A Discussion of Billbacks on Core Charges
In earlier years, a core charge for an exchange part was like a little insurance policy for the vendor to ensure they got a unit back in exchange for the one they sent out. It’s just like a trip to the auto parts store. When you buy a starter for your car, they bill you a core charge. After you take out the old starter, install a new one, and then return the old part to the store, they refund the core charge portion. In aviation, some vendors charge the core value up front and refund it later; the majority, though, allows 30 days for return of the core unit and only bill the core charge if one was not received.
Back when I managed Beechcraft West in Van Nuys, core charge billbacks were the exception, not the rule. In rare cases, the customer’s core unit was badly damaged and deemed BER (beyond economical repair), so the core value had to be paid. But back in those days, it wasn’t common to get partial core billbacks – maybe once every couple of years. Now, it’s every other week!
After the economy went south in 2008, I saw a definite increase in partial core charge billbacks for parts or repairs that were “beyond the scope of a normal overhaul.” In the last several years, it has spiraled out of control!
I think I’d rather have a root canal without anesthesia than go to a customer who has just spent a bunch of money on King Air maintenance and tell them they need to pay more because their cores were no good. I’m not sure which is worse – the outrageous cost of parts these days, or the continual billbacks on cores. The end user is getting taken advantage of both coming and going.
There are a host of components on a King Air that go in and out of the rotable pool. Landing gear drag legs and actuators, starter generators, brakes, blowers, engine gauges – these are just a few. Recently, I exchanged a fuel flow gauge because the needle was sticky. A few weeks later I got a billback on the core for $250 with a note that the movement is sticky, and that’s not part of a standard overhaul. Really?
A few months ago, I exchanged a GCU (generator control unit) because the generator would not come online. The billback on that core was $1,000 for a relay. A relay? Seriously?
Vendors versus Overhaul Shops
Let me make one thing clear – the billback comes from the shop that overhauls the core unit. Their business is making exchange cores serviceable again. The vendors that stock and sell rotable aircraft parts do not originate core billbacks, they just pass them along.
Certain vendors have a sister company that overhauls the components they sell. Others have no such affiliation and shop around for overhaul facilities to maintain their inventories. Some are very selective with their overhaul affiliations, others choose the overhaul shops with the lowest price.
The Agony and the Actuator
A couple years ago, I purchased an exchange ice vane actuator and sent my customer’s core back to the vendor. This particular vendor had a sister company that overhauled these cores. Several months elapsed with no word from the vendor, so naturally I assumed the core was good. Then I got an email noting that the core was BER and they were going to invoice me for the full core value of $3,000! I was extremely displeased!
I called the vendor and spoke to a guy (let’s call him Harry). At first he claimed the exterior case was bad and the cost of replacing it was prohibitive, hence the BER designation. I knew darn well the case wasn’t bad when I took it off the aircraft. I demanded the overhaul shop provide a breakdown report and pictures of the bad case; I received nothing. I asked why it took three months to assess my core. They said the shop was “backed up.” I pestered Harry on this actuator core, and he finally admitted to me that it needed a new motor, a $500 part.
I said, “Fine; get the motor, overhaul the unit, and invoice me for a $500 billback.” Nothing happened. Six months went by and nary word from Harry. Then, out of the blue, their billing department sends an invoice for $3,000, plus the freight charges for sending the core back to me. I never asked for the core to be returned to me. Their exchange policy explicitly states that they only send rejected cores back to the customer at the customer’s request. Nevertheless, the core arrived the next day, with a bright red BER tag attached.
I called again and was told that Harry was “in a meeting,” “out of town” or otherwise unavailable. Messages and emails to Harry were unreturned, and someone else called back. We forwarded that person the vast string of emails between Harry and me. They promised to get to the bottom of the situation, but of course, nothing happened. It’s now almost two years later. I never paid their invoice … and I never ordered another part from them.
Probing into Fuel Probes
I cannot remember getting a billback on a fuel probe core before 2008. It just didn’t happen. But after the economy went south, billbacks on fuel probe cores were suddenly commonplace. Today, if a customer mentions a fuel quantity issue, I tell them right away to expect a core charge billback if it turns out to be a bad probe.
