Electronic Equipment Service Contract
Global Consolidated Industries
(GCI) has for years had an in-house electronic equipment maintenance
department. It has been responsible for providing maintenance (such as
periodic cleaning and lubrication of moving parts) and repair (fixing
machines when they break down) on thousands of printers, photocopy
machines, FAX machines, scanners, and so forth. The experience, in a
word, has been a disaster. On most days, secretaries can be seen
running from floor to floor and pushing in line to use other machines
when theirs are inoperative. Even the CEO is often heard screaming
about memos being late, meetings having to be rescheduled, and other
headaches caused by out-of-order equipment.
GCI has decided that it is time to contract out for these services. As
a member of GCI’s general counsel’s office, you have been
called in to participate in the contract negotiations with the outside
service provider, Reliable Response Repair (RRR).
RRR has offered two contracts for your consideration. Under one
contract, RRR receives a flat rate per machine each contract year. (For
example, there is a $200 per year charge for a standard, mid-size
photocopy machine.) Under this arrangement, RRR is obligated to provide
all necessary maintenance and to repair broken-down machines promptly.
Under the second contact, RRR is paid $75 per hour (plus parts) for all
maintenance and repair services. Under this arrangement as well, RRR is
obligated to provide all necessary maintenance and to repair
broken-down machines promptly.
Explain the pros and cons of each of the two contracts. Which seems
best? Can you think of additional terms that would improve it?