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

[Bell206]

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

Obviously, you never have owned a business. But I don't quite follow your thought train.

You come to my shop for an engine overhaul. I give you a written estimate with a $50/hr labor rate and an itemized A-Z list of other charges. Complete turn-key. At the bottom is the total cost. You accept it or not. As you said it's not the clients job to figure out my rates or costs. So where is the fraud or money laundering?

How would you charge for such a job? I'm always open to new ideas.

 

[Salty]

Obviously, you never have owned a business. But I don't quite follow your thought train.

You come to my shop for an engine overhaul. I give you a written estimate with a $50/hr labor rate and an itemized A-Z list of other charges. Complete turn-key. At the bottom is the total cost. You accept it or not. As you said it's not the clients job to figure out my rates or costs. So where is the fraud or money laundering?

How would you charge for such a job? I'm always open to new ideas.

I certainly wouldn't charge you an extra percentage on top of work someone else did. If I'm not adding any value to that transaction I'm not going to charge you for it. If I have expenses due to your project, I would bill you appropriately for those expenses in a way that reflects the services I am providing you. Billing you an add-on fee for work someone else is doing is not expressing to you anything meaningful other than that I want more money out of you, it does not help you understand the value I am giving you for that money.

I also think it's unethical to force you to buy an engine from one provider. Especially if I'm not standing behind their work anyway. There's no legitimate reason for this unless I am willing to stand behind the provider.

 

[Bell206]

If I have expenses due to your project, I would bill you appropriately for those expenses in a way that reflects the services I am providing you.

So, your engine overhaul estimate to me would be itemized in this fashion?

3) Engine Overhaul at Acme

• Acme Engines O/H: $10,000.00
• 10 Hours Labor for discussions with Acme: $500.00
• 20 Hours Labor for discussions with client on engine overhaul: $1000.00
• 20 days shop electric cost: $135.00
• 20 days shop storage: $300.00
• 20 days shop insurance coverage: $175.00
• etc, etc, etc

it does not help you understand the value I am giving you for that money.

Trust me. You’ll never have a customer ask about the value you are giving them. They will only say you’re trying to steal their money through fraud and money laundering.

I also think it's unethical to force you to buy an engine from one provider.

This is strictly a personal decision by the shop. I always allowed pilots to select 3rd party vendors provided they had a good track record, provided a serviceable item with the proper documentation, and completed the work in a timely manner that would not screw up my schedule. Short of that, I would decline the job or use one of my vendors.

 

[bradg33]

So, your engine overhaul estimate to me would be itemized in this fashion?

3) Engine Overhaul at Acme

• Acme Engines O/H: $10,000.00
• 10 Hours Labor for discussions with Acme: $500.00
• 20 Hours Labor for discussions with client on engine overhaul: $1000.00
• 20 days shop electric cost: $135.00
• 20 days shop storage: $300.00
• 20 days shop insurance coverage: $175.00
• etc, etc, etc

Trust me. You’ll never have a customer ask about the value you are giving them. They will only say you’re trying to steal their money through fraud and money laundering.


This is strictly a personal decision by the shop. I always allowed pilots to select 3rd party vendors provided they had a good track record, provided a serviceable item with the proper documentation, and completed the work in a timely manner that would not screw up my schedule. Short of that, I would decline the job or use one of my vendors.

When your customers selected the 3rd party vendor, did you still mark-up the vendor's charge?

 

[Salty]

So, your engine overhaul estimate to me would be itemized in this fashion?

3) Engine Overhaul at Acme

• Acme Engines O/H: $10,000.00
• 10 Hours Labor for discussions with Acme: $500.00
• 20 Hours Labor for discussions with client on engine overhaul: $1000.00
• 20 days shop electric cost: $135.00
• 20 days shop storage: $300.00
• 20 days shop insurance coverage: $175.00
• etc, etc, etc

Trust me. You’ll never have a customer ask about the value you are giving them. They will only say you’re trying to steal their money through fraud and money laundering.


This is strictly a personal decision by the shop. I always allowed pilots to select 3rd party vendors provided they had a good track record, provided a serviceable item with the proper documentation, and completed the work in a timely manner that would not screw up my schedule. Short of that, I would decline the job or use one of my vendors.

Your electric bill is not my concern. Your overhead is not my problem. The bill should reflect the value you are providing me. At best that might mean storage of my plane in a controlled environment. Not your electric bill. That doesn’t mean you aren’t allowed to make a profit. It means you figure that out and bake it into the hourly rate so that I can decide BEFORE I bring you my plane.

The “discussions” costs should be rolled up into the service of managing the overhaul for me, which of course would have a real cost.

 

[Bell206]

When your customers selected the 3rd party vendor, did you still mark-up the vendor's charge?

Depends. If the plane stayed in his hangar, no. If the plane stayed in my shop yes to cover the costs.

 

[Bell206]

Your overhead is not my problem

This is where your theory looses traction. To follow your method I would need to calculate a labor rate to capture all overhead for each separate job. When you call an electrician you probably ask him how much per hour. With your method that electrician couldn't offer a rate until after he looked at your project.

Life and business ownership doesn't work that way. While your plane is in my hangar sitting I can not bring in another to offset the loss revenue. Take your engine project. Curious, how would you expense out this overhaul out to me if you were doing it for me... before you started? And how would you supplement that estimate as things changed?

Regardless, this type of discussion would not happen most of the time. I would simply present you a estimate to overhaul your engine before you brought the plane. You would accept then or not.

So does it bother you as much when you go to Walmart to buy a quart of oil for $4.65 and $1 of what you paid bought the oil and the other $3.65 paid wages, keeps the lights, and provides a "free" shopping cart for you to load your oil in?????

 

[Paulie]

Here's a idea. Spent two years of your life in A&P school, then spend at least 10 years working for crappy wages building experience, get a IA then you can do the work yourself and leave everyone alone.

 

[German guy]

Again, I wasn't upset that the shop charged us for their services: I was upset that they initially refused to provide a written quotation for either a repair or an overhaul and that they were also not willing to break the total costs down into at least the bigger chucks. They also initially indicated that we could use any engine shop we want, one of the guys even told me that they would not make any profit with the overhaul itself. I would have expected at least something like this:

Removal, crating and shipping: $$
Overhaul, including XYZ: $$$
Installation, test run: $$$
Engine mounts, starter, misc parts, etc.: $$$
Handling, including possible warranty issues: $$$

They only changed they attitude, and finally broke the costs down, after I threatened them that I will push the plane into a local hangar and pick our engine parts up from the engine shop, if they don't come up with a plausible explanation of the costs. Overall, it turned out that the price was not a bargain, but at least within a reasonable range.

The other thing I was not happy with, was that they told us only after the engine was removed and in the engine shop, that they would not install any kind of used crankcase and insisted on the installation of a new one for $6,500, as older IO360 crankcases supposedly have a tendency to crack. This drove the costs significantly up from the original estimates, even though it was them who themselves diagnosed the cracked crankcase, what started the drama.

Anyways, we can pick the plane up in the next few days. I hope that everything is in good order and that the engine is trouble free for the years to come. We haven't received the final invoice yet, but will probably end up at around $38K. This includes the services provided by our shop, a re-sealed propeller, an engine overhaul with overhauled cylinders but a new crankcase, a new starter, new engine mounts and a cleaned oil cooler.

Oliver