In The Public Eye: Protect Your Budget With an Equipment Maintenance Management Program

Introduction (00:03):
Welcome to the Alliant In the Public Eye Podcast, a show dedicated to exploring risk management topics and challenges faced by today's public sector leaders. Here are your hosts, Carleen Patterson and Justin Swarbrick.

Carleen Patterson (00:22):
Welcome back everyone to another episode of In The Public Eye. Today, we have Robert Schimke joining us and he is an author of an article that just came out in our recent, In the Public Eye newsletter. And it is on equipment maintenance management programs. As public entity brokers, we're always looking for ways to help reduce budgets and control costs for our public entity clients. And here's one of the ways that we want to explore a little bit further. And so before we do Robert, do you want to tell us a little bit about yourself?

Robert Schimke (00:53):
Hi. Sure thing. Thanks so much for having me Carleen. I am Robert Schimke. I have been with Alliant for about six years now. I am 100% focused on public entities and I currently do business across the US ranging from cities, counties, airports, K to 12 schools and healthcare. I have worked on and managed an EMMP program since coming to Alliant and have worked with the EMMP program in a very large state here in the US.

Carleen Patterson (01:26):
So I guess the first question I need to ask you is yes, EMMP stands for equipment maintenance management program, but just exactly what is it?

Robert Schimke (01:38):
Yeah, it's it can be a little tongue-tied sometimes, but the EMMP is essentially an alternative risk transfer mechanism associated with original equipment manufacturer or OEM service agreements that a municipality might have on electronic equipment and where services throughout the year are being provided. So think copy machines, phone systems, or even jail electronic equipment. That's kind of what the EMMP can step in on.

Carleen Patterson (02:11):
All right. So if you have like say a bunch of Canon copiers and a bunch of whatever it is, it's a way to bring all of those together.

Robert Schimke (02:22):
Yeah, exactly. So one of the biggest advantages of using or utilizing an EMMP is the ability to consolidate multiple agreements with multiple vendors and multiple different effective dates into one agreement under one control. So, that helps reduce some of the admin burden of tracking those multiple vendors, multiple contracts, effective dates, etc. So we're able to consolidate that all into one umbrella and you have a one-stop shop for all of those Canon copy machines that you might have on top of we're able to reduce cost savings from anywhere from about 10 to 25% on each of those contracts that are eligible for the program. So it's a great cost savings and ways for entities to reduce their overall spending, which can be kind of crazy when you start adding these up. The other thing that's really nice about an EMMP is we have a flexible contract to add and delete your machines.

Robert Schimke (03:27):
So, throughout the year, you may acquire a new Canon copy machine, and you want to get the service under your umbrella. We're able to add that machine on a pro-rata basis, same as deleting it. So you're not locked in for an entire year. Again, under this mechanism, you're able to create a yearly budget and for public entities, budgeting can be one of the really difficult and tricky things to have. So under the EMMP, you're able to have a fixed budget and, you know your annual costs outside of any new machine door or removal of any machines, your service agreements spend is a fixed number. So another huge advantage for public entities.

Carleen Patterson (04:12):
It really is. And I have about a million questions about how to implement something like this, but you've mentioned copiers, phone systems, that kind of thing. What types of equipment are eligible for an EMMP?

Robert Schimke (04:26):
There are a ton of eligible equipment. So the way I kind of like to think about it is if it can plug into the wall it's likely eligible and would recommend submitting that contract or that service agreement for review under our program, we're able to underwrite and review contracts at a no obligation and provide a quote for that service equipment. So think copy machines, printers, scanners, automated filing machines, alarm systems, card access systems, pre-screening, Avaya, or Blackbox telephone systems, specifically within the jail systems. We, through one of our states, do a large jail system and the card access readers and all of the electronic equipment in the jail system is actually covered under any MMP program.

Carleen Patterson (05:17):
Right? So one of the things that you mentioned was OEM or original equipment manufacturer. So talk a little bit more about that, sitting here, and how has that defined?

Robert Schimke (05:30):
So when a municipality purchases a new piece of equipment, it generally comes with the three-year warranty that's covered by purchasing that piece of equipment. What we are looking to do is not cancel that three-year contract. We would more wait until that piece, the OEM contract has run its course, and you're looking to renew with the, say an HP or a Dell or a cannon. That's when the EMMP would step in. We are also able to, because there are so many pieces of equipment where if a piece of equipment doesn't have a service contract on it, but your, maybe an entity would like to get one. We're able to kind of create a make model of similar kind and kind of come up with a service contract that makes sense.

