AMC CONTRACT WITH KONE ELEVATORS

NEGOTIATION OF AMC (2008-2011) RATES WITH KONE ELEVATORS INDIA PRIVATE LTD.

On 02 Dec. 2008, KONE Elevator India Private Ltd. forwarded a comprehensive AMC for six lifts in the Society for 2009 quoting Rs.2,57,555/- as the new charges applicable. On 09 Dec. 2008, the Society pointed out to KONE that the increase of 15% over last year’s (2008) AMC charges was exorbitant, unsubstantiated by facts on ground, contrary to all logic and arbitrary. The following grounds were enumerated to reinforce the Society’s contention:-

(a) Decrease in price of petrol and diesel by Rs.5/- and Rs.2/- per litre respectively. Hence cost of procurement of materials and conveyance expenses had come down.

(b) Reduction by 50% in the price of steel; cost of materials accordingly affected.

(c) CENVAT has been reduced by 4% across the board

(d) Inflation is down from 11% to 6.5%.

3. It was emphasized that the points in para. 2 ibid have had a cascading effect on cost of spares, material and transportation. There should, therefore, be a reduction in AMC charges for 2009.

4. On 22 Dec 2008, Mr.Sudhir Lakhwara of KONE came to the Society office to negotiate the AMC charges for 2009. The Society was represented by the Secretary, Mr. D. V.Gupta, Mr. N. N. Srivastava, Mr. K. Ramachandran and Mr.Suresh Srivastava. It was strongly highlighted that KONE had made an offer in Nov. 2006 for AMC for six lifts for a period of three years from 01 Jan 2007 to 31st Dec 2009 at a rate of Rs.2,22,163/- for each calendar year, which was accepted by Mr.Rajeev Manchanda. How then, this offer was converted to yearly AMC is beyond comprehension of the present MC; particularly as the rates quoted and gained by the Company were beneficial only to KONE and the Society remained at a disadvantage. Mr. Sudhir Lakhwarra said he would check the records available with KONE and get back to the Society. He did, however, mention that rates are usually negotiated with the MCs of Societies and bribes accepted by MC members at the cost of overlooking the Society’s interests.

5. On 25 Dec 2008, Mr. Nirmal Kumar of KONE along with Mr. Sudhir Lakhwara and Mr. Abhishek arrived in the Society Office at 1530 hrs to negotiate AMC 2009 with the MC. Upon insistent bargaining by the MC, KONE agreed to sign an AMC for a three years period albeit the rates offered by the Society were not agreed to. The MC was told by Mr. Nirmal Kumar that KONE can at best offer the following comprehensive AMC rates: -

(a) 2009 - Rs.2, 35,000/- (an increase of 4.5% over AMC charges of
2008)

(b) 2010 - Rs.2, 35,000/- plus 4.5%

(c) 2011 - An increase of 4.5% over contract rate of 2010.

6. The MC made the following counter offer:-

(a) 2009 - Rs.2, 30,000/-

(b) 2010 - An increase of 4.5% over contract rate of 2009.

(c ) 2011 - An increase of 4.5% over contract rate of 2010.

NOTE: - KONE officials stated that the Company cannot reduce AMC charges beyond those mentioned in para. 5 (a) to (c) above. The KONE’s offer was then accepted. Mr. L. C. Tomar asserted that we must still write to KONE’s head office in Chennai to reconsider the Society’s offer of reduced rates.

7. On 28th December 2008 KONE officials forwarded a fresh draft Contract for AMC for six lifts for the period 2009 to2011 vide their letter dated 26th December 2008. The Society raised the following objections/observations for modifications/rectification.

(a) Para 4.0 The contract price negotiated included only the existing taxes imposed on the Company. Mention of the customer and Company’s supplier in the clause is redundant and must be deleted.

(b) Para 5.1 The mode of payment must be quarterly advance. The Para may be modified as “ The contract price is inclusive of taxes & duties for the period and must be paid in quarterly advance within 7 days of receipt of the Company’s bills”.

(c) Para 5.2 It should not be applicable as payment will be in advance. Contract of 2007 is relevant where no such condition exists. In addition, interest rates applicable for any delayed payments must conform to the current rate of
12 % being charged by the banks in India.

(d) Para 6.3 Considering the vintage of the equipment, at least 12 annual visits must be made by Company’s technicians to systematically inspect, adjust and lubricate the parts of the elevators to the extent necessary to maintain the elevators in satisfactory working order.

(e) Para 6.5 Include “All requirements of insurance / Govt. will be complied with by the Company.

(f) Para 9.8 Reframe as “The Company shall indemnify the Society of accidents / injury to its employees or third party during maintenance of lifts.

(g) Existing Para 9.8 May be renumbered to read 9.9.

(h) Para 6.3 The minimum number of visits by KONE’s representatives for preventive maintenance used to be eleven initially and were reduced to eight per year without assigning any reason since 2006. Considering the vintage and condition of the equipment, it should again be reverted to at least twelve, if not more.

(i) Para 6.7 Nil. Inclusion of ‘Nil’ clause is confusing and must be deleted. Alternatively, the Para could include the provision of TDS as applicable.

(j) Para 6.8 General Exclusions. Sub Para a (i) read Elevator Car Enclosure (Inside) in the contract of 2007. The word (inside) has now been removed for no explicable reason. This may be included.

(k) There was an important Note after Clause 9.8 in the AMC of 2007 that read “The Kone Elevators India (P) Ltd will ensure that under no circumstances the both lifts of same block will not be under breakdown more that six hours at a time”. The Note is missing from the fresh Contract forwarded by Kone. This may please be included.


8. Mr Sudhir Lakhwara promised to project the Society’s stance to his superiors in the Company and get back to the Society as soon as possible.