Frequently Asked Questions

We have acquired one or more facilities with existing maintenance contracts – are these aligned with my business operating requirements?

A change in asset ownership often opens a window of opportunity for the new owner to accept, terminate or restructure the underlying Gas Turbine Generator maintenance contracts. These windows of opportunity are time sensitive with short cycle requirements to give notice of intent or the contract will continue in force under its current structure. It is during this critical time that Cratos’ best in class four step approach analyzes an asset’s term-maintenance contract and identifies misalignments between the current maintenance program and the intended business strategy. >60% of contracts are misaligned with an asset’s strategic objectives and present an opportunity to extract Millions of Dollars in stranded capital.

Are my existing agreements in line with current market pricing and risk allocation?

As technology matures across the product life cycle curve, competitive entry into the market will have a significant impact on the availability of qualified service providers and the cost for service. Depending on the technology, this change can be significant. In the current market for example GE 7F and Mature technology pricing has declined by 35%-50% over the last 5 years.

What hidden value can I benefit from by Optimizing my maintenance agreement(s)?

While the approach to a structured term-maintenance agreement is similar from customer to customer, the underlying variables of operation, technology, business objectives, location, etc… can vary greatly. As such, the real value that can be extracted is customer specific. Cratos’ Contract Health Check applies its 4 step process to review each of the contractual levers of a term maintenance agreement, thus identifying inefficiencies and gaps to your specific Operational Objectives. Our experience shows that i) >40% of contracts contain stranded capital in the form of inventory, ii) the contractual constraints of the existing agreement benefits the service provider, allowing the service provider to optimize and take the financial benefit of demand planning optimization, iii) the agreement contains fixed escalation clauses which has put your contract in an uncompetitive price vs. current market available pricing, etc…

My existing agreement will expire in the next 2 years. How should I prepare for a renewal or RFP to attract competition?

A term-maintenance agreement brings tremendous economic and risk management advantages when properly structured. The earlier you start in understanding the competitive landscape, contract structures, operational alignment and scope requirements the better off you will be. Cratos’ Contract Health Check will provide the information you require to best understand your current situation and the underlying improvements that can be obtained.

Do I have an end of contract term concern that I am unaware of? What is the potential financial and operational impact?

Understanding end of term conditions is a critical aspect of the Contract Health Check process. It is common for agreements to contain title passage that is unclear in regards to service provider requirement for end of term inventory. This ambiguity in language translates to the owner being responsible for millions of dollars in capital requirements to execute the first post contract maintenance event, or it forces the owner to renew the contract under unfavorable conditions.

Is there a best time to engage my current service provider to renew my existing agreement?

A term-maintenance agreement brings tremendous economic and risk management advantages when properly structured. The earlier you start in understanding the competitive landscape, contract structures, operational alignment and scope requirements, the better off you will be. Cratos’ Contract Health Check will provide the information you require to best understand your current situation and the underlying improvements that can be obtained.

I need to structure a term maintenance agreement with a qualified service supplier. How can Í be sure to obtain the best overall commercial and risk position?

Cratos ensures the best overall commercial and risk position by aligning all of the commercial and technical risk levers available in a contract with an asset’s strategic business objectives. Cratos interviews the key stakeholders in your organization and converts an asset’s business objectives, KPI’s, and end of life strategy into a clearly outlined scope of work. This scope of work includes economic and risk allocation requirements for respondents.

The market is driving me to look at all aspects of my business. Although I have an existing maintenance agreement, are there ways to further improve value in this area?

Yes, customers that implement the Cratos’ Contract Health Check will receive a detailed Report outlining specific areas where there is opportunity for improvement. The detailed report covers Technical and Commercial Risk, Inventory Levels and Requirements based on Demand Forecasting and Optimization, current market pricing Vs. contract price, etc… This analysis provides customers with a detailed optimization plan which, when implemented, improves the project’s financial returns, and recovers the costs of restructuring the existing agreement.

Do I have an over inventory situation that I can monetize for re-investment requirements?

The changing operational profile of today’s gas turbine power generation facilities has created inefficient inventory situations in more than 40% of contracts evaluated. This Stranded Capital can be monetized and reinvested in needed capital projects to improve project returns.

Additional Questions? Contact Us To See How Cratos Can Support Your Contract Needs

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