Carleen Patterson (06:24):
So, you talked a little bit about what's eligible. Can you talk about some of the things that are not eligible or would not be a good fit for an EMMP?

Robert Schimke (06:32):
This is a very common question that we get and under our program, for instance, the HVAC centers or cars and outdoor equipment like lawnmowers and such would not be eligible. The other thing that we see is elevators. We're not generally able to cover them because they do require such specialized training. And it's just not a good fit for the program. Some of the other equipment that we see on the healthcare and hospital side is the higher-end CT scanners. Again, they generally are higher, require specialized training, and they just really aren't a good fit for the program. The one other thing that we are not able to include is software systems. So those are the software like your McAfee or your, you know, any of those kind of software licenses. Those aren't eligible for this program.

Carleen Patterson (07:33):
What if I have a favorite service guy who I've always been calling to fix my copier or phone systems, that kind of thing? How does that work with this new program?

Robert Schimke (07:46):
Under this program or this model, we do not require that you have to use a specific service provider and you would still be able to keep the Johnny from down the road that you like, he knows your facilities. And he knows the people we're able to still utilize Johnny from HP or Dell. The only thing that's different is where the payments of the services are being directed. We're able to reduce that pricing, but still, you can use, you know, whichever equipment manufacturer you would like to use or service provider.

Carleen Patterson (08:24):
So, if one of our public entity clients was interested in an EMMP. What are some of the hurdles that they could anticipate having to get past if they wanted to implement a program?

Robert Schimke (08:36):
Yeah, the largest hurdle in getting an EMMP program up and running is to get these service contracts gathered up. Sometimes that can be quite a daunting experience, especially if there are 10, 25, 100, or 200 service contracts that you have physically locate the actual agreement and go through the underwriting process, which doesn't take long. It's just the act of actually getting the service contracts pulled and submitted into review. Once you're in the program, the EMMP is able to run relatively smoothly and each year we would have a complete schedule of, you know, your equipment, serial numbers, and everything. And you're able to tick the box. If it's you want to renew that piece of equipment, or if it's been taken off, we're able to do that.

Carleen Patterson (09:32):
Interesting that you mentioned that you have been working with the state. And I think about some of the states that I've worked with and how procurement does not usually come out of one central location because of all the different state agencies. So, I can't even imagine how daunting it was to get a program like that in place for a state. Is that something that increased over time? Like you started with a couple of different agencies for an entity that large, or how did something like that work?

Robert Schimke (09:59):
So, I was able to come in kind of after it had already started. And I was in, I think year three when it was started, but it definitely started as a very small program with only a handful of departments participating in the program. Then over time, this particular state's program is now in excess of $14 million in premium dollars in the program and almost 35,000 pieces of equipment being covered. So, this state is seeing in excess of $4 million of savings each year by utilizing any EMMP.

Carleen Patterson (10:37):
I was just going to do some back math and go 15 to 25% of 14 million. That is a big chunk of change that can be used somewhere else. Wow. Okay. So, the current program that you're working on, and you mentioned premium, is it an insurance-backed program or what did you mean by that?

Robert Schimke (10:57):
For this particular state being able to utilize an insurance-backed program had to be a requirement to satisfy the purchasing agreements. And the program that we utilize is actually insurance backed with stop-loss aggregates behind the scenes. So, we are on a rated paper and with an insurance company back behind the program.

Carleen Patterson (11:21):
You mentioned states, and I think you maybe mentioned hospitals earlier. What are some of the other types of public entities that would make good candidates for this?

Robert Schimke (11:31):
So, all kinds, as I mentioned, states use it, but K through 12 schools, cities, counties, hospitals, healthcare districts. Really, if you have service contracts on electronic equipment, you could utilize a program like this.

Carleen Patterson (11:47):
Any other comments and anything that you think that we should talk about with regard to EMMPs before we close?

Robert Schimke (11:53):
I would just say that you would be shocked about how much savings and cost-reduction opportunities are out there. I did mention a state and it's obviously a very large number, but cities, k-12 schools, especially with all of the budget constraints going on these days, if you're able to save 5,000, 10,000, 25,000, 100,000 dollars, this is a great way to get some reduced cost savings right off the top.

Carleen Patterson (12:23):
The numbers that you were mentioning are really incredible and a great way to take budget and money that is basically being wasted if you don't have one of these in place. So really appreciate your time. This is an interesting concept. And please reach out to us if you have any questions about the EMMP, but we do continue to provide information and resources as we try and navigate 2021 and beyond. So thanks, Robert, and we hope you all enjoyed this episode of In the Public Eye.