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Tuesday, 18 October 2016 18:09

Consultant Tells East Bay CAA "The Rest of the Story" Behind Paint Material Shortfalls

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Industry Consultant Ralph Defibaugh recently spoke at a meeting of the East Bay chapter of the California Autobody Association to reveal the facts behind paint material shortfalls.


Industry Consultant Ralph Defibaugh shared his knowledge gathered over 40 years in the collision repair industry recently at a meeting of the East Bay chapter of the California Autobody Association (CAA) held at the PPG Training Center in Concord, CA.


His workshop, "The Rest of the Story” reveals the facts behind paint material shortfalls. By utilizing basic business principles and leveraging his wisdom about how to treat paint like a part, Defibaugh revealed to the 100 members in attendance that training and negotiation will enable them to attain fair material compensation on repairs.


From 1986 to 2010, Defibaugh was president of Spa Body Works Ltd., an MSO in Upstate New York. For the past two decades, he has represented PPG Industries, providing management training classes on behalf of the company throughout North America. In 1997, he established Benchmark Consulting Services to assist collision shops in the areas of process improvement and profitability.


While covering topics such as dealing with “refinish overlap,” “blending with-in the panel” and “clear coat cap” deductions, Defibaugh discussed the adverse effects of these major refinish time deductions on paint material reimbursement.

"For years, these deductions have been grandfathered into the collision estimating databases and software," Defibaugh said. "Shops are being short-changed with the shell game of using refinish times to formulate paint material reimbursement. Today, there is no reason to be trapped into underpayment of the required materials to perform insurance covered repairs. On nearly every repair, shops are being short-changed."


According to Defibaugh, the big three database companies "Calculate the time required to refinish a panel, then the insurance companies multiply that time by a market-accepted price per refinish hour standard," he said. "For example, in San Francisco, it can be as high as $40 per hour for every paint hour sold on an estimate. In other parts of California, it could be as low as $32; in Tampa, FL. the mid-20s; and in NY, where I live, under $30, even though paint and material pricing varies little across the country. It all depends on what is acceptable in each respective market. It’s the refinish hours multiplied by the accepted reimbursement rate that determines what the insured and shops gets paid.


"There are several refinish time deductions,” Defibaugh explained. "Overlap is a prime example, when painting a hood and a front fender at the same time there would be an adjacent overlap deduction of .4. If you were painting a hood and a trunk lid, there would be a non-adjacent overlap deduction of .2. The reason for that overlap deduction is because there are duplications of refinish time operations when painting multiple panels. Included in those operations is time for mixing the color, loading and cleaning the spray gun, and several other things that you would not have to do more than once."


These calculations appearing on Motor, Mitchell and AudaExplore databases are not going to change anytime soon, Defibaugh said. "I had a territory manager call me one day and asked me for some help. One of his shop customers refinished the better part of a Ford F-150 Crew Cab pickup. The estimating program calculated $850 for material reimbursement. The printout from their digital scale after completing the job was $1,800, quite a difference.


The insurance company said, sorry--that's what is being accepted in the market. If a hood was specified for that truck at $350 and the actual price was $400, I would prepare a supplement, prove the price change and be paid for the balance. Everybody understands fluctuations in prices for hard parts, but not everyone looks closely at the actual pricing of refinish materials. Overlap taken on a Ford Fiesta should be different than that taken the F-150 for the sheer difference in the size of panels and the additional materials needed to cover them, yet the same overlap deduction is taken. In most cases, the time designated to refinish a section of a vehicle is enough to complete the task even after overlap is taken. Yet, if adequate time doesn’t provide for adequate material reimbursement, what is the shop to do?"


Another deduction insurance companies are now exploiting is a 50% reduction when refinishing a "repaired panel." The term applied is 'blend with-in-full clear.' If this is the fourth or fifth panel painted and the 2.5 clear coat cap has been reached, no additional time is recorded on the estimate and no additional money allocated for clear materials. According to all three sets of P-Pages, this deduction should only be made on an 'undamaged panel'. Under the guise of 'user defined' settings in estimating software, P-Page rules are being misapplied."


It all comes down to out of sight, out of mind when it comes to P-Pages in many shops, he said. "Shops don't understand or pay enough attention to the Procedure Pages, that are the rule books about how to fully interpret database operation times. When the new updates come out, estimators don't analyze them. If you asked an estimator, when was the last time you read the P-Pages, most would admit it was years ago. The average shop estimators go-along-to-get-along and in the end, they're leaving a significant amount of money on the table--literally thousands of dollars weekly."


In the end, shops need to start treating paint like a part. "Shops can prove exactly what they use down to the hundredth of an ounce and to the penny, plus provide an invoice that lists exactly what was required," he said. "The operation times may be enough, but multiply it by an ambiguous refinish rate, that is subject to arbitrary 'user defined' refinish reductions that is further complicated by variable paint cost and it’s easy to see the problem is out of control. Shops must provide a materials invoice to eliminate this estimating shell game. Insurance companies must reimburse their insureds with reasonable compensation for the damages covered under their policies."


Using Defibaugh's techniques, shops can get paid for the material they're using on each repair. "The insurance companies are taking a 50% deduction on refinish time that Motor calculated to be 26%," back in 2004, he said. "So if they can't rely on refinish time for proper reimbursement, they should use their paint management software to prove the real cost of repairs. In the end, it all comes down to building a case and backing it up with refinish standard (P-Page) facts."

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