We get fuel probes from wherever we can. I have my favorite suppliers and I check with them first, but if they don’t have it, I have to look elsewhere. We have noticed that no matter which vendor provided the exchange probe, if the core was overhauled by Shop XYZ, then there would be a billback on the core. We also noticed that the rejected part which was “over and above the cost of a normal overhaul” was, in each and every case, the flange. We started querying vendors when purchasing fuel probes to see if we could avoid Shop XYZ.
Once I checked with a favorite vendor and they had the exact probe I needed. “Did it come from Shop XYZ?” I asked. They replied that they didn’t use Shop XYZ, and preferred Shop ABC. How interesting. We ordered the probe, installed it and sent back the core. Guess what? No core billback. No rejected flange. That sure strikes me as odd.
Exchange Price versus Core Value
I learned a long time ago that the cheapest exchange often comes with a higher core value. If the overhaul shop is charging a low price to make a core serviceable again, then chances are they will find plenty of problems with the core that are above the cost of a normal overhaul and a core billback will be the result.
This does not mean that I automatically go for the most expensive exchange! I shop around like crazy on behalf of my customers, and I’m very picky with my vendors. Unlike the aforementioned Harry, there are some really good vendors out there, who care about retaining their customers. They, too, are concerned about the adverse effects of core charge billbacks.
The Good Vendor
Remember my GCU core with the $1,000 billback for a relay? As it happens, the vendor in that case was superb. At my request, they obtained a list of GCU parts included in a normal overhaul. Unfortunately, that $1000 relay was not on the list. They then searched around and unearthed a serviceable GCU for $600. They substituted it for my bad core, thus reducing my billback to $600 and saving my customer $400. It’s not a huge amount of money, but every little bit helps. Most importantly, it softened the blow of a core charge billback, and they provided fantastic service to me and my customer. This wonderful vendor is the same one that prefers Shop ABC over Shop XYZ when it comes to fuel probes.
Some savvy vendors have observed that certain cores come back with the same extra charge for the same extra part, time after time. In response, they have raised their exchange price to account for that extra part. Now, they don’t have to invoice me and collect from me on a billback; and I don’t have to invoice and collect from my customer. It’s a smart thing to do when the circumstances warrant it.
Overhaul or Exchange it?
You might remember my article on starter generators which must be overhauled every 1,000 hours. I suggested to operators of newer King Airs to have their starter generators overhauled instead exchanging them. The very first overhaul on a starter generator should be pretty routine. But if at 1,000-hour total time, you exchange your “young” core units for a pair from the rotable pool, you have no idea how old those exchanges really are. They might have 5,000 to 6,000 hours on them. And when it’s time for those exchanges to be overhauled again, there could be some ugly core charge billbacks.
If you have a newer airplane, consider overhauling your components. If you are using exchange parts, consider pushing back against core charge billbacks to get some proof of their validity.
Get Reports, Pictures and the Part
In the event of a core charge billback, find out if the vendor used by your maintenance shop got the teardown report from the overhaul shop. I find the best vendors always include such reports when they are billing me for a bad core, and I put those findings into my invoice to my customer. There must always be an explanation for a full or partial core rejection.
These days, I press a lot harder for proof of a bad core. Many times I ask for pictures. I now ask for a list of parts included in the normal overhaul, and/or a detailed description of the standard overhaul. I want a clear picture of what is included in the exchange price my customer already paid.
Sometimes I request the rejected parts be returned to me. It’s a lot of extra time on my end, and it’s nothing I can bill for, but I refuse to just roll over every time a core charge billback comes down the pike.
Clearly you can see that I am not convinced all core charge billbacks are justified. I owe it to my customers to get them the best bang for their maintenance buck. I would like to see aircraft owners and managers, along with aircraft maintenance technicians like myself, and even the vendors selling exchange parts, band together and take the overhaul shops to task. I think we should hold their feet to the fire, so to speak. The good shops will have nothing to hide.
This is a tough and complicated problem. The overhaul shops will be the first to declare that the rotable pool is older; and that’s true. Some units have been around the block quite a few times. Eventually, things that are not part of the standard overhaul need to be replaced. But I still maintain that as consumers of exchange aircraft parts, the end user is entitled to full disclosure when it comes to core billbacks. To this end, I feel maintenance shops and parts vendors should support the end user and assist them in verifying that a billback on a core unit is justified and fair.
If there is a particular maintenance issue you would like Dean to address in a future issue, please email Editor Kim Blonigen at kblonigen@cox.net.
Leave a Reply