In most environments price creep and nonconforming contract terms and conditions begin to take over.  By reviewing contract terms and conditions additional savings are available.  When contract information is organized vendor negotiations can begin.  All contact information must be tracked and by following-up on vendor contacts dramatic savings will be achieved..

      CONTRACT TERMS AND CONDITIONS

Difficult to read multi-page contracts with very fine print are very dangerous to complete without a full understanding.  Legal departments can explain the legal aspects but unless you are fully trained and have experience the Vendor may still gain an advantage that will be very costly in the future.

Contracts that refer to Web sites for additional terms and conditions should be avoided at all costs.

If avoiding Web site conditions is not possible, summarize your understanding and insist that the Vendor acknowledges that your interpretation is correct.

When in doubt do not sign the Vendor agreement.

The more complex promised discounts, special pricing, customized terms and conditions are the more difficult and costly contract compliance becomes.

Terms and conditions must be broken down so the accounts payable department and/or the responsible employee can track the special conditions and validate that the billing is correct. 

In a highly volatile society where employment is constantly changing a “Contract Compliance File” must be well organized.  New employees must be able to refer to it and validate invoices easily.

At least every six months all contracts must be reviewed to make sure that “special conditions” have not been overlooked.  This is a critical step to keeping the “Contract Compliance File” up to date.

WHY IS A COMPLETE INVENTORY ESSENTIAL?

Without a complete inventory the cost reduction process will be incomplete.  Many items and cost saving opportunities will be missed.

To do a complete job all vendors, all items to be purchased, and all services/items needed must be organized in a database that will enable tracking of information and vendor communications.  The cost reduction process consists of numerous contacts requiring complex analysis of the need and the vendor contacts.  Once the volume and need are understood and the existing contract/vendor relationship is defined negotiations can begin.

A list of critical questions about the quality of service/product, pricing, and other relevant items should be defined so that a long term plan can be established. 

It is essential to determine if the vendor needs to be replaced.

THE NEED FOR VENDOR TRACKING

Without long term tacking of vendor/service provider information and communications it is not possible to develop a system to select the best vendor. If vendor/service provider has caused problems without logging the past  the same problems that occurred may happen again.  In addition, when contract negotiations begin it is essential that a history of existing vendor/service provider problems be clearly defined.  This will enable new contracts to address these problems and will supply the negotiator with information that can be used to reduce costs and/or improve services. 

Also, new employees will be able to work with the vendor/service provider with an understanding of what past issues must be addressed and what to watch for so that the service/item can be improved. 

Finally, overpayments and non-contract compliance issues can be addressed and watched if clearly stated in the vendor/service provider tracking database.

 WITH UNDERSTAFFED DEPARTMENTS WHAT IS THE SOLUTION?

As budgets are being cut the time and energy devoted to contract compliance is being reduced.  The solution is to outsource these services to professional cost reduction specialists that have extensive experience in the cost reduction processes and contract negotiation complexities.

OUR PROMISE TO YOU: "Our charges are based on first years savings only.  Almost all cost reduction services are done off site. The time and energy involved by the client is very limited.   Our experienced staff makes recommendations that enables cost savings without disruptions.  We work exclusively for you and your best interests.  We maximize your ability to reduce costs and improve your services" 

We hope you will look forward to the Communicator and would appreciate any feedback that you would like to provide. 

Please email comments to dc@auditbills.com

ATI Cost Reduction & Cost Management Services

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