Maintenance shop wants to add markup on the work of prop / engine shop! Is this normal?

Discussion in 'Maintenance Bay' started by German guy, Dec 9, 2017.

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Maintenance shop adds 10% - 20% profit margin on the work of prop and engine repair shops.

  1. This is absolutely reasonable and normal.

    15 vote(s)
    44.1%
  2. This is probably not good style but also not uncommom.

    11 vote(s)
    32.4%
  3. They are ripping you off!

    8 vote(s)
    23.5%
  1. German guy

    German guy Line Up and Wait

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    Our maintenance shop, which we have been using for the first time, was supposed to do the annual inspection on our Mooney.
    They found that the crankcase of our angle valve Lycoming IO360 has two big cracks and that the prop needs to be re-sealed.

    It turned out that they insist on handling the repair / overhaul of the prop as well as the engine and that they will be adding a profit margin of around 10 - 20% on the invoices of both, the prop and the engine repair shops. I addition, they will still charge us for their labor and the materials they'll be using.

    Is this a common practice or a rip-off? Local friends believe they are trying to take advantage of us and so do I. :mad:

    What do you think?

    Oliver

    Edit, for clarification: Removal, crating and installation of the engine and prop are NOT included in the markup. We still have to pay for all of this separately. Zephyr quoted $27,900, while our shop wants $33,000 (they are using a different engine shop) for an overhaul with the same contents. The only thing that is out of the ordinary is, that we will need a new crankcase, what is also included in the Zephyr quote.

    Removal, crating and re-installation of the prop and engine will cost us at least another $3,000, based on what I was told (also for this, no written quote).
     
    Last edited: Dec 9, 2017
  2. AKBill

    AKBill Cleared for Takeoff

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    I think it would be fair for them to charge for the time it takes to pack and ship components and the time it takes to arrange for the repairs. 10 to 20% seems a little out of line to me. Of course they may be getting a better price for the repairs than the average person gets and are charging you the regular repair rate.
     
  3. Stewartb

    Stewartb En-Route

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    They're contracting for and paying the bills for the outside work. They can't do it for free.
     
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  4. Chip Sylverne

    Chip Sylverne En-Route

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    Who's paying the bill from the prop shop? You, or them? If they are paying it then invoicing you, sure, a markup is to be expected. If you're paying the prop shop directly, I would pay for the time to crate and ship, no more.
     
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  5. wsuffa

    wsuffa Touchdown! Greaser!

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    Pretty typical. Car mechanics do the same (had to have a sensor replaced on truck engine in a place that was impossible for me to reach - they charged full cost for the sensor, where I could have gotten the sensor from their supplier at about 25% less or online at 50% less, so effectively there was a markup).

    I see a reasonable amount as fine, especially if they're getting a discount from the supplier. After all, they're arranging the work, handling shipping/delivery, etc. some places charge a markup on owner supplied parts.
     
  6. luvflyin

    luvflyin En-Route PoA Supporter

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    Very common practice. In all industries. They get the 'parts' at contractors prices and put retail prices on your invoice. A house building contracter adds to the sub contracters price to him, plumber, electric, drywall etc etc. It's business as usual everywhere. Some don't itemize it directly, but it's going to built in to the final price somehow.
     
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  7. PaulS

    PaulS Final Approach

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    Absolutely reasonable and quite frankly a deal. I'm tending to doubt they are adding a 10 to 20 percent margin, more likely a markup to cover their billing and AP expenses, the cost of making the arrangements to have this work done. Don't be surprised if dis/reassembly, shipping and crating are also added to the bill. It costs money to do stuff in a business, you can't reasonably expect them to do stuff for free.
     
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  8. mondtster

    mondtster Pattern Altitude

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    It is common for shops to mark up the costs of subcontracted work, the same way they mark up the costs of parts. The shop is doing the leg work of finding an appropriate repair facility and either shipping or delivering the propeller, which takes time. Do you work for free? Why should they?

