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.

    20 vote(s)
    45.5%
  2. This is probably not good style but also not uncommom.

    14 vote(s)
    31.8%
  3. They are ripping you off!

    10 vote(s)
    22.7%
  1. Bell206

    Bell206 Pre-takeoff checklist

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    Gg:
    Unfortunately, I think you're a bit late in the whole process to keep the high ground after you verbally OK'd the engine removal based on a verbal estimate. Now there is a complex situation with 3rd parties involved and the shop, for whatever reasons, is covering their financial liabilities as the project gets deeper. Without a written version of the estimate to guide the specifics I'm afraid you're at a disadvantage. Before it bleeds more, I would recommend a work stoppage, regroup, and get things as they stand today in writing from all parties you plan to send a dollar to.
     
  2. UngaWunga

    UngaWunga Cleared for Takeoff

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    True, but he should be able to get an explanation to the costs.
     
  3. German guy

    German guy Line Up and Wait

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    This is exactly what I am complaining about - costs almost doubled, but no reasonable explanation. AFTER they had ripped the plane and the engine apart.
     
  4. Tom-D

    Tom-D Taxi to Parking

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    You never know what it in any engine until you tear it down.
    I just finished an estimate for a prop strike tear down on a 0-300 If the crank is re-grindable it is a $710,00 charge to re grind and polish.
    If not it's $8763.66 for a new one.
    If the cam is good to regrind it's $190.00
    If not it's 2098.18 for a new one.

    Things change a lot went the micrometer is applied.

    Like I've said many times, every engine is a Pandora's box.
     
  5. Salty

    Salty Pattern Altitude

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    Taking my engine hostage and charging me for the privilege is bs I wouldn't stand for.
     
  6. GRG55

    GRG55 En-Route

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    That seems quite a different issue from the problem described by the thread title.
     
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  7. German guy

    German guy Line Up and Wait

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    Sorry for the confusion, I tried to keep the initial post brief and focus on what I thought is the main issue. Thinking about it, the unexplained jump of the repair cost and that they now hold the engine and the aircraft hostage is however the real issue. Only because of the much higher than expected repair costs, we though about going for a full overhaul, as this at least adds some value to the aircraft.
     
  8. iflyvfr

    iflyvfr Cleared for Takeoff

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  9. Omalley1537

    Omalley1537 Line Up and Wait

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    The markup on others’s work is standard business practice. The part that concerns me is where they are marking up the work but still (a) making you deal with the outside company and (b) saying that in the event you have an issue you’ll have to deal with the company. The only reason anyone would be willing to pay said markup is for the convenience of having the primary shop deal with it for them.

    The other deal breaker for me would be them insisting on which shops I use. BS. If I’m dropping 30+ on an OH, you better believe I’m going where I want to go. That’s certainly not to say that I wouldn’t listen to the primary shop’s input from experience etc. But I’ll be darned if you’ll tell me “you have to go here...”
     
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  10. GlennAB1

    GlennAB1 Ejection Handle Pulled

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    But you gotta have your A&P's buy off on the engine...
     
  11. Salty

    Salty Pattern Altitude

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    No. You have to have AN A&P signoff. That A&P has no right to do work on your plane you don’t approve of.
     
  12. Omalley1537

    Omalley1537 Line Up and Wait

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    I see your point if I have “Billy Bob’s Discount Overhauls” do the engine. But he mentioned Zephyr. That’s a recognized shop in the industry based upon what I’ve seen/read. There should be no reason for the A&P to refuse signing that I can see. Personally I’d be finding a new shop if I were the OP. Sounds like they are putting their kids through Harvard...
     
  13. GlennAB1

    GlennAB1 Ejection Handle Pulled

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    Well, only he can make that decision.
     
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  14. German guy

    German guy Line Up and Wait

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    Thank you very much for all your responses, they were certainly most helpful.
    I sent on Sunday an e-mail, requesting the shop to invoice us for the work they have already done, so that we have a clear cut.

    Monday we had another call, to which they came much better prepared and with a more open attitude. It turned out that the engine overhaul would include a brand new crankcase (Zephyr assumed a used one) and that they had $3,000 for crating, shipping, handling, profit and the handling of future warranty claims baked it. The overhaul itself was almost exactly $30,000. Considering the new crankcase, but otherwise identical contents compared to Zephyr (minus the one way shipping which was included in the Zephyr price), the quote now made much more sense and was pretty much on the same level as Zephyr, who quoted $27,900 with a used crankcase.

