Owner Furnished Equipment

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Oh, 15 years ago video projection was ever so wonderful to this business! The integration world was dominated by expensive and cantankerous CRT projectors needing constant maintenance. Lots of margin and lots of on site maintenance: the perfect recipe for profits.

Yes, those projectors were a pain to install and they were an even greater pain to maintain. Yet when properly installed and maintained, they looked darn good. Most importantly, those projectors belonged to our industry of specialists. They were way too much trouble for the Average Joe.

And now they no longer belong to the specialists, at least most of the time. Suppliers figured out how to make stuff Average Joe could work by himself. Coupled with improvements in technology and cost reductions, video projectors are generally perceived to be a commodity now. I just searched on one model video projector we've been using on a project recently. There were 137,000 references for this specific projector, most of them valid!
Looking at the details, the specific projector model in question has a retail list of just under $10,000. There were a few intrepid souls out there actually trying to sell it at list price. There was one character selling it for $4 over list price. They did not represent the majority though.

There was one group selling around $9,400; another around $6,500; and still another at $4,900. The low end of the spectrum was from a well established and perfectly legitimate dealer at $4,149. Mind you this was for the exact same box with the identical lens in ease case.

This is where it starts to get interesting. It's pretty obvious the dealership requirements from the manufacturer no longer have anything to do with the ability to integrate, install, or maintain the projector. It is the ability to pay for them in some defined level of quantity-nothing else.

Now we did not sell the projectors on this particular project, nor did any other dealer. They were drop shipped to our shop by the manufacturer at the behest of the client, who was then billed directly. The infamous Owner Furnished Equipment (OFE) has become an anathema to systems integrators. The client was getting a considerably better price than lowest price dealer, presumably well under $4,000.

It's not like the projector manufacturer was doing something unique either. There are a few manufacturers that don't sell direct to owners, but this has become standard operating procedure for many in this industry. It's not just projectors either. It's every type of display device and many audio devices as well. Many of you are likely dealing with Owner Furnished Equipment on a daily basis now.

Those contractors that have dealt with OFE realize two important points. The first is that while commodity equipment is far more reliable than 15 years ago, it is still far from perfect. I spoke with some colleagues grappling with this issue and there appears to be an 8 percent rejection rate among projectors and around 5 percent with plasmas depending on the rigidity of their inspection standards. One can assume that one in 20 is a defective unit that will plague your shop, installation, and maintenance staff. One can further assume the supplying owner has absolutely no mechanism in place for supporting defective boxes nor has purchased sufficient spares to maintain your installation schedule in the event of a failed device.

The second (and more important) point is that margin still needs to be made on every project to keep your business healthy. If the client is going to hand you boxes to integrate then you're going to have to make money somewhere else in the project cycle, whether it is in design fees, staging, installation, or maintenance.

One firm I've consulted to (and have the permission to share with you) insists on a 7.5 percent of list price fee for handling OFE equipment. They're very straightforward about it and include it in all of their proposals. They don't back down from it when challenged either. Generally speaking, they get it as well.

Asking for an upfront handling fee for OFE has become an important part of their business and possibly one for your consideration as well. The integrator recognized they have certain responsibilities associated with possession of OFE that are inescapable: lifting, storing, and securing them at a minimum. Usually there is a configuration fee, long term storage fee, and failed device fee as well. It's just business and an inevitable reaction of a business trend over which we have limited control.

It would be great if we could set this as a generally agreed upon industry standard amongst integration contractors. This would just one a simple mechanism to better ensure the long term vitality of our field.

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Living and Working With Owner-Furnished Equipment

When it comes to commodity products like TVs, projectors, and even large video displays, facilities owners often choose to procure these items themselves. Hence the (many times, dreaded) term owner-furnished equipment (OFE).