    If I were the mechanic I’d pass the expense of the propeller repair directly on to you, but charge my hourly rate for shipping the propeller and coordinating the repair. Even better is if I can give you the prop and tell you to deal with it and give me back a repaired propeller. Then it is your problem if you damage it or find a crappy shop to do the work. All I have to do is remove and reinstall it.

    What I don’t like about your situation is the shop’s insistence of choosing the repair facility and handling the transaction. That leaves you with your hands somewhat tied and no ability to send the prop to your favorite repair facility.
     
  9. German guy

    German guy Line Up and Wait

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    We would indeed still have to pay separately for the work they will be doing, like removing and crating the prop and engine. I would also gladly coordinate with the prop and the engine shop directly and also pay them directly, the maintenance shop however insists that they it HAS to go through them.

    I have a quote from Zephyr in Florida, who were by the way super friendly and helpful when I called them yesterday, for a complete overhaul of our engine, including a new crank case, for $27,900. Our shop quotes $33,000, with the same contents. This is over 18% more!

    And, again, we still have to pay our maintenance shop separately for all of their efforts...
     
  10. Tom-D

    Tom-D Ejection Handle Pulled

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    It's reasonable to charge for what they do, packaging, shipping, removal and replacing. etc. but to simply tack on 10 for what others do just ain't right.
     
  11. German guy

    German guy Line Up and Wait

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    This is NOT included in the markup. We still have to pay for all of this separately. Zephyr quoted $27,900, while our shop wants $33,000 (they are using a different engine shop) for an overhaul with the same contents.

    Removal, crating and re-installation of the prop and engine will cost us at least another $3,000, based on what I was told (also for this, no written quote).
     
  12. Ravioli

    Ravioli En-Route PoA Supporter

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    There are some comments about "shopping the work out" that imply that there is some effort involved. ********. They send it to the same shop they always send it to.

    Now then, the labor to pack and send out, and receive and unpack is certainly chargeable to the client.

    If someone wants to show datas (kidding.. I know it is data) that percentage added is only to cover those costs, and there is no labor charge for that bit of the work, okay.

    More than likely it's a double charge.
     
  13. luvflyin

    luvflyin En-Route PoA Supporter

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    There ya go. Your choice who you pick to do the work. Maybe the shop that lost your business will re-evaulate how they do business, maybe they won't
     
  14. PaulS

    PaulS Final Approach

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    Sorry guys, but this is standard practice for businesses, businesses that are successful anyway. You cannot pass dollar for dollar on something like this along to a customer, you absolutely lose money as a business doing that. Beyond that what happens if there is an issue with the engine job? It turns into a ****ing contest with you stuck in the middle, not worth it for the shop, this way he owns it, it's his problem anyway but at least he is paid for it.
     
  15. Vance Breese

    Vance Breese Line Up and Wait

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    I feel price is not the most important consideration when selecting someone to work on my aircraft.

    I prefer to do business with a shop that is making a profit so they have resources for customer service and are likely to be there the next time I need something.

    I feel my role as a customer is not to tell someone how to run their business.

    When I get the bill it will be my decision if I received value and if want to continue to do business with this shop.

    There will always be someone that will charge less and I feel that lowers the odds of getting good customer service.

    When I owned a motorcycle shop it cost me 17% to run anything through the shop.

    Most of the 17 years I owned the shop I netted less than ten percent of the gross income.

    It appears to me there are fewer FBOs today than there were five years ago.
     
  16. Bell206

    Bell206 Pre-takeoff checklist

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    Gg:
    Just to clarify, did you sign a work agreement with this shop for them to correct discrepancies found during the annual, or are you implying the shop will not release your plane back to you with the annual signed and a list of discrepancies?
     
  17. Banjo33

    Banjo33 Pre-takeoff checklist

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    I think the first few posters need to see that you edited your original post to add additional information, after they had responded.
     
  18. JOhnH

    JOhnH Touchdown! Greaser!

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    Each business has their own pricing model, unless they are illegally colluding.

