12-month warranties leave utilities on the hook for unplanned repair & maintenance costs
I have just finished reviewing another bid document. This one was 48 pages long. Many specs and plans have been developed for months years, but what puzzles me about this and every other bid document is the complete lack of emphasis on the quality and longevity of the equipment that is required. Why is that?
I work for a manufacturer of submersible mixers and pumps. In the municipal wastewater sector, working with design-bid jobs, we often experience that cheaper products are offered on bid day, which end up costing the owner huge amounts of money over time. A product that is a mere 20% cheaper on bid day will often cost 300% more over time, compared to a higher quality product. Premature wear and equipment failures are expensive. Surprisingly, little is done to prevent this during the design phase and in the bid documents, despite the fact that unplanned costs are quite easily preventable.
If you are wastewater utility, then please answer these questions:
- Do you allot funds on your yearly budget to cover unplanned cash expenses, such as equipment repairs?
- Have you ever had to exceed your equipment maintenance budget?
- Would it be easier to run your operation if you knew your exact maintenance costs every year?
If you answered “yes” to any one of these questions, then consider discussing with your consulting engineer how you can include a long-term maintenance cost guarantee in your next equipment specifications.
As we all know, on bid day it all comes down to dollars. That is all that matters, but it does not have to be like that. Ironically, most wastewater utilities will invest millions of dollars in new wastewater treatment plant constructions or upgrades. Generally, after the first 12-month standard warranty is over, they have absolutely no idea what the actual maintenance costs will be for the next year or the next 20 years. That part is simply not specified. Isn’t it crazy that nobody knows the long-term costs of operating the plant, which just cost millions of dollars to construct?
It is extremely rare that pumps and mixers purchased on bid day because they were the cheapest will be the same units that turn out to be the most cost-effective in the long-term. Now, I do not blame any pump or mixer salesperson from trying to do their job, but part of the reason for this crazy situation is the throwaway promises that are made when closing that all-important sale. I have heard them all, including: “The pumps are maintenance-free”; “They will last at least 10 years”; and “You do not even have to change the oil.”
As far as I am concerned, if you truly believe in the quality of your product, then put your money where your mouth is and back it up in the form of a guarantee that is written down in the form of a binding contract. My suggestion then is that it really would not hurt to add just one small paragraph to that 48-page bid document. As an example, for submersible mixers, the guarantee could be the following:
“The mixer manufacturer shall provide an all-inclusive service plan and a 10-year non-prorated warranty on all mechanical and electrical equipment. This 10-year service plan must include all lubricants, all wear parts, and all labor required to service the mixers during the 10-year period.”
Scary, eh? Not if you are a manufacturer who makes long-lasting equipment and wants to see your customer succeed.
Suggesting to a customer their pump or mixer will not even need its oil changed is music to the ears of those whose profit is in replacement parts. Those units they told you would just keep on working and working? Nonsense. They want them to fail. They are ready and waiting to sell never-ending replacement parts at a hefty cost.
Fair enough. It is a legitimate business strategy to sell equipment in this way and then live off the sale of expensive spare parts and repairs. However, why should utilities (and their rate payers) be the ones to flip the bill?
While I have spent the better part of two decades in North America, I am originally from Denmark. There, offering a “one-year warranty” is laughable. While a guarantee of 10 years sounds quite commendable, you would still fall short. Equipment amortization is required for 15 years, sometimes 20. You state your sale price and everything in the paragraph noted above. All the nuts and bolts, wear parts and repairs are included. No exceptions. So, even if a particular pump or mixer is not the cheapest on bid day, the owner can see that it will be far more cost-effective in the long run, resulting in less downtime, maintenance and hassle.
It is time to look well beyond a puny 12-month warranty and the cheapest price on bid day. Surely the potential owners of new wastewater treatment equipment deserve better than that.