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Maintenance contracts in industry

As a contractor/client make sure not to underestimate termination conditions in your agreement

 

STUDENT PAPER

By Hassan Coulibaly

SKEMA Business School

Paris, France

 



ABSTRACT

In order to deliver needed resources, or in order to maintain functionality of some material, some companies or institutions need to outsource their maintenance tasks. Sometimes these companies don’t have the skills or sometimes the maintenance needs some special skills. These are the reason why Maintenance contracts exist.

But when maintenance is not needed anymore for any reason or can’t be performed, client or contractor deserves the right to terminate the contract. Termination clauses take all their importance in this case, but what kind of clauses need to be incorporated in this section of a maintenance contract?

By using compensatory method of the Multi-Attribute Decision Making method, we compared different termination clauses in maintenance contracts. By making this analysis, one contract has been eliminated and two contracts catch our attention.  Finally, Siemens’ maintenance contract appears to be the best choice for us.

Key words: Termination clauses, Industry, Maintenance, Contract, Agreement, Safety, Negotiation, Equity, Fairness, Dispute resolution, Force Majeure

INTRODUCTION

According to a study published in 2017 by the National Institute of Statistics and Economic Studies (INSEE), the Manufacturing industry will represent in France: any 84% of the total industry added value, 85% of the turnover and 89% of employees.

Repeated or occasional malfunctions occurring in a company in this sector can have serious consequences.

This can have an impact on the company’s productivity, its financial results or even threaten the safety of its employees.

It then becomes important for the organization to think about actions for insuring the proper operating conditions of the equipment; to ensure the proper conduct and optimization of equipment operation. These actions can be implemented through a curative and preventive maintenance policy and process. The company, to carry out these actions, can call on an internal or external servicing.

In the case of external maintenance, the establishment of a contract is necessary between both parties and very important. Before signing the contract, the company and the service provider negotiate and put in place the clauses that will be part of it. These arrangements allow protecting the mutual interest.

It is important to define and regulate the termination rules in the event that one of the parties wishes to terminate the contract. The establishment of a maintenance contract between the two co-contractors must therefore be part of a thoughtful process and follow a proper methodology.

Through this study, we intend to define the relevant terms of a maintenance contract and highlight how critical the termination clauses can be in such an agreement.

We will intend to address the following questions:

  • What are the mandatory and necessary termination clauses in a maintenance contract?
  • How to assess the quality of a termination clause, so that the contract is fair to all parties involved?
  • When a cancellation occurs, but the reason for it is not mentioned in the termination clauses, can the revocation take place? If so, what would be the risks for both parties?

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper:
Coulibaly, H. (2018). Maintenance contracts in industry: As a contractor/client make sure not to underestimate termination conditions in your agreement, PM World Journal, Volume VII, Issue 5, May 2018. https://pmworldjournal.net/wp-content/uploads/2018/05/pmwj70-May2018-Coulibaly-maintenance-contracts-in-industry-student-paper.pdf



About the Author


Hassan Coulibaly

SKEMA Business School
Paris, France

 


Hassan Coulibaly
is a Project and Program Management & Business Development Master of Science student with an Industrial Engineering Degree from ESIGELEC (France, Rouen). He graduated in 2017 from engineering school after 3 years’ experience in an apprenticeship at CEMOI chocolate processing site of Tinchebray in France. Cemoi is a big French company that produces industrial chocolate for distributor brands and for chocolate specialists.

He has successfully conducted process automation and supervision upgrading projects.

The main project he conducted as an apprentice was the designing and building a monitoring system to track a production line performance. With this tool, managers could follow performance in real time (Quantity of production, Number and duration of stops).

He also had the opportunity to follow different technicians during their day to day activity.

Within the Maintenance service, he discovered the maintenance environment and all tasks that belongs to it: Preventive maintenance and curative maintenance.

He is highly motivated and attracted by automation and industrial robotics coupled with competency in projects management and Business development. He decided to attend in January 2017 Skema business school and its Master of Science program for a dual degree. He is also proficient in all computers tools he can get, such as Microsoft office but he is also proficient in apple software.

His aim was to acquire more knowledge in project management and business development, also to learn more about management skills which are important skill to develop as a future project manager.  Also, study in a multicultural environment and improve his English. He holds AgilePM certification and Prince2 certification. He also knows MS Project and Gantt Project, that are project management software.

Dynamic, multicultural and polyvalent, he is highly entrepreneurial, results oriented and operational efficiency focused. He is planning to work in business with continuous improvement and development supported by technical integrated automated systems. He can be contact by email at [email protected].