    When I owned a veterinary hospital, I charged an exam fee, and then I added an extra fee for each service, like vaccines or labs. Many customers complained because the veterinary hospital down the road didnt charge for vaccines. But they charged a $95 exam fee and I charged a $45 exam fee.

    I added a markup to lab fees that I sent to outside labs. The other guy didn’t but he charged extra for blood draw, collection supply fees and analysis fees. I didn’t.

    The point being that you can’t always judge based on single items unless you know all the information.
     
  19. PaulS

    PaulS Final Approach

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    I called it before he added that edit, sounds like the OP went into this expecting not to need a new engine, but for others, it probably is a good part of the initial consultation with a new shop to discuss how this is handled. The small one man operation will probably be happy if you dealt with the engine shop and paid them yourself. The larger shops I would guess would want it as the OPs shop for reasons I posted above.
     
  20. PaulS

    PaulS Final Approach

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    To the OP, how does the shop want you to pay for this, are you paying as you go or will it be one bill at the end?
     
  21. Tom-D

    Tom-D Ejection Handle Pulled

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    Well then,, I believe they are padding the bill.
    When they refuse to allow you to send the engine out to your favored shop, run like the wind. tell them to stop work, set a price on what you owe, Gather it up, trailer it out.
    they know they have you over a barrel, prove they don't
     
  22. weilke

    weilke Touchdown! Greaser! PoA Supporter

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    The 10% is to account for the share of cheapskate pilots who leave them holding the bag with the third party bills. If they took the risk of nonpayment on your overhaul bill, I can see how a markup is justified. When we had to overhaul, we paid the engine shop directly and the maintenance provider just told us the day he needed the engine. That's imnho the preferable way of handling this and it would seem odd that the maintenance shop refused to allow you to manage the overhaul end of the deal yourself.

    If you build a house, do you think your final bill is a sum of all the invoices the general contractor received from his subs ?
     
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  23. Kelvin

    Kelvin En-Route

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    A 'sale' without profit isn't a sale...it is a donation.

    When we do repairs for customers, we charge 30% markup..plus the cost of handling. We are VERY upfront about it and our customers rarely question it. It is explained that this difference is how we feed our kids and keep the heat on in the shop...
     
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  24. James331

    James331 Touchdown! Greaser!

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    Abnormal, not really.

    In bad taste and a shop I wouldn't use again, for sure.


    Owner assist and buy/contract out work yourself FTW
     
  25. nrpetersen

    nrpetersen Pre-takeoff checklist

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    Is your shop with the markup only serving as a pass thru for payment and for warranty on this engine? To me they should also be your primary warranty contact if they are going to mark up the engine re-builder's bill.
     
  26. German guy

    German guy Line Up and Wait

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    So far, we didn't sign anything. Actually, they are not even willing to provide us with a written, itemized quote for the repair, which is option #1. The engine has been overhauled 17 years ago and has 650 hours on it, we are therefore considering a full overhaul to new tolerances, what is option #2. After LOTS of arguing on the phone, our maintenance shop finally agreed to at least provide us with a written quote for the overhaul.

    I did not want to make the initial post too long, but the engine has already been removed and crated by our shop and sent to the engine shop, who again disassembled and inspected it.

    At no point has it been discussed nor agreed upon, that our maintenance shop would take the role of a re-seller. To the contrary, they indicated that the selection of a shop would be our decision and that it would be up to us, to work with the engine shop.

    The original estimate was that the engine repair would cost around $10,000, if the crank case is still good enough to be returned for core value. It turned out that this is not the case and that because of the old overhaul, the fuel pump, divider and servo also need to be overhauled. Even though I am surprised that they came up with the fuel system topics only after the engine had been disassembled, even though they knew how long ago it was overhauled, I am willing to accept that. What I am however not willing to accept is, that this should drive the costs up to $19,100.
    I understand that these are expensive components, I however arrive at 'only' around $16 - $17,000 max..

    And again, this does not include any work by our maintenance shop and they were not willing / able to even verbally break the additional $9,100 down for me.

    Maybe this is a more apples vs. apples than the comparison of the overhaul cost, as it is based on the estimation of the same shop.

