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While at first blush ADS-B Slot Programs may seem like a great idea, you need to examine alternatives to see if there’s a smarter path for you.
An examination of the slot program.
As the looming January 1, 2020, deadline for the installation of ADS-B Out rapidly approaches, some avionics shops are looking to land new business by selling future installation slots. An example of one of these programs by a major service provider can be found here.
With less than 35 months until the ADS-B mandate takes effect, many avionics shops are booked six months into the future. Should you pay extra to “reserve” their next slot? No. However, if your schedule is not flexible and you are trying to combine your ADS-B upgrade with an inspection or other services, you may need to reserve a slot beyond their queue.
Let’s examine your options.
Don’t buy a slot until you understand all the costs
Some slot agreements are structured in such a way that your deposit to secure your installation slot will be applied toward the cost of your ADS-B equipment at the time of installation. This is a normal business practice when prices for parts and labor are not expected to change drastically in the next 9-12 months. But, these are not normal times.
With less than 35 months to go, approximately 20% of general aviation aircraft are equipped with ADS-B in the U.S. Therefore, as the deadline approaches, demand for hangar space, parts, and labor will all increase significantly.
History shows, along with underlying economic supply & demand principals, that prices will sharply rise going into this mandate. Before you put down any money, you need to ask the provider how much you will be charged for the parts and labor (including shop materials and fees) at the time of your installation.
If left unanswered, your operation is at risk, not theirs.
Risks of a slot agreement
If you don’t negotiate a contract for a future ADS-B installation when you sign, then when the date arrives to use your slot, you may easily find yourself paying more than expected because of the rising market. The closer we get to January 1, 2020, the fewer the number of workdays available to install ADS-B systems nationwide. Prices for parts, labor, and fees will only be going up as slots become increasingly difficult to find. This volatility could easily amount to a difference of hundreds or even thousands of dollars, depending on the particular type of ADS-B equipment you select for your aircraft.
Worse yet, if you have put money down for a slot, without a negotiated contract, you may feel squeezed to stay in budget and end up installing an ADS-B system with fewer capabilities. If you are dissatisfied with the slot agreement, it may be difficult, or impossible, to find another avionics shop that has both an approved ADS-B solution you need, and hangar space remaining. Negotiations seldom go well for the individual who cannot walk away.
A smarter alternative to the ADS-B Slot Program
Instead of making a deposit or signing a slot agreement for a future hangar reservation alone, negotiate an ADS-B installation contract upfront that includes the cost of parts, labor, and fees.
Here are a couple of contract types that can ensure you are not locked in to a bad deal:
- Firm-fixed-price contract
- Cost-plus-fixed-fee contract
Let’s look at the advantages and disadvantages of each.
A negotiated contract will protect you in a rising market
A firm-fixed-price contract will allow you to lock-in your equipment and costs ahead of time. The total amount is not subject to any adjustment, and the avionics shop assumes full responsibility for delivering as negotiated, whether they make a profit or not. The further out you are scheduling your installation project, the more you can expect to pay for a firm-fixed-price contract because the shop is assuming more risk.
The advantage of a firm-fixed-price contract is predictability for both the buyer and seller. Predictability offers stability during the length of the contract. Before the avionics shop can give you a realistic quote, you’ll need to let them know what type ADS-B system capability you want. And, they will need to know your aircraft’s avionics architecture and aircraft configuration before they can purchase parts ahead of time. If you make any last-minute changes or reveal items that were not disclosed during negotiations, it can drive the final cost up significantly.
If you are trying to schedule service for more than a year from now, some shops may not even consider a firm-fixed-price contract. Moreover, if you are undecided about which ADS-B system capability provides the most operational benefits for you, then consider negotiating a cost-plus-fixed-fee contract instead.
A cost-plus-fixed-fee contract is where you agree to reimburse the avionics shop for the actual cost of the parts, labor, and supplies and a pre-determined profit margin or fee. The fee is fixed at the start but may be adjusted as a result of changes in the work to be completed. The advantage of the cost-plus-fixed-fee contract is that you’ll get better quality products and services. The avionics shop will not skimp on materials or labor, and you can make changes until the time of the start of installation. The disadvantage of the cost-plus-fixed-fee is that in a rising market there is a much greater chance of cost uncertainty than firm-fixed-price contracts. You should try to negotiate a maximum not-to-exceed clause and provide an incentive bonus for delivering under this amount.
With a cost-plus-fixed-fee contract, you should clearly define what expenses you will reimburse the avionics shop for. Commonly accepted expenses are parts, labor, and shop materials. Do not cover general overhead costs.
Get multiple bids to lock-in their business … not yours
Now that you know the advantages of negotiating a contract versus a slot agreement, you’ll want to find multiple bidders to lower your out-of-pocket expense for an ADS-B installation beyond the queue.
More than likely, there are many certified repair stations in the U.S. that have an ADS-B solution for your make and model of aircraft. Before you contact them, you’ll need to do some homework.
- Go to the FAA’s database and find the ADS-B compliant equipment for your make and model of aircraft. Go to Search for ADS-B Compliant Equipment.
- Choose a solution pairing (i.e. transmitter/transponder & position source) and check the compliance status. You want to look for approved or certified equipment. There will be an associated STC, AML STC, or TC.
