How To Determine the Right NTE

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You have read about NTE’s being a powerful tool for efficiency and cost control. Then you took a look at the the three most common objections. Now we are are on part three of our series on NTE basics…how to determine the right NTE.NTE strategyLet’s get into it. There are three common schools of thought on setting NTE’s.

  1. Set an NTE so all jobs need an increase.
  2. Set an NTE so most jobs need an increase.
  3. Set an NTE so a few jobs need an increase.

The best method depends on your program’s specific needs. We will discuss the pros, cons, and applications for each option.

Set an NTE so all jobs need an increase.

This method is most often used by facility managers who want to know the cost of every job. In this case the NTE is set low, around the cost of one trip charge and an hour of work. A service contractor will need to determine the cost of the repair and get an approval prior to completing the service request.Pros:

  • FM’s will know the cost of every job.
  • FM’s will be able to track when a service provider is onsite.
  • This method saves time over getting multiple quotes while still allowing cost control.

Cons:

  • FM’s need to be available at all times to review and approve NTE increases.
  • There is in an increase of inbound phone calls and emails.
  • Service providers spend time onsite getting an increase that could be used to make repairs.

Note: All of the cons associated with this method are solved with FM Dashboard’s maintenance automation features. Download the free report here.

Set an NTE so most jobs need an increase.

This is the most commonly used NTE strategy. A facility manager will spend time looking at historical invoices for each trade category. Then an NTE will be set so around 80% of repairs can be made without needing an NTE increase.Pros:

  • Significant time savings because facility managers do not need to review each repair as it is happening.
  • Service providers can spend more time making repairs and less time waiting for an NTE increase to be approved.

Cons:

  • Facility managers don’t review each work order and have less information about the repair prior to receiving the invoice.
  • A dishonest contractor can take advantage of an NTE.

Set an NTE so a few jobs need an increase.

In this strategy, the NTE is set equal to the amount the facility manager is able to approve without a more senior level manager signing off. Usually this is around $1,000. It is important to note this strategy requires extreme trust and partnership between customer and provider as well as a checks and balances system in place. In this case, a service provider is able to make repairs without the need to stop and assess whether or not an increase is needed. Only large repairs that require a quote will not be able to be completed in one visit.Pros:

  • Increase efficiency for the facility manager.
  • The right service provider will complete repairs faster because they are able to focus on the repair.

Cons:

  • Facility managers don’t review each work order and have less information about the repair prior to receiving the invoice.
  • A dishonest contractor can take advantage of an NTE.

These are the most common strategies for determining the right NTE. The next post in this series will cover the best practices for managing an NTE based facility maintenance program.We believe there is a best way as long as you have the right system to support it. Find out which one will save you the most.[button size="large" url="http://fmdashboard.com/free-demo" content="Schedule a demo"]