I worked with fixed fee arrangements for years, and I absolutely love them and highly recommend them. When possible, I will opt for this kind of contract with an offsite RIM vendor every time. I'm very careful in drafting the contract terms to make it fair for both the vendor and the customer, i.e., we do an activity analysis covering 1-2 years of account activity before setting the caps, specifically to avoid any kind of surprise for the vendor (activity levels far exceeding what is covered by the flat rate). Also, the contract has to contain specific line item rates for monthly services exceeding the cap. The optimal goal is to manage your offsite activity so as to never exceed your caps, but there will always be some exceptions during the course of a year. For me, the willingness of a vendor to work with me in crafting a flat rate contract is a top selection criteria when I go out vendor shopping. Unfortunately, when I last changed jobs I inherited a storage account with a vendor that will not consider flat rate contracts, so I'm stuck for the time being!
Lee R. Nemchek, MLS, CRM
Vice President, Records Management
Oaktree Capital Management, L.P.
333 South Grand Avenue, 28th Floor
Los Angeles, CA 90071
p +1 213 830-6252 f +1 213 830-8504
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www.oaktreecapital.com
-----Original Message-----
From: Records Management Program [mailto:[log in to unmask]] On Behalf Of Patrick Cunningham
Sent: Tuesday, August 30, 2011 9:35 AM
To: [log in to unmask]
Subject: Fw: [RM] Storage Contracts -- Fixed Fee Arrangements
That is an interesting concept. Manages the annual cost for the customer and guarantees a level of revenue for the vendor. The only problem is when things get crazy. My experience over time has been the all in costs for commercial records centers for a moderately active account work out to around $5 per cubic foot per year. I've found that to be a useful budgetary number, although far from scientific and certainly not representative of a very large sample size. But it seems to work when I have tested it. That said, if I were a vendor, I'd want a fair amount of history before considering a fixed fee deal. I think that many organizations are hard-pressed to articulate their "normal" levels of activity and thus have trouble estimating the annual spend to begin with.
Contractually, I think a vendor would have to set some limits. In other words, a fixed fee only applies to standard services, there are volume and activity caps, and so forth. I'm not sure that such an arrangement would do anything other than create a budgeted expense, but anomalies to what is "normal" clearly blow the model out of the water. I doubt that a vendor would want to assume normal activities, then be presented with a 10% retrieval volume for litigation. Likewise, I doubt a vendor would like this sort of agreement, then find out that the customer wanted to destroy 20% of their volume in storage. The risk is really driven over to the vendor and the only upside is if the customer underutilizes the contracted services.
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