Annual Maintenance Contract: Everything You Need to Know
An annual maintenance contract is an agreement with a service provider for repair and maintenance of property (i.e. machines, printers) used by your company. 3 min read
An annual maintenance contract (AMC) is an agreement with a service provider for repair and maintenance of property used by your company. The service can be of any property owned by your company from the large manufacturing machines creating your products down to the computers and printers used in your offices. It can also include service to the building, the land, parking lots, etc. A company that cares about improving day to day operations should have an AMC in order to ensure quality of product and process.
Quality output from any machine depends on the machine's long-term repeat performance. Machine maintenance is the key to this quality performance. You want the best personnel with the most expertise and experience to ensure a machine is working as it should.
An AMC can last from 1 to 3 years as agreed to by the parties. You can extend the term if you want to continue the service. Typically, AMCs include service support; however, you can add a comprehensive maintenance contract (CMC) that will cover IT support and replacement as well.
AMCs are common across many industries: healthcare, IT, retail, etc. An AMC agreement to maintain property is a general concept that can be applied to many needs. And most AMCs and CMCs contain similar provisions across all industries:
- Name and address of parties
- Details of equipment under the contract
- Expectations (number of visits)
- Comprehensive or non-comprehensive
- Payment terms
- Penalty clause
- What is not included
- Termination of contract
- Signature and seal
In order to end an AMC, a company will mail a maintenance contract cancellation letter to the service provider. This document ends the relationship between the parties. Before sending this letter, your company should, as a professional courtesy, let the provider know how they are not meeting your expectations and/or the reasons for canceling the AMC.
Comprehensive Maintenance Contract (CMC)
A CMC is usually for one year and can be extended up to 3 or 5 years if agreed to by the parties. A CMC includes prompt service for repairs and replacements of faulty parts or machines. A CMC costs more than an AMC because it includes the costs of the replacements on top of the maintenance service.
Computerized Numerical Controls (CNC)
Maintenance of machines with computerized numerical controls (CNCs) requires special skills. If a company does not have specialized CNC maintenance team to take care of all variety of CNC machines, it should enter into an AMC with CNC machine manufacturers. These are the best individuals to contract with for maintaining these machines.
- Continuous updates/upgrades to the software ensuring optimal performance and productivity
- Long-term cost savings in machine purchase and function
- Expertise knowledge base
- Preventative maintenance (goal: no breakdowns)
- Quick response (if breakdowns)
- Increased longevity of hardware and software
- Expert technicians available to answer the tough questions
- No coverage lapses
- No hourly charges for service
- Keeps company on time and in compliance
You can be very specific in your AMC agreement. You can specifically delineate which equipment will be serviced. You can require the service provider to bring all their own tools and materials for service. You can let the service provider know that you will, or will not, provide extra hands when they come to provide service. You can require your service provider to have the replacement parts and/or machines available immediately given one of yours breaks down. You can also specify what happens in the event of a breakdown between scheduled service visits and how this shall be handled and, of course, paid for.
An annual maintenance contract gives a company and the service provider the benefit of having everything planned out ahead of time, so that if in the event of a machine, computer, piece of hardware, or software breaks or ceases to work properly, the company knows that they can be up and running in the shortest amount of time possible. This helps prevent undue delays resulting in loss of profits or income.
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