Service Cost and Wisdom

Why you, as a consumer, should insist on quotes for most of your service, repair and refit projects. Only you have the power to drive the industry to make this change
First published in PassageMaker Magazine, February 2011

Not long ago I wrote a column entitled "A Case for Quoting" for a marine industry trade magazine for which I'm a contributing editor. In the column, I threw down the gauntlet for boatyards, marine industry contractors, and, to some extent, boatbuilders (whom I'll collectively refer to as "service providers"), making it clear that they need to get savvy when it comes to quoting.

You see, in my work as a consultant for boat buyers and owners, the most common complaints have to do with cost— not necessarily the high cost of a product, project, or repair, but the angst, frustration, and anger that result from not knowing what the final cost will be. Indeed, I've had more than a few clients tell me, "I ask the service provider for an estimate, then I triple it and I have a number that I know is realistic."

Full-vessel electrical refits and panel replacements, while complex, are projects worthy of the quote process. For skilled, experienced, and preferably ABYC-certified electricians who carry out such work on a regular basis, preparing a quote not only is reasonable but also can yield benefits in the layout and material-acquisition phases of the project.

To my peers and colleagues in the industry, I submit that this is no way to win customer loyalty, admiration, or respect. Instead, it's a fast track to enmity, bitterness, and disputes. In the aforementioned column (which you can read at http://www.stevedmarine consulting.com/boat_brokers_dealers. php#caseforquoting), I shared another thought with those in the industry: expect more of your customers to ask for quotes. I insist upon it, and so does today's economy, although the latter reason really shouldn't matter. I would not accept a reversion to business as usual—i.e., customers needing to triple the estimates they receive— when our current economic woes fade from memory. Providing quotes must become the norm in this industry if it is to endure, and, like so many other changes, I believe this one will be driven by you, the consumer.

Time And Material Versus Fixed-Price Quotes

I routinely hear the terms "time and material" and "fixed-price quote" used in the marine industry. When I do, I often suggest to my clients that they request clear definitions of these terms from each and every contractor. My definitions, while typical, are by no means codified within the industry, which is why you must ask for clarification—in writing.

Time and material (T&M) means you will be charged a specified labor rate, which must be detailed in writing, for every hour spent aboard your vessel carrying out the agreed upon tasks. You also will be charged for the cost of all materials plus a reasonable markup; that is, for every pump, foot of wire, screw, pair of disposable gloves, quart of primer, sheet of sandpaper, etc. When the T&M approach is taken—and that shouldn't be very often—I would argue strenuously that the material markup should be based on the service provider's cost plus a percentage, rather than an arbitrary list price for the product that often isbased on a (fanciful) manufacturer's suggested retail price that no one should actually pay. By the same token, you should expect a markup; it's part of a service provider's profit formula, and without profit, there's no incentive. With the cost-plus-apercentage approach, if the provider gets a deal on a product because it's on sale or because it has been purchased in bulk, the savings are passed on to you.

While there is a time and a place for T&M work, this type of estimate should be used in the minority of cases. Mechanical and electrical troubleshooting are good examples of instances where paying by the hour is appropriate, provided the folks carrying out the work are skilled and efficient. Remember that T&M rewards inefficiency—the longer it takes to complete a job, even if the service provider is not intentionally taking longer than expected, the more the provider gets paid. This is an undesirable position for the boat owner and, in my opinion, for the service provider, too, because it's the genesis of many billing disputes.

On the other hand, quoting—and I mean fixed-price quoting, not estimating—is an entirely different ball game and one that offers clear advantages for you and for the service provider. With quoting, you are offered a guaranteed, fixed price for a clearly specified project. You will pay no more and no less. You have an opportunity to think about the fee, and, if it fits your budget and you decide to proceed, you will be secure in the knowledge that the price will not change.

