- 06 Jul 2020
- Brian Wells
- Aircraft MRO
Let’s assume the aircraft maintenance project has now reached completion: You have completed the maintenance debrief and successfully monitored the work remotely during the four-week event. Now it’s time for the aircraft to fly off to its next destination. But what about the invoice...?
All documentation has been cached, including work-in-progress (WIP) reports, quotes, teardown reports and all communications related to the project. You have a solid sense of what the financial impact is going to be, and are expecting no surprises.
Feelings of anxiety or dismay, typically at something unexpected.
For complete transparency, it should be noted that a significant portion of my duties includes invoice reviews. A single aircraft operator might see the number of invoices I see in a week over an entire year, depending on utilization. This is by no means a statement of expertise, however the volume has allowed me to devise a systematic approach to identify certain concerns that may arise during the review process.
Much like the approach to managing the event, where invoices are concerned one size does not fit all. Here, we’ll identify a handful of scenarios that should prompt you, the paying customer, to investigate further.
Quoted Labor and Materials for Scheduled Maintenance or Inspections: Verify that the invoice amount for quoted work packages matches the quote you received prior to input. If not, check why not and confirm that any overages were explained prior to invoice receipt.
Consumable Charges: Many MROs will invoice on average 3-4% of the total labor amount for consumables versus charging for them individually, and this is standard practice across the industry.
For those MROs choosing to invoice individual consumables, check that the items and amounts are relevant to the inspection or defect. In other words, confirm you are not being invoiced for 10 screw extractors under a gear lube work order item . If the consumables used do not fit the narrative of the inspection item or defect, you should ask for further clarification.
Handling Fees: If you have elected to supply your own parts, you should verify that these fees are in line with the percentage agreed at debrief. When an MRO orders a part, there is often a reluctance to show you their cost (less markup).
If you sense something is amiss, there is enough information on the open market for parts pricing. Find the comparable parts price (i.e., new, repaired or overhauled) and add the agreed markup. If there is a large disparity, it is reasonable to question it.
Freight: In the aviation industry, freight is inherently more expensive than what we are accustomed to in our normal daily lives. However, a $100 freight charge for a $0.60 O-ring is clearly cause for concern and should certainly be reviewed more closely.
Warranty: Always confirm that any applicable warranty has been properly applied. This is not just relevant to newer aircraft but parts (or even in some cases workmanship might have applicable coverage).
Though never intentional, MROs may not always perform warranty research when ordering a part. It should be one of the first things considered but unfortunately this step is too often overlooked. Regardless, it is a crucial step and you should reiterate the importance of it during debrief and throughout the maintenance event.
The Common Cause for Invoice Disputes…
Most invoice disputes I see arise from time and material (T&M) defects. Every corrective action should tell a story and explain the solution. This is where you should find the hours expended, including all disciplines (i.e., mechanical, avionics and engine), at either a standard, overtime or weekend rate. Additionally, you should also find parts usage and pricing, as well as consumables and freight.
The following invoice items are some indicators that should raise a red flag and prompt a closer look:
This is by no means a comprehensive overview of the entire invoice review process but hopefully will provide you with some guidance moving forward. Any consternation you may have can be relieved if the first two steps in the process are followed:
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