What's The Difference Between Time & Material And Fixed Rate Repairs?

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All of your success balances on the best type of repair. Overspend and you don't fly, underspend and you have parts falling from the sky.

Neither is a good scenario for you.

So what do you do? You focus a lot of your time and money on asset repairs. The most common repair pricing structures are time & material (T&M) and fixed rate.

Each has its pros and cons. We’ll tackle in future posts but right now we’ll define each one for you so you can begin planning the best options for your operation.

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Time & Material Repairs

This is the most common form of repair. You're billed based on labor hours and piece parts used to repair your unit.

Once your MRO receives the LRU they'll do the following:

  • Functional test or disassemble according to the CMM
  • Analyze work needed to be done and parts requirements for repair and overhaul
  • Send a detailed work order quote with labor hours and piece part requirements
  • Receive quote approval

This type of work is usually the highest risk as hourly rates and piece part pricing may not be competitive.

In these situations, you’ll want to focus on strategies that leverage economies of scale, piece part expertise, and a sound QA approval process. By focusing on these three strategies you’ll be able to leverage your time and reduce your rotable cycle times.

Fixed Cost Repairs

The fixed based pricing model takes on two forms one with exclusions, a diluted and popular form of fixed based pricing, or a pure fixed cost model.

With exclusions, you'll have to pay for items that fall out of scope. A good example is let’s say you have a component and the housings fall out of scope. You’ll have to pay the flat rate plus the housing for an approved repair. Exclusions are in addition to your flat rate fee.

Fixed based pricing with exclusions is considered a variable cost with no current or future benchmarks.

Once your MRO receives the LRU they'll do the following:

  • Disassemble per CMM
  • Analyze part requirements for repair and overhaul
  • Determine which parts are in scope and out of scope
  • Send a detailed quote with agreed upon repair scheme
  • Logistics department receives quote and checks it against pricing agreement

These two pricing models are still widely accepted. Choosing the best option for you will be based on your operational goals. Every airline and MRO is different and it’s never a one size fits all solution.

Do you have assets that need repair?  We can help.  Click here and fill out the form at the bottom of the page and we’ll give you a call.