- If there are multiple solution pairings, you’ll need to determine which ADS-B system capabilities you want for your operation. Read Six Easy Steps to Get ADS-B Equipped for help.
- Next, you’ll need to determine how far you’re willing to fly for service and locate the shops within this radius. Shops are listed by state in the AEA’s Pilot Guide to Avionics.
- Contact several competitive shops within your flight radius to get competitive bids. Let each shop know that you are accepting bids from other avionics shops and you want their best quote for an ADS-B installation (and any other service work) at a date in the future you specify. The more specific about your aircraft, ADS-B requirements, and time frame, the better.
This approach will put you in the driver’s seat, and you’ll get an ADS-B installation completed when you need it done, and at a fair price.
Don’t get caught up in the frenzy
As of January 2017, there are approximately 140,000 general aviation aircraft in the U.S. that need ADS-B Out by January 2020. That will require over 4,000 installs per month! Unfortunately, the current rate is only 1,500 ADS-B installs per month. With less than 35 months remaining, many aircraft owners are going to pay higher, and higher, prices as market volatility increases.
The sooner you schedule your ADS-B installation, the better. If you can’t take your aircraft out of service in the next few months, you’ll need to make arrangements for a future installation date.
Start locating avionics shops and email or call them to get quotes now, or register at the Marketplace and let avionics shops find you! It’s a lot easier and less time-consuming. If you already have a quote from somewhere else, you can upload it and you and let our avionics shops try to beat it. Our program will not reveal the name of the avionics shop they are competing against, but they will have enough information to give you a fair deal.
Remember, negotiate a contract in advance to lock-in schedule & price
We built the Equip ADS-B Marketplace to make it easy for you to get multiple quotes from FAA-certified avionics shops within your flying radius. You specify when you need an upgrade and how far you’re willing to fly for service – we’ll even try to match or beat any quote you obtained elsewhere.
Whether you go out and find avionics shops yourself or let the shops find you on the Equip ADS-B Marketplace, you don’t want to wait to reserve your place.
Schedule your ADS-B installation on the Equip ADS-B Marketplace today, and get all the benefits of purchasing an installation slot in advance, without any of the drawbacks.
Have you found other ADS-B Slot Programs that are working to your advantage? Let us know what you think.
Take a few minutes and leave feedback in the comments section below.
In previous articles, we have discussed how important it is for avionics shops to maintain their cash flow throughout the duration of the mandated ADS-B equipment installation period. For example, most shops are not booked to their full working capacity right now; they could benefit by selling advance installation slots to generate immediate revenue. Towards the end of the mandate period they may be fully booked; at this point, they need to rely on strategic partnerships and referrals to generate additional cash flow.
Regardless of the timeline or the manpower circumstances your avionics shop faces, there is one challenge that will remain constant throughout the process – getting potential clients to sign on the dotted line and schedule the purchase and installation of their ADS-B system, rather than merely discussing it with your sales staff.
There are a few specific things your sales team can remind potential customers of to help persuade them to schedule their installation and purchase of an ADS-B system sooner, rather than later:
- Realities of Workflow Capacity – The simple fact of the matter is, that as of the summer of 2016 – approximately two-thirds of the way towards the mandated deadline for the installation of ADS-B Out equipment – only about 20% of aircraft have had the requisite work done. Notwithstanding a policy change by the FAA, it all but guarantees that both aircraft owners and avionics shops are going to run into scheduling challenges and difficulties down the line. Many shops are still in the process of developing their FAA-approved solutions as well, meaning that the regional distribution and availability of technical expertise is still in flux, further complicating things. Basically, the longer aircraft owners wait to purchase their ADS-B equipment and schedule its installation, the higher the chance they will run into potential issues related to service availability.
- Supply and Demand – Hand in hand with the availability of service goes its pricing. As the ADS-B mandate approaches and workflow capacity diminishes as it is executed or sold, avionics shops will naturally raise their prices to compensate. Depending on how long an aircraft owner delays, the difference in price could potentially be quite substantial. Furthermore, these pricing pressures are magnified if a particular aircraft owner has a rare model or requires an uncommon solution; finding someone who can service you at the last minute can be quite expensive indeed.
- Extra Challenges as Mandate Approaches – Above and beyond concerns related to pricing and service availability, there are additionally a whole host of logistical issues that will become more and more inconvenient for aircraft owners to deal with the longer they delay service. For example, they may find it necessary to apply to the FAA for an ADS-B exemption if their service installation date falls after the deadline. Or, they may find themselves needing to fly their aircraft hundreds of extra miles out of their way to find the only avionics shops able to accommodate them. They may be forced to work with a shop about which they know very little instead of their first choices closer to home. None of these additional wrinkles benefit aircraft owners; they instead create additional delay and hassle.
- Benefits – Access to airspace, improved safety, and increased situational awareness are just a few of the advantages that available now but are often overlooked and taken for granted. Pilots and air traffic controllers alike are sharing their stories about the benefits of ADS-B on the FAA’s website. You should encourage your prospects to check it out here or go to the Equip ADS-B Marketplace Resource Center for more information.
If your sales team can effectively communicate this information to potential clients, you will have a much easier time convincing them to book their ADS-B installation at your shop immediately, rather than choosing to delay. In particular, place emphasis on the fact that supply and demand are certainly going to cause their costs to go up, without additional benefit to show for it.