    An additional $9,100 for a unwelded, used crankcase and an overhaul of the fuel system components neither sound reasonable to me nor to our local mechanic, particularly, since the original $10,000 were already supposed to contain a buffer for unexpected repairs.

    I find it pretty miraculous, that the costs skyrocketed only after our engine had been removed and disassembled what made it much more difficult and expensive for us to hand everything over to another shop.


    Exactly. We dropped it off for an annual inspection and the installation of a Garmin GTX345.

    After we learned about the cracks, it did not even occur to me and there was also no indication by our maintenance shop, that they would act as a re-seller of the engine repair. Also, from reading forums, but also based on what I personally heard from other pilots, common practice seems to be that the owner chooses an engine shop himself.


    I don't know yet.


    I already crafted an e-mail, listing the work for what I authorized them and asking them to invoice me for it. I will also try to find a hangar at their airport, to put the plane in and to have them sign off the installation of the GTX345, as well as the annual, stating the discrepancies.

    I want to have a clear cut and don't want them to between me and the engine shop. If they continue to play stupid, I am willing to pick up the parts myself at the engine shop, drop it off at a shop of our choice and to have the the engine installed by an independent mechanic. I am aware that I would have to pay the engine shop for the inspection, but am willing to swallow this pill if needed.
     
  27. Tom-D

    Tom-D Ejection Handle Pulled

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    that's the difference
     
  28. wsuffa

    wsuffa Touchdown! Greaser!

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    Ugh. Profit on profit is allowed - to a degree - in government contracting, unless both companies share ownership.

    But you should get to specify the subs without any argument. Are these two shops co-owned? Ther should be no more of a discussion than to talk about the merits of each shop. For them to send it off without talking to you is unauthorized work (depending on the terms and conditions of the work-order you may have signed).

    There used to be a shop at one of my home airports that did this kind of crap. They are now out of business.
     
  29. German guy

    German guy Line Up and Wait

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    I told them at the beginning that I would rather want to pay the engine shop directly. They however insisted that it has to go through them, indicating that this is just a service they provide, to check the invoice for plausibility and to also make sure that everything is technically correct. No I know the real reason...

    I actually see a conflict of interest here. In working with the engine shop I expect our maintenance shop to represent my interests. An general, nontransparent markup, which seems to be close to 20%, provides absolutely zero incentive for them the keep the repair costs low. Quite the contrary. Actually, when I called the engine shop two weeks ago, when the trouble started, the engine shop(!!), suggested to only inspect and repair the engine, whereas our maintenance shop was pushing for the much more expensive overhaul.


    This is absolutely fine, I accept this for example for the installation of the GTX345.
    In case of the engine repair, they will however not even provide a warranty: If there is a problem with the engine, I will have to work with the engine shop directly, including the removal and re-installation of the engine. And, again, I learned about this only after the cost went up dramatically and I pressed them for a breakdown of the additional costs. The story would be different if they would have been transparent, stating something like "if you let us take care of this, it will be more expensive by $ABC, but in return XYZ will be your benefit"


    No, I would have to deal with the engine shop directly, if problems with the engine occur. Our maintenance shop would only be responsible for their work.
     
  30. mondtster

    mondtster Pattern Altitude

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    I don’t see a difference, the OP knows about these charges before the bill has arrived so I’d say the shop in question is being up front about the charges too.
     
  31. Radar Contact

    Radar Contact Line Up and Wait

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    After getting several quotes from local shops on installing a Insight G4 Twin, WAAS'ing the 530 and installing a GTX345, the mark-up on the gadgets plus the heavy amount of hours they quoted had me looking elsewhere. I found a great shop just across state lines that told me I should go to OSH and get all the equipment on discount and they would just install it all (at a much more reasonable hourly quote). It worked out great for me.

    I will say my normal maintenance shop at my home field pulled my props and sent them off for a double O/H and they billed me exactly what the prop shop charged with no mark-up. Simply their time to remove and install. I'm a fan of how they've done business with me this first year.
     
