Cost Capture and Invoicing in MRO and Heavy Maintenance

Most MRO work in aviation is done on a Cost-Plus basis. Sometimes Fixed-Price and often a combination of both, i.e., Fixed-Price for the basic service and Cost-Plus for additional findings. How do you capture all the costs and are you missing any of them? Quality of work and customer service are paramount in making a business successful, but capturing and billing for all costs is probably just as important in the ultimate success of the enterprise. The two largest costs in a repair or overhaul are generally labor and parts and most businesses are good at capturing those (or they wouldn’t be in business). However, added costs, such as external repairs, shipping charges for external repairs, sub-contracting, small parts and material, shipping tools to remote worksite, etc. often go undetected and are not charged to the customer. Additional expenses, such as travel charges, shop-supplies, test-cell or other items also need to be accounted for and billed. The software you use will often make the difference between capturing these charges or missing them. Now for the shameless plug for our software: LogMRO lets you capture all these charges (and more) and automatically apply a markup if necessary. It can default these charges when creating a work-order (job-card) and you can define if the items are chargeable or fixed-price. The defined charges can be applied to a quote or estimate and then transferred to the job. INVOICING Invoicing for these costs generally falls under one of four rules: Firm Fixed Price (FFP) Time and Material (T&M) Cost-Plus (cost plus a percentage) Contract specific rules and rates (contract) Most MRO work is subject to one of the above, but larger projects such as an airliner D check are often subject to all four of these rules for different aspects of the job. As an example, FFP is given for the set of basic tasks on a D check on a triple 7. However, as the work progresses there are myriads of issues that are discovered, and the customer often decides to perform some modifications as the project unfolds. This extra work is negotiated on an individual basis and priced differently depending on many factors. Often Cost-Plus and no one knows what’s going to be found when you open a specific component. However, sometimes there is enough knowledge of the likely f indings customer wants and the job is done for T&M. Then there are contract specific rules, e.g. the task will be performed for X dollars but material over Y dollars and labor over Z hours will be billed additional. In other words, the pricing rules when you have 2,000 task and each can be invoiced differently can be complex. To add to the complexity, the invoicing is often performed as the work is on-going. I.e., progress payment invoices, as well as trial-invoices to review with customer prior to a real invoice are often generated and must be replicable other than agreed upon changes. All the while the work continues and additional charges must still be accurately calculated for further progress payments or final invoices. LogMRO also allows the creation of trial invoices to discuss with the customer before creating a final invoice (often used on D checks where you have thousands of job-cards, all with their own pricing rules). Invoice details can be printed to any level depending on the specific invoice. E.g., print every part used with its price or all parts with a single price for parts or just a single line with no details. Same for other charges, labor, and external repairs.