    Our maintenance shop was also willing to lower their markup to $2,000, the total now comes to $32,000 plus the costs for the for removal and installation of the engine. The overhaul is done by a pretty reputable engine shop for which I found quite a few recommendations on PoA and in the Mooney forum. It comes with a 2 year warranty.

    Please understand that I don't want to mention any names, as I still find the tone, the poor preparation and in-transparency of our shop's past communication unacceptable. I therefore feel that I neither have to warn other pilots, nor do I at this point want to promote them.

    I am glad, though, that things worked out OK. I received earlier today a formal quote, based on which I already placed an order.

    Oliver
     
  15. PaulS

    PaulS Final Approach

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    Glad it worked out Oliver. Now I hope they deliver.
     
  16. Ravioli

    Ravioli En-Route

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    All in all, a good discussion with some lessons for the plane owner and the shop owner.

    Now get that thing back in the air, schnell!
     
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  17. Isosceles

    Isosceles Pre-Flight

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    could not help it...
     
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  18. SkyDog58

    SkyDog58 Final Approach

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    What goes here?
    Sounds like comparing apples to apples is a better idea than comparing apples to oranges.
     
  19. UngaWunga

    UngaWunga Cleared for Takeoff

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    Funny how actually communicating solves problems. Good to hear.
     
  20. blueskyMD

    blueskyMD Pre-takeoff checklist

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    what the shop doing to you is totally unfair and there is no way to justify this. I am pretty sure they will be able to keep their lights on without the 20% markup on engine but this is just simply greed. I am always OK with markup on the parts but markup on services done by others is unheard of. But your situation is messy and there at no good options. sorry
     
  21. Paulie

    Paulie Line Up and Wait

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    No markup on services done by others? It's done by many different businesses. What about magneto overhauls, the engine shop probably sends them out, so that's a third hand outsource. Fuel servo overhaul? How many engine shops do you think are willing to buy the equipment to do that? Radio repairs? Do you realize how many specialized shops there are in the aircraft industry?
     
  22. Kelvin

    Kelvin En-Route

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    Math is hard...

     
  23. Paintyourplane.com

    Paintyourplane.com Filing Flight Plan

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    As a shop owner, we incur cost in many ways while servicing your plane. Even while the parts are off to third-party vendors, we are still storing your plane, covering it by insurance, and it is taking up space in our shop. we do incur admin cost, shipping and labor cost. Material cost for crating. Now we use a sliding scale on the total amount too. There may be a 200% markup on a bolt but an 8% markup on a $10,000 part.
     
    Last edited: Jan 27, 2018
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  24. coloradobluesky

    coloradobluesky En-Route

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    It costs money to order and receive parts. Frequently, getting the RIGHT part is the hardest task of the job. Same with shipping out a unit for repair and getting it back. Shop needs to be compensated somehow.
     
  25. Paulie

    Paulie Line Up and Wait

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    Jeez, it kills me how guys think nothing of spending $6k to get their Porsche tuned up but scream when a mechanic tries to make a living. There's a guy on my field that wants me to sign off a engine he's building. For free. It's just a signature no effort he says. Fat chance. Meanwhile he spent $50k on cars last month.
     
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  26. Isosceles

    Isosceles Pre-Flight

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    Aviation mechanics have to be poor. It's the only way to overcome the liability. They won't sue if you got nothing to lose :)
     
  27. Derek Zeanah

    Derek Zeanah Pre-Flight

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    I think a lot of folks are looking at this from too close, and are lacking perspective here.

    My mechanic gives me the option of buying parts myself or letting him do it. If he does it he charges a mark-up, as you'd expect. This is fair - if it's the wrong part, he makes it right or eats it. If the part fails, he deals with sending it back to the manufacturer and gets a replacement part on his dime. If I buy the part, that's all on me. That's enough that I prefer to have him buy the parts most of the time, and the additional 20% is worth it to me.

    Now, with an engine as the OP indicated, this gets different. Suddenly the OP is on the hook for buying a $30,000 engine that the local mechanic wants (presumably) $6,000 for sending to the engine shop, receiving it, and installing it. Issues with the new engine are to be handled by the airplane owner, period. The owner can't use the shop of his choice that quoted a lower cost for reasons that aren't explained. That $6,000 as originally discussed wasn't the cost to remove, package, ship, reinstall, and test - that was an additional cost.