Because the service provider has carefully calculated the amount of work required, ideally he or she also will be able to establish a timetable. With this and the written quotation in hand, you'll have answers to the three essential pieces of the service puzzle: what will be done, how much will it cost, and how long will it take? Clearly, it's advantageous for you to know the answers to these questions, but it's also advantageous for the service provider. With a fixed-price quote, efficiency is rewarded. If a project is completed within the quoted time and within the budget for materials, the profit margin is guaranteed. The service provider has been rewarded for careful planning, skill, experience, and efficiency, and there is clear motivation for finishing the project—a tenet of quoting that lies in stark contrast to the T&M approach, which, as mentioned earlier, rewards inefficiency.

Taking Charge

When I discuss quoting with marine industry professionals, often they are reluctant to commit to what they consider a high-risk venture. T&M is safe, they argue, so why rock the boat?

If a service provider can't provide a fixed quote for routine work—and 75 percent of the work undertaken in this industry is routine—then your potential customers and your competitors will question whether you are skilled enough to successfully complete the project. The good news is that most experienced professionals are much better at quoting than they realize, and once they try it, they see it's not very difficult. The rewards are clear: happier customers, fewer billing disputes, and, often, higher profits. Additionally, in my experience, folks on the shop floor work with a renewed sense of urgency when a project has been quoted.

As the consumer, you are at the helm. If the service provider you use or are considering using doesn't quote and isn't willing to start, go elsewhere. You have the power to make this shift in the industry.—Steve D'Antonio

More on what you should expect from the marine industry
First published in PassageMaker Magazine's Channels e-Newsletter March 2011 vol. 1.

As I sit in my office quietly contemplating a series of exchanges between a client and the owner of the shop that recently completed a very expensive refit, one word comes to mind: exasperation. Hold that thought.

Building and repairing boats and designing and installing complex engine, plumbing, electrical, and electronics systems are all challenging yet rewarding tasks, to be sure. I've undertaken this work for my entire professional career, from bottom painting to electrical panel replacement, and while it was never fun hanging upside down in a narrow bilge on a hot summer day wiring a pump, knowing the pump would work reliably because I had installed it correctly was, and remains, immensely satisfying. All of the aforementioned tasks and many others in the world of boats have one thing in common: without accurate information and instructions, they cannot take place successfully.

I routinely inspect vessels, both factory fresh and pre-enjoyed, whose myriad and complex systems lack what should be considered a basic necessity—documentation and instructions. Not knowing whether this is standard practice in the industry, many owners ask me, "Steve, isn't it just common sense that I should expect instructions, diagrams, or documentation with this installation? How would I know how to use this or what to do when it doesn't work?" Indeed, these are valid questions, and ones you've likely asked yourself at some point in your boat-ownership life.

WHAT TO EXPECT

So, what are reasonable expectations? Considering that you've probably spent a great deal of money on your boat and/or on the work that was carried out, I believe it's appropriate for your expectations to be high. For instance, new vessels should come with schematics or diagrams for electrical systems and all plumbing systems. If you have electrical or electronics work carried out on your boat, part of that installation or repair should include preparation of a diagram that clearly indicates what was done.

When I point this out to boatyards or other installers, they often scoff, saying, "Do you know how much time that would take? No one wants to pay for that." I have two responses: One, let the customer be the judge of what he or she wants to pay for. If you offer it as the default—i.e., as part of the job—I suspect few will want to omit this work for the perceived savings. Two, think about how much it will cost the owner in troubleshooting time if this documentation is not supplied (or, worse, how much it will cost for someone else to track down a problem years later when they are a thousand miles away and none of the wires, switches, or fuses are labeled).

