XI. Procurement and Contract Management

Guide to Financial Operations

XI.11.D Equipment and Software Maintenance Contracts

XI. Procurement and Contract Management
Guide to Financial Operations

The purpose of this section is to provide guidance to state agencies on:

  • Assessing the need for equipment and software maintenance contracts;
  • Determining price reasonableness for those contracts; and
  • Essential language for equipment and software maintenance contracts.

Prior to obtaining equipment or software maintenance contracts, agencies need to determine the specific maintenance services needed. Agencies also need to ensure they obtain those maintenance services at a reasonable price. Therefore, it is essential to involve both program and fiscal employees in the process.

In cases where a request for proposal includes a provision for a best and final offer or when agencies are seeking contracts in a single or sole source market, agencies should also involve staff with knowledge in analyzing complex vendor proposals and who are adept in negotiating contract prices.


Equipment maintenance contracts may be needed for various types of equipment including vehicles, heavy machinery, elevators, medical equipment, communications equipment, and computer hardware. Maintenance can be preventive and/or remedial in nature.

Preventive maintenance is intended to help avoid future equipment failures and to help extend the useful life of the equipment. It can include the systematic inspection of equipment and detection and correction of failures either before they occur or before they develop into major defects. Preventive maintenance procedures may include tests, measurements, adjustments and parts replacement performed at specific time intervals defined in the contract. Remedial maintenance, on the other hand, includes the labor and/or parts necessary to repair broken or malfunctioning equipment.


The term “software” has been used to describe a variety of products, from operating systems to complex applications. Generally, software maintenance means modifying software after an agency has purchased and installed it. It can include version and release upgrades, security updates or patches, performance enhancements, compatibility improvements, certification of interoperability with other products, data cleansing/archiving, minor application modifications, and configuration changes. The number of personnel needed to perform software maintenance increases in proportion with the frequency and complexity of the maintenance activities.

Process and Document Preparation:


Contracting for equipment preventive maintenance is appropriate when the agency does not have the personnel with the capability to perform such preventive maintenance itself, and:

  • The services are necessary to keep the equipment in optimal working order to ensure the safety of state employees and the public;
  • The agency wants to extend the useful life of equipment because it will be more cost effective than procuring new equipment; and/or
  • It is critical to minimize equipment downtime due to the nature of the program for which the equipment is used.

In certain circumstances, well-made durable equipment (e.g., switches and routers) can have a long life with few breakdowns, regardless of whether it has received preventive maintenance services. In these cases, contracts for preventive maintenance would provide little value to agencies at potentially significant costs. In some cases, it may be better to simply buy another piece of equipment instead of paying for preventive maintenance. Therefore, agency managers should evaluate the durability of the equipment before entering into contracts for preventive maintenance.

Contracting for remedial maintenance is appropriate when the critical nature of the equipment necessitates a contractual requirement to minimize downtime and/or to clearly document essential maintenance requirements to the vendor, or when the agency reasonably anticipates annual expenditures will likely exceed its discretionary spending limit.

Agencies should refer to Exhibit A for guidance on assessing the need for equipment maintenance contracts.


Maintenance agreements are necessary when:

  • The functionality of the software is critical to the agency’s operations;
  • The agency lacks personnel with the capability to sufficiently support the product;
  • The nature of the license agreement precludes maintenance by the licensee; and/or
  • Agency management has determined it is cost-effective to obtain those services from a third party.

Not all systems are “critical” all of the time and so, for this reason, it is a best practice to specify the operational periods when their importance to the agency is highest. This allows agencies to establish lower service level agreements for non-critical periods, thus reducing unnecessary expense.

Software maintenance may be appropriate when it is more cost effective to have a maintenance agreement than to purchase software upgrades separately. In cases where the agency is a major client of a smaller software developer, a maintenance agreement can be a cost-effective way for the agency to communicate enhancement requests that the developer can incorporate into its regular upgrades.

An agency may not need software maintenance agreements when it owns the software source code as part of the software purchase agreement and has sufficient personnel with appropriate skills to modify, enhance and/or troubleshoot software problems in-house. Also, some software may not require regular support or enhancements. In these cases, agencies may be able to rely on ad hoc procurements for needed services.

Agencies should refer to Exhibit B for guidance on assessing the need for software maintenance contracts.


Ideally, agencies should competitively procure maintenance service contracts from a field of responsible and responsive offers. This competition can help to ensure that the procurement process produces an optimal solution at a reasonable price. However, there are times when agencies are unable to rely on competition for maintenance contracts.

For example, some maintenance services are available only from the equipment manufacturer or software developer (i.e., sole source). Also, there may be more than one potential maintenance provider, but the agency has determined that it is in the best interest of the state to procure maintenance services from a particular vendor (i.e., single source). Agencies also may not be able to rely on competition to help ensure price reasonableness when maintenance is available from a small group of vendors who dominate a market.

In all these instances, agencies have an obligation to exercise due diligence in negotiating pricing and determining price reasonableness. The best time to negotiate maintenance pricing is at the same time the agency procures the equipment or software that requires maintenance. However, it is important for agencies to remain diligent throughout the contract term so that an appropriate adjustment in pricing can be made as circumstances change, the contract comes up for a renewal or extension or the maintenance services are no longer needed at the same level as previously determined.

Agencies should refer to:

  • Exhibit C for guidance on determining the price reasonableness of equipment maintenance contracts; or
  • Exhibit D for guidance on determining the price reasonableness of software maintenance contracts.


If the maintenance contract is necessary and the price is reasonable, agencies should refer to:

  • Exhibit E for guidance on developing contract language for equipment maintenance; or
  • Exhibit F for guidance on developing contract language for software maintenance.

Further, if the agency enters into any maintenance contract, agency managers should establish contract monitoring procedures to ensure compliance with contract terms.


Agencies must obtain OSC approval for a single or sole source maintenance contract if the anticipated value over the life of the contract will exceed the threshold amount set in Section 112 of State Finance Law (See Section 2.A - Thresholds in this Chapter for additional information). In addition, agencies are required to advertise maintenance procurements in the New York State Contract Reporter (Contract Reporter). If the agency is seeking a waiver from advertising in the Contract Reporter, OSC must approve the exemption before the contract is executed.

When agencies intend to procure maintenance along with equipment or software, they are required to incorporate their maintenance needs in both the Contract Reporter advertisement and in the bid solicitation. In cases where maintenance is needed, including maintenance in the bid for equipment or software is the only way to determine true best value.

For more information, see:

Certain equipment maintenance may be available through state centralized contracts. For more information, see:

Guide to Financial Operations

REV. 03/19/2012