29 Oct Maintenance Budgets: Why Conservative Estimates Become Supplier Profit

Maintenance budgets are positioned as a way to manage risk. They are set conservatively to cover worst-case scenarios. But in practice, these budgets often become a profit centre for suppliers.

By inflating assumptions around wear, usage, and cost, suppliers ensure they capture surpluses. Unless contracts include profit-sharing or transparency, these reserves stay hidden, quietly inflating supplier margins.

Why It Matters

• Built-in surpluses – Conservative budgets almost always exceed actual spend.
• Hidden profits – Suppliers retain unused funds unless contracts specify otherwise.
• Masked performance – Without visibility, procurement cannot measure real service costs.

The Risk for Procurement Leaders

This trapdoor creates an illusion of safety, while in reality procurement is paying for risks that rarely materialise. Across large fleets, the accumulated surpluses can represent a significant transfer of value.

What To Do Instead

• Benchmark budgets – Compare against historical spend to spot inflated assumptions.
• Profit-sharing – Ensure unused reserves are returned or shared with the client.
• Demand reporting – Require transparency on claims, costs, and reserves by vehicle.

In a well-managed fleet, maintenance should be predictable, not a hidden profit stream for suppliers.

Our ebook, Control the Contract, Control the Cost, shows how to protect against this and other hidden risks. Download Now