Another retort I hear from the folks from whom I expect such documentation is, "We can't justify the CAD program and operator training for creating these schematics." This is either a simple misunderstanding of the expectations or an excuse for avoiding the responsibility of providing the information to the client. Let me be clear: I don't expect computer-generated schematics using electrical engineering argot and symbols. On the contrary, a neatly drawn diagram that simply illustrates placement of the components, indicating where they are located aboard the vessel, if it's not immediately obvious, and lines connecting them, along with any relevant notes, will often suffice. This should be a standard part of all but the most basic electrical installations. A PDF scan of such a diagram enables the owner to keep an electronic copy as well as a printed copy, and the yard/installer can retain a copy for future reference. To omit this vital step in the building, systems installation, or refit process of a new boat is simply irresponsible, and you should expect—nay, demand—more.

Along similar lines, consider how utterly confusing a series of valves can be if they are not clearly labeled. For that matter, consider the consequences of encountering a single valve that's not labeled—is it the raw-water intake for the engine, or an overboard discharge for the sanitation system? I'm not exaggerating when I say that I routinely venture aboard new boats made by well-respected, quality builders and find dozens of unlabeled valves. Recently I worked with a vessel owner who, when asked about manipulation of the fuel system manifold valves, said, "It all works, so don't touch them. I'm not sure what they do, anyway." Small wonder—most of the valves aboard this new boat were unlabeled. Folks, this is simply unacceptable, and you need to let it be known that you expect more.

Let's return to the exchange between the owner of the recently refitted boat—a refit that cost hundreds of thousands of dollars—and the yard that carried out the work. The source of the client's frustration, and my exasperation, was the yard's failure to provide the necessary documentation. Such documentation would have made the delivery of the vessel and its subsequent use a seamless and, if not completely stress-free, at least low-anxiety transition for the owner. Imagine—the vessel is now filled with new, complex equipment that wasn't there before, it is hundreds of miles from the yard, and the instruction manuals that came with the gear are disorganized and, in some cases, absent altogether, as are warranty and registration cards. The owner doesn't know where to start, because he doesn't know what might be missing. Additionally, he's not even sure where to look for a blown fuse when a set of cabin lights stops working.

If the boat owner does receive instruction manuals for each piece of gear, in many cases they do not explain how the various pieces work in unison. The responsibility for supplying this information lies with the installer or the installer's manager. He or she must take the time to explain the operation to you verbally and write it down, with diagrams if necessary, for future reference or for reference by the next owner. I'm not suggesting this be done free of charge; on the contrary, it's part of the job, just like tie-wrapping wire bundles and making sure all connections are properly crimped and all bus bar screws torqued. This all-too-important aspect of so many tasks must be carried out, and it's worth paying for.

ASK AND YE SHALL RECEIVE

Here is a list of reasonable expectations you should have for any boatbuilder, boatyard, or specialized contractor:

• Every fuse and circuit breaker must be clearly and permanently labeled.
• Wires should be labeled or numbered at both ends. If numbered, the numbers should correspond to an accompanying diagram.
• All but the simplest of electrical/electronics installations or refits should include a wiring or layout diagram.
• Installation manuals and owner's manuals must be supplied upon completion of the project; they should be neatly stored and must include warranty or product registration cards.
• Equipment model numbers and serial numbers should be recorded; these can be written in the instruction manuals.
• Every valve—including seacocks and overboard discharges—should be clearly and permanently labeled.
• Installed gear that requires setup or initialization should be so initialized by the installer, unless specifically instructed otherwise. Battery chargers, electrical system monitors, autopilots, and alternator regulators come to mind. Setup is part of the job; it's unreasonable for the installer or boatbuilder to expect you to do this, unless you specifically request this option.
• A list or diagram of fuses used aboard, and a list of replacement fuses for the owner to purchase, should be provided.
• The installer should walk the client through the location of key fuses/circuit breakers and their operation.

Avoiding the Boat Yard Blues
First published in Cruising World Magazine April 2011

I've worked in the marine industry for 23 years as a mechanic, electrician, and boatyard manager, and I work now as a consultant for boat buyers and owners. Exposed to the inner workings of this somewhat enigmatic business, I've learned a few lessons. Chief among these is that when it comes to maintenance, repair, and other boatyard work, vessel owners should leave as little to chance as possible. Because the cost of boat ownership isn't likely to go down, and because a properly built and maintained vessel is one that's likely to bring you back to the dock at the end of the day, it pays for you to become and remain as involved as possible in refit, service, and repair projects.

