Why spend money on a TDM support contract?
Updated: May 13, 2021
Buying yourself a new car is always exciting. You look forward to driving it and usually have considerable peace of mind knowing that it's covered by various warranties should the unexpected happen. You entrust completely the manufacturer’s authorized dealers to perform service and support on the vehicle, at least for the first few years. But inevitably, sometime down the line, when the warranties are expiring, the manufacturer offers you extended warranty and servicing at a premium cost, but you know that more affordable options are available through local garages or service centres should you need it. We have all been there and in the end it's a matter of risk management, but is it any different for FSTDs?
If you own and operate a Flight Simulation Training Device (FSTD) it’s normal that the Training Device Manufacturer (TDM) offers to sell you an on-going support contract beyond the initial warranty period. This week we discuss the pros and cons of such contracts compared to just buying your support as, when and if you need it.
What are the TDMs liable to offer
Most contracts will offer support to the FSTD operator to fault find and correct in service defects and/or crew reported deficiencies (where the simulation does not meet requirements) that the FSTD operator maintenance team may not have the expertise for. These services will normally be delivered remotely, over a VPN secured internet connection and are sometimes subject to a cap on the annual number of hours they will support you for.
Inclusive site visits
These normally take the form of an annual entitlement of days on-site by the TDM’s staff. One of the big drawbacks of inclusive visits is that the person the TDM sends to site is liable to be a generalist or, if a specialist, one in just one aspect of the FSTD design and operation. It is quite probable that not all the problems presented to the person attending your site will be corrected during the visit; "I’ll get back to you on that" unless a clearly defined list of issues is agreed with the TDM prior to the visit.
Aircraft On Ground (AOG) services
We have seen a lot of support contracts including AOG support in them, whether remotely or with guaranteed response times to have their personnel or spares at your site within a given timeframe. It could however be argued that the TDMs should be providing at least basic remote support regardless of any support contract.
Spare Parts Services
Some TDMs will also offer inclusive spares contracts. Most of these are based upon an annual fixed payment for which you will receive replacements for any parts that fail. These are normally limited to rotable parts (those that can be repaired) and exclude consumable parts (those that cannot economically be repaired or have a limited life). They are often linked to on-site spares consignments; this can be good in that it saves the initial out-lay for spares but it does mean that you are tied to the contract unless you eventually buy spares of your own.
It is prudent to ensure that the service includes advance exchange parts (that you honour the return policies) and that you are clear about the scope, for example are third party systems and Commercial Off-The-Shelf (COTS) parts covered. If it is only the parts designed and made by the TDM, given the increased number of COTS parts, the price should reflect this.
Be under no illusion though, these contracts are not intended to be, in any way, an alternative to holding spares on site, be that on consignment or purchased outright.
What is unlikely to be covered are things such as mandated updates whether they be regulatory or aircraft or TDM mandated field service bulletins. None of us have a crystal ball good enough to predict what these might be usually but if you do then it's worth thinking about how they might be included in a support contract (we’ve not heard of any operators who have had UPRT updates implemented under a support contract thus far).
Although unlikely to affect your FSTD in the initial years of operation it is not usual that full or meaningful obsolescence protection will be covered under most support contracts. The clauses we have seen are sometimes heavily caveated to the point of being valueless. There is a separate blog devoted to managing FSTD obsolescence.
What about my warranty?
Good question, why on earth would you need to have a support contract while the warranty is still valid? Your TDM will probably extol the virtues of having regular support visits and access to advance exchange parts; but it could be argued that there is less of a need for this these days. FSTDs have become increasingly commoditized and standardized in their production and consequently more reliable from day 1; so the TDM should be ensuring their product exceeds reliability expectations. Before even thinking about a support contract first make sure the warranty you are being offered is comprehensive and without too many caveats.
What if my FSTD has a Product Load?
We discussed the advantages and disadvantages of Product Loads in a previous blog; taking out a support contract is a way of mitigating some of the disadvantages of product loads if it means that the TDM will keep you up-to-date with their latest Product Loads after warranty has finished. Remember though you will still face the problem of getting your specific discrepancies corrected in new loads and the overhead of continually testing new Product Loads.
It is all a matter of risk management!
The positive for these support contracts for operators is that, at least for the services included in the contract, they have a fixed price that can be budgeted for allowing the risk of an unplanned for surprise being mitigated. To pass these risks on properly it is important to ensure that there are clear targets in the contract and that the TDM accepts meaningful Liquidated Damages (LDs) should those targets be missed, contracts on a "best efforts" basis are arguably worthless. Of course, transferring risk will always attract a premium price, the TDM would not be taking on that risk if they didn’t think the price they were charging more than covered the risk they are taking on. All that said TDMS do have the advantage of being able to spread any risk over a number of customers and devices (just like the car manufacturer).
So, are they worth buying?
If you are buying your first FSTD and have no experience of running one it is certainly worth considering taking out one for peace of mind until your FSTD maintenance team have some experience that is particularly relevant to a spares service. Even then though we suggest, in the longer term, your money might be better spent on training for your simulator technicians and additional spares. See our previous blog entitled Establishing Your Maintenance Team.
What we would highly recommend though is that you put in place a framework contract that specifies what support you will get as a matter of course from the TDM and what the TDM will charge you for; most importantly this should set out how much you will be charged and what response times will be. If you wait until your FSTD is out of service (AOG) and it requires the TDM to come to site to start negotiating the price of services you will not be best placed to get a good deal or your FSTD back into service promptly. Of course these are always best negotiated at the time you are buying your FSTD.
How can Sim Ops Help
The partners in Sim Ops have many years’ experience in both delivering the services on these contracts and writing the contracts themselves! We are well placed to assist operators in reviewing and re-writing any contracts you might be tempted into signing. Contact us here.