    I think it's fair to ask your mechanic "what service are you providing for this four-figure sum you're asking to be paid?" In the OP's description, as originally indicated, the answer was "not just nothing, but less than nothing, because we are forcing you to use an engine shop whose reputation you don't respect, that costs more than a name-brand shop you would normally choose."

    That ain't right.

    Yes, mechanics should charge a mark-up in most cases - it's good business, and they need to be compensated for fronting the money for the purchase and dealing with any issues that pop up.

    But if I want to buy a new $40,000 engine from CMI and ship mine back as a core, is that a reason for a mechanic to bill me $8,000 in addition to the cost to remove/ship/install the old/new engine? I think it's reasonable to say "no, I don't see how this is a fair charge, because you're not doing anything in this transaction other than forcing yourself to be an unnecessary middle-man."

    It's a fair perspective to have. And it's not an anti-mechanic perspective. Most of us expect some sort of value in return for the money we pay. I see no value in the scenario as originally presented.
     
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  28. PaulS

    PaulS Final Approach

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    Let us know how that works for you when you have your own ac mechanic shop. The people who think this way would have their head spin until it twisted off and fell on the floor if they knew how much "mark up" they pay at retail stores.
     
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  29. Derek Zeanah

    Derek Zeanah Pre-Flight

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    OK, Paul. I understand your perspective. It's work, you need to stay in business, cash flow is king, and so on.

    So how about a direct question, which I hope has a direct answer. If I come to PaulS's Airplane Shop and say "PaulS, I need a new engine, and I looked on Continental's site and they have a rebuilt O-470R that I'd like put into my plane. CMI charges $32,642 for that engine, and I'd like you to remove my current engine, package and ship it to CMI, and install the new engine once it shows up." You're going to tell me "the cost is $x,xxx to remove/package/ship/reinstall your engine, plus I'm going to charge you $6,528.40 for the CMI engine instead of letting you pay CMI directly, and if there are any issues I'm going to charge my full labor rate and force you to deal with CMI directly for remedies."

    That's essentially the situation the OP described in his initial post.

    My question to you is this: what exactly am I getting in return for that $6,528? Other than the knowledge I'm helping keep your shop open?

    There are valid answers here:
    • I'll cover labor for any issues that pop up with new engines, because we know a new engine from CMI should be (but isn't always) perfect.
    • I'll cover warranty work and deal with CMI for compensation, so if you need a new cylinder in the warranty period I'll buy the cylinder, do the work to install it, and deal with CMI.
    • Maybe it covers the cost of dealing with the engine and accessories that need to be serviced too. Maybe it covers installation (not as described by OP). Maybe there's some other value here.
    I think the wrong answer is "you're going to pay it because you're stuck with me and most mechanics charge a mark-up so stop whining and just be thankful you're not having me as a middle-man for a turbine engine you whiny bastard."
     
  30. PaulS

    PaulS Final Approach

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    Derek, your scenario about PaulS's airplane shop isn't what happened. Have you read through all of the OP's posts, suggest you do if you haven't. My take on this shop is that it has tried to work customers as you described and it turned into a nightmare for them as mistakes either by the engine shop or the customer were made and this shop had to sort it out, then the customers told this shop to screw when it asked for compensation for handling problems the customers were supposed to handle. I've had similar things happen, in another industry, you either get paid for what you do, or you go out of business.
     
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  31. Salty

    Salty Pattern Altitude

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    It sounds like you think it's ok to charge $6,000 AND have zero risk of any issues you have to deal with. Again, what exactly is the $6,000 getting the customer besides the pleasure of your company?
     
  32. PaulS

    PaulS Final Approach

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    First, you need to read the rest of the posts too to see what happened beyond the first post. But to answer your question, the $6000, or what ever the markup is covers things like shop rent, heat, tools, electricity, insurance, taxes, employee costs and the myriad of other expenses someone there to service your airplane incurs. It also covers part of what it costs to handle the inevitable, a screw up beyond the shop owner's control, if things go great, then the owner profits. Profit is why these guys are in business and it isn't determined by some guy on the internet who has no idea what running a business is like, then decides it is too much.

    In the end the OP talked it out with the business owner and ended up satisfied with how it is supposed to happen, I don't think we've heard any more from him as to how it went.
     
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  33. Salty

    Salty Pattern Altitude

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    I'm paying you $6,000 to run your business, then you shouldn't be charging me a markup on parts, or anything more than the exact amount you're paying the specific employees that work on my plane, actually no, there should be no hourly rate, since I just paid you for "employee costs". I might as well buy the tools, heat, hangar space, employees myself.