When I converse with boat owners on the subject of their interaction with boatyards, the discussion invariably turns to cost or, more precisely, to the unpredictability of the cost of maintenance or repairs. On many occasions, I've heard boat owners say, "I take whatever the yard tells me about the cost and I triple it. Then I know what the job will really cost," or words to this effect. Having said that, I'm convinced that most boatyards and marine contractors aim to please, and they want their customers to return.

The solution to this problem, clearly, is to emulate other industries in providing boat owners with fixed-price quotes. A few months ago, I wrote a column on this very subject, imploring marine professionals to get savvy on the subject of quoting because it's likely that more and more owners will shun yards that can't offer this level of cost predictability. I strongly believe that this process, when adopted, will provide a sea change in the way the industry is perceived by consumers. Admittedly, it's not an easy leap to make; however, the rewards, in my experience, are undeniable.

T&M vs. Fixed Quote

I routinely hear the terms "time and materials" and "fixed quote" used within the industry, and when I do, I often suggest to my clients that they ask for clear definitions from the contractor. My definitions of these terms, while typical, are by no means codified within the industry, which is why you must ask for clarification, in writing, before committing to any work.

In most cases, when you cruise into a boatyard or work with a marine contractor—this can include anyone from engine mechanics and electronics techs to riggers and varnishers/painters; from here on, I'll simply refer to all folks carrying out work as "boatyards"—you may have a choice as to how the work will be invoiced. A common approach involves charging for the time that the project takes as well as for the cost of the materials, plus a reasonable markup for these materials. When I managed boatyards, customers would occasionally ask what I paid for materials or what my "markup" was. While some yards are reticent about sharing this information, I was unabashed in my explanation; the markup on materials is part of the yard's overall profit plan, along with the markup on labor. Remember, the yard's goal is, understandably, to make a profit, and that's its incentive to work harder and smarter. Expect to pay the markup, provided that it's not exorbitant; it typically ranges from 10 percent to 40 percent, depending upon the product or part.

This concept—carrying out work and being paid for how long it takes, however long that may be; it's often referred to simply as T&M—has been around for many years, and it's well entrenched in the marine industry. Many boatyards prefer to work using this approach. When I discuss this concept with managers and yard owners, the refrains are familiar: "T&M is safe" or "We can't get burned because you really can never tell how long a repair or project is going to take." The notion is that most undertakings of the marine variety are such an incredible shot in the dark that no boatyard would dream of any billing approach other than T&M. With this approach, risk is minimized—to the boatyard. The boat owner really has no idea how much the project is going to cost, and in many cases, the boatyard doesn't know, either. Thankfully, an alternative exists: fixed-price quotes.

Quoting is just that, a quotation for a specific project, repair, refit, or upgrade, and it's a game changer to be sure, as it offers clear advantages both to you and to the boatyard. For you, the consumer, it affords you the opportunity to consider the proposal as well as compare it to those provided by others. You can also plan and budget for the project secure in the knowledge that the price is fixed.

When I hear that a boatyard won't quote a clearly quotable job, I have two thoughts. The first is that there's always a fear of the unknown, and most boatyards, when they do undertake quoting, are much better at it than they believe. It takes some practice, the implementation of a quoting program, and employee education; however, it's clearly doable. As I mentioned earlier, other industries use this format with great success, and the marine industry shouldn't be the exception. My second thought is that these folks do this work day in and day out, and they've done it for years. The collective wisdom of some yards is often vast and spans many decades. If they can't tell you how long it'll take and how much it'll cost to carry out routine projects, I'd question their ability to undertake the work altogether. Finally, based on my experience, when the folks carrying out the projects know it's quoted, they tend to work with a greater sense of urgency, particularly if management invests them in the quoting process, as it should.

