Service / Maintenance contracts complicated bid

Just discovered this CCTV forum and found a lot of good information. We have only been in doing cameras about 4 years and I am hoping for some advice from some people that have been in this situation. We have an IT background so IP based cameras was a good fit. I wish my first post wasn’t looking for help right away.

We are a Milestone camera integrator and have a contract with a municipality coming up for renewal. The old contract was a time and material but this time they want to do flat rate yearly contract. It would include any day to day repairs, maintenance, programing etc. It does not include parts. This was put out to bid and we need to put our number in. Unfortunately we do not usually do maintenance contracts and we have no past numbers to use as reference.

I found some great information for future bids but really they do not apply here because it is a combination of different methods.

Recommendations from varascope:

1) Method 1: Value based – using those numbers approx 10% failure per year

2) Method 2: System Cost percentage – Can not do because some cameras are 10 plus years old

3) Method 3: Customer evaluation – Again doesn’t apply

RFP Overview:

-Major metropolitan market

-Municipality

-There are 188 cameras currently.

-60% outdoor and 30% indoor

-98 are on Milestone the remainder on DVRs (another 27 out of the 188 are being converted to Milestone as part of this bid)

-Cameras on DVRs are all analogue

-Spread amongst 17 locations in a 10 mile radius

-The server is new and we just installed it

-Bidder is responsible for all labor but not parts. (2 hour response time required) 24x7x365

-IP cameras are all Axis

-Approx 50 of the cameras on Milestone are analogue and converted with Axis video encoders

-3 other bidders that are large competitors and have little more info than what I just posted

-If someone would like more info to give advise I would be happy to email it but a little hesitant on what I post online since it is open until next Thursday. (although it is narrowed down to us and 3 competitors that are allowed to bid).

In the past our install bids have been WAY lower than others and I would like to find a more logical method of bidding. I do not even now where to begin for a bid number and could really use some help.

One big thing that may not seem important, but it will add up fast is lifts to get to the outdoor cameras. Do you own a lift? If so, make sure you account for that as a service.

As for the rest of it, I am a bit busy right now but I will reply in greater detail in a few hours.

We have our own lift and have equipment to handle anything that might go wrong. Considering some of these are at intersections it is a very good point.

Also thanks for the fast reply and any input and thoughts are great at this point

Calculate how much it would cost you to reinstall the entire project from scratch as if it were a new system.

Remove the parts from your price, leaving you with just the labor portion.

Divide the labour by 10 years or whatever you feel is the lifespan of the system. Since half the system is already old you might want to use a shorter lifespan.

That will give you a pretty safe annual flat rate for labor since you know that even if you have to replace the entire system over x number of years you'll still come out ok.

Oh, and add 10% for good measure.

Awfully tedious way to do it but if that ends up being the best bet it would be a good way to calculate it and a safe one. Although the competitors will not be able to use that method because they do not have enough info to recreate everything.

My main goal is to try and get some guidelines of how the other 3 bidders "might" calculate it so I can make a good educated guess. This is a good place to start. There are still other potentially large contributors like 24x7 2 hour response. fortunately we are right in the middle of everything.

I know there is not going to be one perfect answer so the more ideas the better and yours is one that I previously have not thought of.

Thanks

We have several maintenance contracts for systems that are 7-15 years old with the sizes you are talking about. Typically the maint. contract ends up being 15% of the original install cost. We also explicitly exclude hardware replacement from the contract. If we discover bad hardware, the customer has to fund that replacement cost and then we cover the install and config of the new stuff under the maint. contract. We will sometimes include optional fixed costs for a SMALL set of stocked hardware (typically one of each model in the system and a DVR/ NVR as needed). This allows them to pony up for emergency equipment that we stock for them. it reduces emergency replacement downtime and gives them a warm fuzzy feeling about our commitment to them. Another fixed cost we will include is annual license or extended support contract renewals from the manufacturers if they are offered. This can help us handle warranty replacement without telling the customer they need to buy another device. On top of that we also include annual training costs (to keep our techs up to speed for them).

In one contract, it covers three separate campus areas so we had to include travel in the contract.... this took some flat out guess work, but we left language in there to allow for us to invoice any travel overages based on abnormally high maintenance needs. The best way I have seen to do this is to allow for it, but cap it at a little less than double what your "normal" travel cost would be.

