Elevator Maintenance Contract- What are the Market Rates?

Elevator Maintenance Contract

You are a small or medium sized building owner or property manager who has had the same elevator maintenance provider for years. They probably installed the elevator! You pay a monthly fee and the occasional invoice for overtime service or something outside the scope of the contract.  But how do you know if you are paying the market value for your services.  First, let’s answer what is an elevator maintenance contact?

What is an elevator maintenance contract

An elevator maintenance contract or elevator maintenance agreement is an agreement with an elevator maintenance provider to provide preventive maintenance for your elevator and typically cover parts and labor to keep an elevator running. These agreements allow a building owner to pay a consistent monthly fee and in return the elevator provider covers all labor and parts for repairs and preventative maintenance.

Elevator Maintenance Contract Prices

A general rule of thumb for elevator prices is $2,400 / year for hydraulic elevators and $4,800 / year for traction elevators. These are very general numbers, and don’t apply to high rise buildings or buildings in New York City. However, you can use this as a baseline guide.

Elevator Annual Escalation

When is the last time you bid out your the elevator maintenance contract?

Why is this question important?  99% of elevator contracts have an annual escalation clause which range from 2 -7%. This means the monthly fee you paid 5, 10 or 15 years ago is significantly higher than the original contract price.  You are probably thinking, haven’t the elevator companies costs gone up that much as well from inflation, wage increases etc.? Not exactly. In fact, many elevator companies charge similar pricing to what they charged in the mid 1990’s!

If your elevator has not experienced any major problems in the past 12 months there is a very high likelihood that your elevator company is making 40% + margin on your contract!

Save Money on Your Elevator Maintenance Contract

So now I have you thinking that you may be paying to much!  What next? First, go look at your elevator contract and see when it is expiring. Many elevator contracts roll for 5 years so you could easily be years away from expiration.  No need to waste your time if your elevator contract does not expire soon.  That being said, if you want to put in some effort and be that squeaky wheel to your elevator maintenance company you may still be able to re-negotiate your contract.  You now have a couple options to see the market rates and if you are overpaying:

• Do you have any friends or colleagues who manage or own buildings with elevators?  Ask them what they pay. The main points to consider are how similar the contracts are and what type of elevators your friends have (traction or hydraulic).  If you have many people to do this with I would recommend this option first.  However, if you only know a few other building owners or managers this may not be a large enough sample size to get a realistic picture.

• Call your elevator maintenance company and let them know you would like a new elevator maintenance contract with their best and final offer. You can even mention you may be bidding out your contract. If your contract is expiring within the next 12 months this should be effective. If you are working with one of the big 4 companies you should not forget who you are dealing with.  Likely, you are going to talk to your account manager.  These account managers are typically not veterans. Your account manager can get penalized (in some cases financially) if they lose too many contracts. In this scenario you have the leverage.

• You can go ahead and bid out your elevator maintenance contract.  This is the most time consuming option and you will need to offer resources to show the different elevator companies around the building.  This is the sure fire way to see if you are getting market value. Remember if you do this you will be reviewing a lot of elevator contracts that may be different in scope. If your happy with your current level of service I would send out your current contract and tell the elevator companies to match that scope.

• You can hire an elevator consultant to bid this out and/or give you an approximation of market rates. This option is good if you own multiple buildings.

Send me a note if you would like a referral to a reputable elevator consulting company.