The International Network of Hospitality Consulting Professionals

Maintaining Hotel Maintenance Contracts

Someone signing a contract with a pen

One of the most important and high impact responsibilities of a hotel’s engineering team is the administration of maintenance contracts and service agreements. Successful management of this critical function can streamline engineering operations, reduce operating expenses, and minimize downtime. However, when executed poorly, maintenance contracts can act as the proverbial tail wagging the dog, shortening equipment life cycles, raising expenses and increasing the risk of loss and exposure to liability. As such, choosing the right service professionals, creating appropriate contract documents, and pragmatically executing their scope of work, are some of the most vital responsibilities of the engineering team.

The potential benefits of maintenance contracts are numerous, and should be carefully considered when deciding whether to enlist the assistance of outside service professionals. Outsiders often bring specific and applicable expertise and are able to reduce staffing needs, and there are many other advantages including risk mitigation, access to specialized labor and parts inventories, and preferred labor rates. Yet despite these benefits, many hoteliers are often hampered by service agreements that fail to meet the needs of their properties. Contracts with obsolete provisions and terms, and automatic price escalations, can hinder the hotel engineer’s ability to meet the quality and financial goals of the property. Below are seven tips to help ensure that the property’s contract maintenance experience is an effective one.

1. Avoid, or at least seriously scrutinize, vendor-supplied contract documents

Service agreements written and provided by contractors are often extremely vendor-centric, and tend to include provisions that put an inordinate amount of responsibility or risk on the customer. These boiler plate contracts are designed to benefit the contractor, often at the expense of an equitable agreement. Instead, opt for standardized agreements offered by the hotel company’s legal department, or consider other standardized agreements that create a level playing field for both parties. A quick internet search for “standardized maintenance contracts” can provide a great starting point, and can offer plug-n-play style contract creation. While these are no substitute for the advice of competent legal counsel, use of such documents can help to prevent committing a property to unfair and often detrimental contract terms.

2. Consider agreements for the long term

Contract terms vary greatly, from months to several years, and there are many good reasons for this variance. Longer term agreements can generate financial security for both parties, in the form of predictable expenses for the customer and predicable revenue streams for the contractor. A longer contract term can have value to both parties and may positively influence contract terms or reduce costs. In addition, a longer term may make it more palatable for a vendor to invest in equipment or training that positively affects the hotel, by knowing that the cost of such an investment can be amortized by them over a longer period of time.

3. Beware of automatic renewal; and “boilerplate” renewal terms

Avoid automatic renewal clauses that keep parties bound to an agreement simply by doing nothing, or agreements that are designed to automatically renew unless prior notification to cancel is provided many months before a contract expires. At a minimum, include a provision that requires written notification of intent to exercise a renewal option. By doing so, it affords both parties a chance to review an agreement for its appropriateness and will prevent a contract’s inadvertent renewal.

4. Don’t forget the “meat and potatoes”

Legalese and elaborate clauses aside, the purpose of a service agreement is to bind a vendor to provide specific, timely and appropriate maintenance services. Yet oftentimes even contracts that have undergone diligent legal review falter when it comes to their non-legal content. Such contracts typically include Scopes of Work that poorly define the contractor’s responsibilities. Moreover, the absence of well-defined scopes of work clauses creates an opportunity for unintended contract interpretation, and can result in an inordinate amount of “billable services” that were expected to be included in the agreement. To prevent this, be sure to have the Chief Engineer or other qualified personnel review a contract’s scope of work to ensure its completeness and applicability.

Also, where necessary and/or appropriate, use a third party consultant to provide this review, especially for high risk or highly technical disciplines such as vertical transportation, water treatment, or life safety systems. Lastly, utilize manufacturers’ recommended maintenance standards when defining a scope of work. By doing so, not only will there be an appropriate scope definition to aid in maximizing the reliability and longevity of hotel equipment, but it will also provide a system for ensuring manufacturers’ requirements are met to maintain their specific warranties.

5. An educated consumer is often the best customer

Frequently, service professionals are relied upon exclusively to maintain a given system, a piece of equipment, or building component. While this is often appropriate, or even mandated, there are many instances where the limited use of building personnel to supplant contract maintenance can be extremely beneficial, even cost effective, in the ongoing execution of a service agreement.

One example is the hotel building automation system, often referred to as an energy management system. Frequently, the in-house staff lacks the training and skills to troubleshoot even the most basic building automation problems. Instead, a log of deficiencies is commonly kept to be shown to and addressed by a service technician, necessitating that the property will endure the problem until their next routine maintenance visit. This means that the technician’s contractual maintenance time is spent fixing rudimentary problems which are better addressed by in-house personnel, while long term system improvements that require the technician’s care are deferred.

To combat this problem, include contract provisions that require contractors to provide training to in house personnel, training that not only makes the service provider’s visits more efficient and effective, but also provides an invaluable investment in the development of the hotel staff.

6. Make it easy to do business together…and reap the rewards

After the outside service provider’s sales person and the hotel GM have signed a contract, the hotel engineer and service manager are charged with its execution. But no matter how much time and effort go into the creation of a contract, its success is contingent in large part upon the relationship with the service providers. With this is mind, focus on creating an environment conducive to strong relationships with outside contractors, upon whom you regularly rely, and make it easy for them to service the hotel account. The creation of such good rapport will pay back many times over when the hotel has a guest stuck in an elevator, or the HVAC chiller fails on a hot summer night. Seemingly small considerations, such as granting a contractor access to an employee cafeteria, or allowing them to park at the hotel loading dock, can go a long way in building strong, hospitable relationships with key service providers who might not otherwise be so punctilious in their adherence to the strict requirements of your contract.

7. Certification and competence

In some instances, hotels believe that the contract terms are so technical or complex that they are not qualified to objectively judge the performance of the service provider, or the quality of their services. Beyond a simple reference check, hoteliers are often limited to the use of third party consultants to inspect performance and ensure their compliance with contract specifications or industry standards. However, such consultants can be costly, and only provide a snapshot in time relative to a contractor’s performance over the life of an agreement. Moreover, such an inspection would be inappropriate when trying to gauge a contractor’s service quality during a bid review. Thus, hoteliers should consider utilizing the benefits of third party certification entities, which specialize in maintaining quality standards within a given industry. Many industries have well respected associations or governing bodies that are diligent in self-governing their industry and the quality of their members’ products or services. Check to see if a service provider’s ability to safely and effectively execute industry standards is certified by an appropriate entity.

Examples of such entities include the National Fire Protection Association (NFPA) for fire and life safety standards, the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) for mechanical standards, and the National Swimming Pool Foundation (NSPF) for pool operating standards.

Diligent contract administration makes for positive outcomes. So while the meticulous review and execution of service agreements may not be as alluring as a full house or as marketable as the chef’s winning gumbo recipe, engineering managers who implement these tried and true methods can expect as much financial benefit and job satisfaction as their more visible counterparts — and in the process of doing so, they will play an invaluable role in helping their hotels to flourish.

About the Author:

Richard Manzolina is a former member of Cayuga Hospitality Consultants.