This blog series focuses on best practices for the asset management of real property including buildings, grounds, furnishings, and equipment.

by John zumBrunnen, CEO and Founder, zumBrunnen, Inc.

Key Components of a Service Contract

As previously stated, you are most likely to require some maintenance and service contractors. Develop corporate standards for your contracts to ensure contracts are complete and protective provisions in place. It is best to have a checklist of standard contract terms and conditions that have been reviewed by council and your insurance companies. Established and national contractors typically have a standard contract; do not hesitate to negotiate terms and conditions.

The following contract features should be included in most all service contracts:

  • Names and contact information of contractor and owner with space for signatures
  • Parties and contact information to be notified pertaining to emergencies
  • Address of property where services are to be provided
  • Date of contract and term of service: beginning and end dates (usually one year)
  • Renewal notification requirements and approvals versus automatic renewal
  • Escalation provisions: consider tying price increases to previous year CPI
  • Define fulfillment of the contract for both parties
  • Scope of service: description of service to be performed to property or each piece of equipment including frequency of service
  • Description of equipment being serviced: quantity of items, names of manufacturers, model and serial numbers, and location of items
  • Schedule: normal days and hours and after hours/overtime schedule
  • Hourly rates for work performed outside the contract scope
  • List of any parts or materials to be included in the scope of the contract, such as fertilizer, oil, gas, repair parts, filters changes, tune-ups, etc.
  • List of tools and equipment to be provided and maintained by either party
  • Costs for each inspection or maintenance service: i.e. price of monthly service for a defined item, say for a chiller, versus annual for a more extensive scope of work
  • Seasonal requirements, inclement weather and holidays: note any cost or schedule changes which may be affected by such
  • Reports: include report samples and reporting schedule; reports should identify time of service, service technician, service and parts provided, test reports, special conditions or problems, and additional scope required or recommended
  • Payment provisions/terms: include payment cycle, late payment terms, where/how payments are made, and contact information for both parties
  • For critical services: for emergency calls or a disaster response plan, ensure services will not be interrupted or unnecessarily delayed
  • Provisions stating that either party can terminate contract at any time after giving 30 days notice, or other termination provisions
  • Warranty: this must be clear and list specifics including the term of the warranty
  • Insurance: automobile, liability and workman’s comp to meet federal, state and local laws and your corporate standards
  • Compliance with OSHA: note future requirements may be taken as an exception
  • Indemnification: indemnify either party from fines, damages and legal fees due to the negligence or crimes of the other party, employees or agents
  • Transfer clause: the owner must be notified with sufficient time to approve any transfer of contracted services to others
  • Exclusions: provide clarifications and specific exclusions.

Ultimately, the best contract is a fair contract. Place the responsibilities and liabilities on the appropriate party.

About the Author:

John zumBrunnen is Founder and CEO of zumBrunnen, Inc., an independent construction and building consulting firm founded in 1989. zumBrunnen has a BS in mechanical engineering from the University of North Dakota, completed the US Army Corps of Engineers Training Program in 1972, and is a member of LeadingAge and Community Associations Institute on national and state levels. zumBrunnen has 40+ years of experience in construction, property assessment, development, and reserve budgeting. He is the inventor of the FacilityForecast® software system and a respected author and speaker in the industry.

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