Service agreement

What is a service agreement?

A service agreement is a contract for scheduled inspection or maintenance on set terms and price, usually renewed each year. It defines the equipment covered, visit frequency, included labor and parts, and how out-of-scope work is billed. The U.S. Department of Energy's O&M guide describes a range, from inspection-only contracts through preventive maintenance contracts to full-coverage agreements that include parts, labor and emergency service.

Why it matters to a revenue leader

Agreements are the base of a commercial services company: they produce recurring revenue, access to the site, and a steady stream of repair opportunities. They also allocate risk. Under a preventive maintenance contract the owner usually pays time and materials for repairs, while a full-coverage agreement moves that risk to the contractor. A revenue leader should know which agreement types the team sells, at what margin, and how each one feeds renewals and pull-through. In commercial HVAC, ASHRAE/ACCA Standard 180 gives buyers a reference for minimum inspection and maintenance practice that sellers can scope against.

A mechanical contractor sells a two-year preventive maintenance agreement covering 22 rooftop units across a retail chain's regional stores. It includes quarterly visits, filters and belts, with repairs quoted separately. The seller also proposes full coverage on the five oldest units, which gives the customer a fixed budget number for the equipment most likely to fail.