrument back online and qualified for use. As a lab manager, a service contract might be the right answer to reduce the impact on all stakeholders, but doing some homework to evaluate contract options is the best first step.

Running the numbers: how to justify a service contract

Understand the financial equation for reducing downtime through a service contract route. Determine the historical 12-month maintenance spend. Compare the cost of these repairs with and without a service contract. Remember, most companies offer more than one service support level. You may not need a premium service package depending on the instrument’s age, criticality, sensitivity, and other service options. Re-evaluate this balance of need versus service level yearly as your instrumentation ages.

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A service contract can be a smart investment for complex, sensitive instruments with high chemical exposure and workload, such as mass spectrometry and chromatography equipment. In contrast, a basic service agreement might be sufficient—if needed at all—for instrumentation with limited chemical exposure like infrared spectrometry or thermal equipment. 

Contracts vs pay-as-you-go

Don’t assume a service contract is a must-have. Sometimes, pay-as-you-go is the right decision for your operation. Evaluate backup scenarios, including contract lab support availability and your team’s expertise in troubleshooting and instrument repair. For example, do you have duplicate instrumentation that can handle the additional workload temporarily? Do you have a relationship with an outsourcing partner that can alternatively provide the service? If the answer is yes to the above, the additional cost of a service contract might not be justified. Transferring the work internally or externally will give you time to get in the service visit queue at a lower priority level. Also, explore options within your own company. If similar instrumentation exists at another location (such as manufacturing or R&D), and there is capacity to share, this might be a good stopgap.

Don't assume a service contract is a must-have. Sometimes, pay-as-you-go is the right decision for your operation.

Servicing instrumentation in-house

Last, in-house troubleshooting and repair can be an option depending on your equipment/staff capability mix. Leveraging this option depends on the vendor’s approach to troubleshooting and, more importantly, your team’s expertise. Some experienced staff members are comfortable changing out computer boards, replacing or cleaning key components, and doing performance testing at a more rudimentary level. Vendors often provide basic troubleshooting suggestions by phone, then supply parts for change-out by the lab staff, thereby helping you avoid the cost of a service contract altogether. Examples such as gas chromatography and nuclear magnetic resonance can fit this category; however, you must assess based on your individual scientist/instrumentation matrix.

As equipment ages, vendors will halt their support. Sometimes, a third-party service vendor can help extend its life, but spare parts availability becomes the limiting factor. Your financial decision then shifts to either trade-in or operation until failure. Until you reach that point, performing simple return-on-investment calculations can help you make the best decision for your lab.