  32. SkyDog58

    SkyDog58 Final Approach

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    Some truisms from my short 35 year career in aviation maintenance.

    A markup on sending an engine or prop out for overhaul/repair is no different than the markup on parts that come through the shop.

    A lot of shops use a variable markup rate where the higher the cost of the part, the smaller a percentage they markup. Some even have a max markup amount. Markup on o-rings, screws, etc. might be 100% whereas markup on an engine might just be 10%.

    Maintenance shops especially high volume ones can typically get a better price on most items than can the individual owner so even with an x% markup, the owner isn't paying x% more than he would on his own.

    Maintenance shops have worked with the various vendors, know their reputation, know their quality, know their business practices and have developed relationships with the ones they prefer to work with.

    Shops are usually willing to negotiate on price on big ticket items especially if they are doing other work for you as well.

    There are good owners and bad owners just like there are good shops and bad shops. A bad owner will usually end up having a harder time finding a shop than a bad shop will in finding customers.
     
  33. kyleb

    kyleb En-Route

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    The way it worked with my IA (back when I had a certified airplane) was that if he did the legwork (made the phone calls, fronted the purchase expense, etc) he charged a mark-up. If I did the legwork (found the item of need, paid for it, handed it to him), there was no markup.

    Seemed fair.

    The OP's issue is he allowed the maintenance shop to choose the engine shop and handle the communications with the engine shop. In other words, the maintenance shop is doing the legwork and expects to get paid for it. The OP should have understood the business relationship before allowing the shop to do any repairs.
     
  34. Norman

    Norman En-Route

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    Oliver,

    Given that you are close to KPTK I believe the shop may be here. I'm curious to know their name. I'm retired so I have no dog in the fight but may be able to give you some insight about their reputation. If you care to divulge their name PM me. Crating and shipping the prop makes no sense given there is a reputable prop shop nearby.
     
  35. GlennAB1

    GlennAB1 Ejection Handle Pulled

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    I'm glad I don't deal with this side of the industry.
     
  36. German guy

    German guy Line Up and Wait

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    This is however not the case here. They originally gave me the reasonably competitive estimate of around $10,000 for the repair (installation and crating not included). Based on this estimate, I authorized them to remove the engine and to crate it. Only after the engine had been shipped to the engine shop and disassembled by them, the costs went up to $19,100, while they are not able to break the difference of $9,100 down for me. An increase of around $6 - $7,000 appears reasonable, because of the crankcase and the overhaul of the fuel components, but not more.

    Comparing the costs that were originally discussed and what we are now looking at, it appears as whether they added most of their profit only when we were at a point at which it became very difficult and expensive for us to take our business somewhere else. :mad:
     
  37. PaulS

    PaulS Final Approach

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    What a mess, I would sit down with the guy and go through it with him, I don't think he is out of line, but who cares what I think, you need to be comfortable, and maybe he'll give you some relief. Pulling the engine after it is apart is going to be an issue and changing shops is going to be much more expensive in the long run, even with a cheaper shop. It might be better to hold your nose and get through this, at least for your wallet. No matter what you decide, I hope you get your plane back working and not too much poorer for it.
     
  38. Doc Holliday

    Doc Holliday Pre-takeoff checklist

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    How dare these shops charge for these things!

    Don't they realize this is my hobby, and should be their hobby as well!

    Well, have to run, need to take my Lexus to the dealer for an oil change.............
     
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  39. Ryanb

    Ryanb En-Route PoA Supporter

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    Ever heard of a Value Added Tax ? It’s basically the same principle you see here. The middle man has to make his coin somewhere, so this doesn’t sound too unreasonable to me.
     
    Last edited: Dec 9, 2017
  40. weilke

    weilke Touchdown! Greaser! PoA Supporter

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    I dont think it was a reasonable expectation to just repair a 17 year old engine. It is not uncommon for a couple of thousand extra in work to show up after an engine is disassembled. It is probably the principal financial risk to doing a field overhaul rather than shipping a 'running when removed' engine to Lycoming or Conti.