Service contracts are a necessary part of the day-to-day operations of managing public buildings. As I have opportunities to meet with current customers who have history with various service companies and also to speak with potential future clients interested in using services that my company offers, I routinely hear people say that they are not happy with the services they are receiving but either feel powerless to change service providers or feel that all providers are the same. Not true. In today’s economy, you are more valuable to your service company than you realize. This means you have power to negotiate and to make changes that will give you more favorable terms. I also have people tell me they don’t need to worry about anything because they are receiving excellent service from their mechanic, and all is well. This is also not true. The best time to negotiate a better contractual position is not when you are frustrated and wanting out of your contract. In fact, you have a better chance of success if you have no intention of leaving your current provider. Furthermore, you may have a great relationship with the mechanic that has been servicing your equipment for the past 15 years and wouldn’t dream of getting someone else, but keep in mind that mechanics change routes all the time, people get promoted and ultimately, people retire. Any number of circumstances could change your service status without notice, but your service contract will still remain in place for a very long time. Because of these facts, it is imperative that a building operations manager take a few easy proactive steps to put themselves on better footing to prepare for the future.
Step 1: Review your current service contracts
Find the contract that you originally signed with your service provider and carefully review the details. If you can’t locate the original contract, contact your service company and request a copy of your contract. Make sure they produce the original signed contract. Once you have the contract in hand, look for quantifiable deliverables that you are entitled to receive for the amount you are paying. Are replacement parts covered in your contract? Does the contract stipulate how many service hours or visits are included? Check to see if certain components of your equipment are excluded from coverage (i.e. wear items, batteries, light bulbs, etc..)? How about annual safety testing requirements? Will you be charged extra for service after hours? If after hours service is covered, is there a time limit set per repair? Make a list of exactly what is included in your contract. If there is anything that is not included that you would like to add, these will become negotiating points later on.
Secondly, you need to look at the terms and conditions for the pricing of your contract. Are you subject to a penalty if you cancel early? Do you have to give a 90 day written (certified letter) notice of cancellation prior to the contract’s end date? Are you subject to price increases? If so, how much can the price be increased? Look for any other details that may affect your bottom line or the service you receive.
Finally, you will want to look for any grey areas that are not clearly defined, or areas with excessive legal terminology that is deliberately confusing to the average reader. Many times, a simple concept can be stated in a way that makes it sound like it is saying the opposite of what it is actually saying. If the contract stated, “you forego all of your rights to seek any form of legal action against XYZ company”, I would venture to say very few people would sign that contract. However, many contracts contain clauses that mean just that. Again, these will be areas for negotiation.
Step 2: Solicit competitive bids
Call other service providers and ask them to send you a quote to provide service on your equipment. Try to get quotes that are as similar as possible to your current contract. You can choose to offer as much or as little information about your current provider as you choose. You may want to inform the competing company that you still have several years left on your current service contract. This will let them know that they don’t need to call you back repeatedly to see if you are signing their offer. Most companies will respect the fact that you are just performing a routine comparison and may follow up with you on a yearly basis in the future to make sure you’re satisfied with your current provider.
Once you’ve received at least one competitive offer, ask the same questions you did in step 1 above. You can begin to decide for yourself the value of each item. Keep in mind the more definitive the offer the better. If your contract says a mechanic will periodically perform service on your equipment, that could mean many things. If it states your equipment will be serviced quarterly or monthly, that is more definitive. Look for exemptions for preexisting conditions or obsolescence of equipment. Sometimes a new provider will make an attractive offer to get you to sign with them, then they will try to charge for expensive upgrades and repairs because your equipment was, “in dis-repair” or is “obsolete”. If you refuse the expensive upgrades, problems that would normally be covered under your agreement will now be billed extra because you refused the upgrade. Keep in mind, if your equipment is 30 years old and well used, you may very well have obsolete equipment that needs upgraded, but a service contractor should be up front about their intentions prior to signing a contract with you. If you do entertain the idea of accepting an offer from a new provider, make sure they are taking the equipment on “as is” or they have fully disclosed any required repair pricing ahead of time.
Step 3: Evaluate your current provider’s performance
Now that you have a clear idea of what your current contract covers, and what potential providers are offering to cover, you can begin to look at the service you’ve been receiving. Look back through your expense history and see if you have paid for items in the past that should have been covered. Check to see how many service visits you receive over the next few months. What you are trying to determine is if the current company is holding up their end of the contract. If you see discrepancies in service visits or parts coverage, you will want to discuss this with the company to better understand why you are being charged, or why you are not receiving the service you expected. Give your current provider a chance to make things right if they are not already, but be sure to keep track of what you have found.
Step 4: Open the negotiation process with your provider
This is where your hard work begins to pay off. Make sure that you are reaching this step with plenty of time left on your current contract so you can give a notice of cancellation if needed. After all, the provider needs to know that you are capable of cancelling the contract if they are not willing to talk with you and negotiate. If you are already beyond your deadline for submitting a notice of cancellation, your position has already been severely weakened. Also be aware that you may have to be persistent to get through to the person you need to speak with. Aside from being busy, the person that you need to contact may already have an inclination that you are wanting to negotiate or cancel your contract, and so they may not be too terribly receptive to your calls.
When you do make contact, you can decide what approach you want to take depending your previous findings. You may want to diffuse some tension and tell them you currently have no intentions of cancelling your contract, but you want to negotiate a few terms. Or you may want to start by issuing your notice of cancellation and cite reasons you are not happy with the current service. Either way, you are armed with the knowledge of what you currently expect to receive and of what is available from other providers. Ask them to include something that the competitor has included with no increase to cost. For example, “Your contract states that my annual test isn’t covered, however, your competitor DOES cover this. Can you please add this to my contract?” Or, “Your contract doesn’t stipulate how many service hours/visits I will receive each year. I need you to provide a definitive number of visits that I will be receiving each year.”
Remember those grey areas that are full of confusing legal terms? Tell them you want that section either simplified or removed entirely. There are countless items that you can bring to the table. Some may be more doable than others, but in the end, you should be able to gain some ground and take control of the negotiation process. Too many times people assume that all service companies, or all contracts are created equal and they don’t realize they have options.
Step 5: Don’t be afraid to close the negotiation process
By this step, you should be very well understood by your provider’s representative. You will probably be hearing reasons that these changes can’t be made. “Sir, these terms are written by our legal department and I don’t have the authority to make that change.” Or, “Ma’am, you don’t understand. We are the service professionals and we know what you need better than you know yourself.” Be firm. If they are unwilling to make any concessions and you have a more favorable offer on the table from another provider, don’t be afraid to send your notice of cancellation immediately. If you are satisfied with the service you have been provided thus far, you may want to accept the terms as they are. The important thing is that you are in the driver’s seat and can take control of the entire process. Don’t just assume you have to accept whatever is handed to you year after year.