I have also seen companies that have a fair bit of existing maintenance data use those man hours to come up with a labor hours per device figure based on their data. This number typically rises as the system ages so you should add 3-5% more labor to each year (per device).

Hopefully this helps.

It is a great place to start and it gives me an idea of how others would bid it. Unfortunately the contract does not allow for extra driving, emergencies etc. It does allow us to charge for non-maintenance items. We also can charge for software upgrades and they are responsible for the cost of replacement equipment. ( we do always keep spares on hand because I think it is just good business)

At the end of the day it is just going I will have to estimate the install cost and then take an educated guess. At least I know what it has cost them in the past so I know what I have to charge to break even. It is figuring out that top end number and then picking something in between.

You guys have been more help than you know because now I at least have a place to start. It is also going to be a much higher number than I would have originally thought.

Just to clarify one last thing. The 15% is a per year number and not divided over a period of years?

2 hour response time!

That will take some resourcing as you will basically need engineers permanently on standby including allowance for cover for sickness, holidays and spikes in demand.

Sounds like a waste of public money to me.

Does your health and safety procedures allow for one man working on the highway with the cherry picker?

Also don't forget Milestone ongoing licence costs.

Ilkie

The 2 hour response time still has be puzzled. Interesting part of that is there is no penalty for not making the 2 hour response. Fortunately for us all of our people live with in 20 mins of the office. Also, our main business is we are a small internet service provider. Because of that we already have to be available 24x7. VERY good point on 2 people for the bucket truck because it is mandatory for my people. Milestone lic are an extra charge.

I have spent the last few hours trying to get some numbers on rebuilding everything and when I take 10% (instead of 15%) it is almost exactly what my gut feeling was for a "reasonable" monthly rate. Since I mentioned I am usually too low anyway the 15% is probably an extremely good guess what others would charge. I think if I add another 20% for the response time I should have a good number.

It gives me a much better feeling putting some actual percentages to it and knowing that my educated guess was very close. I figured there had to be some sort of a formula.

See if they will let you know how many call outs happened last year and also state in your response that no pre-existing faults on commencement of the contract are included (ie you have assumed that the system is operating 100% to manufacturers specifications and operational requirements)

Ilkie

We have held the contract for a few years so we know what has been done. I wish we could add some fine print but we can not. Just a bottom line number for the maintenance portion. Then a hourly rate for non maintenance items.The new contract will be for another 5 years. When it was bid the last time it was done differently and there was not a bottom line number.

Calculate how much it would cost you to reinstall the entire project from scratch as if it were a new system.

Remove the parts from your price, leaving you with just the labor portion.

Divide the labour by 10 years or whatever you feel is the lifespan of the system. Since half the system is already old you might want to use a shorter lifespan.

 

That will give you a pretty safe annual flat rate for labor since you know that even if you have to replace the entire system over x number of years you'll still come out ok.

 

Oh, and add 10% for good measure.

Sorry but that just sounds a fast way to loose money and work for nothing.

Split over 10 years for a service contract that may only stand for 12months and go out to tender again.

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Lots more information is needed

Is this a install you did or worked on before who has control over network at each location (are they locked or pass worded )

If like 10 or more cameras are old analog cost in replace not repair

Put that in cost over 12 months other work as standard call out charge

This will then give you a good platform to bid on its second year service contract

The contract is for 5years.

"Is this a install you did or worked on before who has control over network at each location (are they locked or pass worded )"

We currently have control over parts of the network but are very familiar with the rest of it. Since we have been working on it for the last 5 yrs we are familiar with the equipment. Some we installed and some was already there.

Sorry but I am not following what you are recommending for a different method?

Doing a single number for a 5 year time span is pretty brutal. Ours typically adjust annually, and that accounts for additional age, changes to the system, and any other issues or disasters that have occurred in the last year. I would add 2-3% to your base number for years 2 and 3, then add 7% to your year one costs for the last 2 years. If you don't escalate it, you run the risk of outpacing your resources rather quickly. This accounts for inflationary costs, and all sorts of other junk that shows pops up along the way. It also accounts for the increasing age of the equipment (higher likelihood of failure) and the increase service calls required.

I would also document this in great detail so that when they ask you to justify it, that willbe as simply as showing them a chart or two.

Let us know how it goes!