    Thank you for reminding me how lucky I am I don't have to deal with shops like that.
     
  34. Derek Zeanah

    Derek Zeanah Pre-Flight

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    It's been a day or so, but I've read the thread. And the explanation the shop offered made this situation a bit better than the original post suggested, but refusing to write an estimate is a questionable business practice in my opinion, and I wouldn't choose to do business with a shop that wouldn't give a written estimate. I'm one that understands that "estimate" doesn't necessarily equal "final bill" either - I'm a pretty reasonable guy, and I just want to be treated fairly by a competent mechanic, and I want to pay him a fair wage too. My mechanic has expressed that I'm one of his favorite customers, and that's because I'm reasonable in my expectations, I work to understand mechanical issues while giving his expertise the respect it deserves, I pay his full rate on-time, and I'm not a jerk.

    That doesn't mean he treats me like an ATM though. I expect fair value for fair pay.

    I understand if past issues have made a shop wary of dealing with customers whose expectations don't line up with reality. This may come across as controversial, but I'll bet most aircraft owners have never dealt with an issue like replacing an engine and have no idea what reasonable expectations are. I believe it's your job to explain what a customer is in for. Something like the following (and I may not get all these issues correct - I've never done it) on the quote would probably be enough to eliminate most problems that might pop up:

    As a customer something like that would seem fair and easy to understand. Much more so that "gimme 20%. Don't ask questions."

    :)
     
  35. Bell206

    Bell206 Pre-takeoff checklist

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    The one thing that is missed in these latter posts is that the OP authorized the initial work without a written estimate or quote. Whatever transpired after that, whether right or wrong, made for a very slippery slope to move forward.

    Then when the bills started to build everyone wanted out. It became the proverbial he said/he said which nobody wins without a written agreement. So while your comments on the original issue hold some merit they are made with hindsight not foresight and tend to skew the original problem and its resolution. Plus without any input from the shop we will never know the complete story.

    As for the markup of services, parts, etc. it happens in every business. That is Business 101. But for some reason in aviation it is always looked at with a suspicious eye. I’ve never figured that out. Ever wonder who paid for the shopping carts at Walmart? I can tell you it wasn’t the Walton family.
     
  36. Derek Zeanah

    Derek Zeanah Pre-Flight

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    That is very, very true.
     
  37. Salty

    Salty Pattern Altitude

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    A markup on parts, sure. A markup on an outsourced service, that you are providing no value add on? No, that is not cool.

    It's like going to a sit down pizza place, and they call domino's and order the pizza for you and add 20%, plus they still charge you for the drinks and a "fee" for the chef's time that they have to employ (even though they are doing nothing in the transaction), and another fee for the waiter to give you the drink you ordered. The pizza is delivered by domino's not the waiter. Then, if there are anchovies that you didn't want, you have to call domino's to complain about it. And, if you don't like Domino's. Too bad, you can't ask for Papa John's.

    It's insane.
     
  38. Bell206

    Bell206 Pre-takeoff checklist

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    Curious, have you ever owned/managed a full-fledge service business? One of the main reasons 75% of all new businesses fail in the first 18 months is loss of cash flow. They don’t charge enough to cover their overhead which includes “outsourced services.” The other side of the coin they charge too much and don’t engage the customer base they need to cover their overhead plus make a profit.

    So on the aviation side, how would you prefer I cover my overhead and earn a profit each month: charge you a day rate regardless of the work you request which will guaranty my overhead/profit and chase you away as a customer; or charge you a fair hourly wage with appropriate markup for the work I perform?
     
  39. Salty

    Salty Pattern Altitude

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    Obviously, the only way to stay in float in a "full-fledge service business" is to charge every customer 3 times for the same service. :rolleyes:

    You're not being honest if you pretend your hourly rate is $50 but your clients are actually paying $300/hr.

    It's not the client's job to figure out how to calculate your job rates and hourly rates. Charging for everything 3 different ways is usually only necessary when you are trying to defraud or launder money.
     
  40. Norman

    Norman En-Route Gone West

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    This discussion reminds me of a customer our shop had in the early 2000'. He wanted oil filters installed on his Baron then pitched a hissy when the oil change prices went up. He had the stones to come into our hangar when the boss wasn't there and ask me if I would moonlight on his plane. I made it perfectly clear to the skinflint I would not be so disloyal to the guy who employed me. We never saw him again and didn't miss him.
     
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