I'd like to warn those negotiating new or follow-on contracts to be very
watchful of all pricing breakdowns at ALL levels within the proposal
each and every time the vendor comes back with a revision.
In my experience, a vendor may offer to reduce a service cost during
negotiations. However, in subsequent reviews of the entire pricing
structure, other changes -- unrequested and unmentioned -- may appear,
and these changes may result in the vendor gaining increased income to
offset the agreed-to reductions.
Examples:
- Reduction in standard pick-up/delivery fees, but addition of a
per-item fee tacked on for every transaction
- Reduced monthly storage fees, but addition of new administrative
charges
- Upon contract renewal, no increase in storage or basic delivery
charges, but standard next-day delivery is being changed to standard
2-day delivery
I guess what I'm saying is that companies are getting very creative in
finding ways to end up getting the same income from a contract, even if
they restructure the sources of that income.
My recommendation would be to develop a standard realistic scenario for
your company/organization that includes a representative spectrum of
typical services over a timeframe, say 3 months. It might look
something like:
- starting inventory in storage: 28,000 boxes
- box new adds: 750
- box permanent removals: 600
- box destructions: 150
- standard delivery requests: 1,200
- RUSH delivery requests: 75
- after-hours delivery requests: 30
- standard pick-up requests: 60
- etc., depending on the types of services in your contract
Then, using the pricing provided in your quote, extrapolate out the
total cost for the timeframe.
This approach helped us greatly during a recent evaluation of competing
proposals and helped us to recognize when something in the proposal
changed from one version to the next (particularly when the vendor
hadn't highlighted that particular change).
Pilar C. McAdam, CRM
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Los Angeles, CA
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