Best Strategies By Facility Managers To Determine An NTE Budget For Commercial HVAC Repairs

Best Strategies By Facility Managers To Determine An NTE Budget For Commercial HVAC Repairs

by | Commercial HVAC, Commercial Refrigeration, Facility Maintenance, Facility Management

Facility Managers - CMI MechanicalFacility Managers (FM) need every tool at their disposal to reduce the time spent on administrative tasks so they can focus on managing their buildings.

One tool at an FM’s disposal is not-to-exceed (NTE) pricing agreements with commercial HVAC  service and repair contractors, especially for complicated building systems for heating and cooling.

Why Should Facility Managers Use An NTE?

NTE Budget For FM's - CMI MechanicalNTE pricing is the process by which a commercial HVAC contractor and Facility Managers come to an agreed-upon maximum price to perform a repair like replacing a chiller compressor or small project such as adding a VAV box.

The commercial mechanical contractor agrees to perform the work, so the cost of their labor, materials, and overhead does not exceed the agreed price. If the cost to perform the work is less than the NTE price, the FM only pays the actual costs.

If costs exceed the NTE, the FM may renegotiate the NTE price or the agreement may be such that the HVAC commercial contractor is only paid up to the NTE price.

Any additional costs are absorbed by the mechanical contractor.

NTE’s are intended to reduce the administrative burden on the Facility Managers, so they don’t need to get multiple bids for every single repair.

The price is controlled upfront and paperwork is reduced by working with one commercial HVAC contractor.

How Facility Managers Can Control Their HVAC Maintenance and Repair Costs

CMI Mechanical Using Data For HVAC ServiceControlling NTE costs is important and there are a few ways to do this without creating work for Facility Managers that negate the time savings the NTE is intended to bring.

The first method is to use historical data for the same or similar repairs as a point of comparison.

For example, if it cost $5,000 to replace a chiller compressor last year that took two technicians all day, you can reasonably assume that a simple fan motor that can be replaced in half a day, will likely be half the cost or less of the compressor.

If the fan motor NTE price offered is $5,000 or more, you have data to dispute their offer. Access to bills from previous commercial HVAC work is invaluable data for comparison to other projects.

Facility Managers Can Use A 3rd Party Platform To Calculate NTE’s

RS Means Logo - CMI MechanicalRSMeans provides cost information for a variety of facility maintenance tasks including HVAC repair. RSMeans data offers factors that increase or decrease the cost of the work depending on your city, whether the work is performed at night or weekend, and other influences like working off scaffolding.

RSMeans information plus a good database of previous repairs will give you a sense of the NTE price as you and your maintenance mechanical contractor negotiate.

But with all the historical data and guidebooks, not all repairs are similar. Some parts may be hard to find, out of stock, or the work may be exceptionally difficult to perform.

Facility Managers and Mechanical Contractors Need Trust… On Both Sides

Keep Calm And Trust CMI MechanicalThis is where the most important factor in NTE agreements comes in: trust. You should never, ever enter into NTE agreements for commercial HVAC repairs with a contractor that you do not already have a good working relationship. 

If you do not trust your contractor to give you a fair NTE pricing, you should find another contractor. This does not mean their pricing will be the lowest every time, but it does mean you will get fair pricing from a trusted company saving you the hassle and paperwork of getting multiple bids.

Perhaps a few times a year you can get multiple prices for a repair to make sure costs are still in check, but good NTE pricing agreements depend on mutual trust by both parties to be successful.

When trusts exists within an established professional relationship, the costs and time savings for the Facility Managers are priceless.