Now that I've made the case for quoted rather than T&M projects, I must admit that not every job can be quoted. Mechanical and electrical troubleshooting, for instance, isn't the type of task that any experienced professional would or should quote; however, it does pay dividends for you to ensure that the folks carrying out the troubleshooting are experienced, well trained, and, where applicable, certified by the American Boat & Yacht Council, for electrical work in particular. In this case, efficiency rather than a fixed price is the goal. Small projects are also typically not quote-worthy. Remember, the yard has to spend time researching and preparing a quote; it makes little sense for this to be done on a job that may take fewer than eight to 10 hours or to cost less than $1,000.

Projects that do lend themselves to quoting are, among others, hull and deck painting, varnish, hardware and equipment installations, and complete vessel refits. Expect a reasonable number of caveats with any quote; however, when I wrote quotes, I was careful not to make too many exclusions, which negates the value of a quote. If a boatyard drills into your deck to install a radar mast or winch, and the bit pulls up sodden, rotten balsa core, expect the quote to be amended.

Good Communication Is Key

There's an easy way to avoid misunderstandings and disputes, and it involves the simple act of placing all of your communication with a yard in writing. Avoid stopping yard employees midstride and verbally dictating work requests or modifications to current projects. You should only be making these requests to those who are authorized to take them—managers and service writers, for instance. Be sure to follow up the conversation with an email reiterating your thoughts. If your vessel is in the midst of a refit or a major undertaking such as an engine replacement, rewiring, or paint job, it's reasonable to expect weekly updates. Smaller projects may require you to request an update. All reports and updates should be received in writing. You should also be made to feel welcome to visit the yard during any repair, refit, or service work.

However, be sure to remember that whether the project is quoted or T&M, time is always money, and if you stop in and chat with the folks who are doing the work, you're costing either them or yourself money. Thus, it's best to minimize the time you spend shooting the breeze with hourly folks. Managers, on the other hand, should give you as much face time as you need.

If scheduling is important to you—and it should be, because projects without schedules often languish—then you should have this discussion with a manager before making a commitment to proceed. Part of that discussion should include the yard's protocol for dealing with projects that fall behind schedule. There are few things worse, when dealing with a boatyard, than finding out on the day before your scheduled departure date that your boat won't be launched and commissioned anytime soon. Depending upon the size of the project, the yard should be able to give you ample warning when it appears that work won't be completed on time. The larger the project, the more notice you should be given.

Finally, for especially complex or large projects, you may wish to call on the consulting services of an independent expert, such as a surveyor, a naval architect, or a mechanic, who has no affiliation with the yard. Boatyards that are confident in their work should have no problem discussing a proposed project or having another professional inspect their work. Again, note that if you have any intention of doing this, it's worth discussing it before the project or repairs begin.

Do Your Homework

The next time you sit down with your boatyard manager to discuss a repair, maintenance, refit, or installation project, be prepared with a few questions about the boatyard's pricing method.

• Do you quote work, and if so, what are the terms of the quote? What's the yard's definition of a quote? Is the price fixed, or is it an estimate?
• For projects that will be billed for time and materials, what's the material markup protocol?
• Is the yard's workmanship guaranteed? What happens if I'm far away from the yard and someone else has to undertake repairs?
• Will the work be carried out according to American Boat & Yacht Council standards? If so, are the folks doing the work A.B.Y.C. certified in the appropriate discipline (there are eight certifications) or supervised by those who are?
• If the work is quoted, is it billed in segments as the work is carried out?
• How often are invoices sent out? Can I call or email someone for an an up-to-the-minute progress report—or at least one that's complete through the previous work day—on the amount of work that's been finished or invoiced? Timely invoicing is important, particularly for T&M work. You definitely want to avoid being slammed with a huge invoice after the work on your boat is completed or nearly completed.