6 Ways to Cut Service Contract Costs

06/01/2015 | By Janelle Penny

Find savings opportunities while keeping operations green

Faced with budget cuts, the last thing most FMs want to do is slash their provided service levels. Unfortunately, as material costs continue to rise, sometimes that may become necessary. If you’re outsourcing any building services, enlist those providers to help cut costs when it’s time to renegotiate contracts – they may be able to help you secure savings without sacrificing sustainability.

“The best thing to do is just ask,” says Ken Bartell, vice president of enterprise solutions for ServiceMaster, a janitorial provider. “That’s happened with many customers. They say ‘We’ve got to cut costs, so how can we do it?’ Providing that your current vendor is doing a good job, they know the building’s idiosyncrasies and its tenants or employees, so they can help you decide what the resistance might be on changing certain aspects of service.”

Try these six cost-saving ideas to find contract savings while preserving your green operational goals.

1) Clarify the Scope of WorkThe services in your contract should be based on the risks of your particular facility, explains Michele Vance, vice president of commercial sales for Terminix, a pest control provider. With pest control, for example, providers can consider your geographic location, the type of building you have, and any sanitary or structural issues that could contribute to pest problems and tailor a program to your building.

“Break the building into high-risk and low-risk areas. Restrooms, anywhere that has food, and areas involved in shipping and receiving should be serviced more often than lower-risk spots like individual offices or equipment areas,” says Vance. “Pests tend to be more present on the lower levels of buildings, so the higher up you go, you could in theory reduce the frequency of services to help lower the overall price without increasing risk.”

Work with your provider to create a scope of work that addresses the real risks instead of going with a boilerplate version that addresses every possible occurrence, Vance adds. Err on the side of detail so that no questions are left unanswered.

“Be very clear on what pests are covered and what is outside the scope,” says Vance. “That way the provider isn’t trying to build in additional money in case of extra pests that they might have to cover, even if they may never show up in a certain client’s geography – instead, those extra billable charges are only added when a rare pest is present. Sometimes, in their enthusiasm to be all-inclusive, a company will include every pest under the sun in their scope of work. When providers see it, they say ‘What allowances will I have to make in case I have to treat for a gopher, skunk, or feral cat?’ Realistically narrowing the covered pest list makes more sense for both sides.”

2) Reduce Daily TasksSmall savings on daily requirements frequently add up faster than cutting out one higher-priced item, Bartell explains: “If you have expensive quarterly or semiannual projects, such as floor refinishing, cutting out one of those could save $1,000. However, if you reduce the daily cost by just $10 over 260 days, you can save more than two and a half times what you would have saved by eliminating the major cost. The real savings is in daily tasks.”

Services such as cleaning involve scores of small tasks that can be customized, Bartell adds. Request a detailed list of tasks and their frequency to give you a good starting point for renegotiation.

Bartell also recommends enlisting the help of building occupants to determine where cuts can be made – for example, employees can dust their own desks and computer screens instead of relying on the janitorial staff to do it. This also helps cleaners use smaller quantities of cleaning supplies, leading to fewer containers and wipes heading to the landfill.

“The one I always point to is the trash can. Is the can in your office full to the brim every night? The answer is almost always no. So why are we emptying it every day and throwing away usable liners when we could empty it twice a week instead?” explains Bartell. “Another task that takes a long time is vacuuming. Could we vacuum the reception area and the conference room where you have meetings every day, but only vacuum general staff areas once or twice a week?”

3) Tweak the ScheduleOne increasingly popular tactic is day cleaning, which offers green perks in addition to saving money.

“People are in the building earlier, so you don’t have to keep the lights and HVAC on as late at night, which helps save on utilities,” explains Bob Quast, vice president and member of BOMA/Chicago and vice president of Lincoln Property Company. “If the cleaning lady comes in the afternoon and a space is still occupied, one of your occupants might say ‘Things are fine today, just go on.’ Cleaning personnel often wind up with fewer tasks than originally specified, which also helps save on time and supplies.”

4) Focus on PreventionIt can be tempting to cut down on preventive services for things like pest control when you aren’t noticing the problem, Vance notes, but waiting until a larger issue arises may end up costing you more in the long run and necessitate reactionary solutions that aren’t as eco-friendly.

“Bird populations can become established quickly. If they’re not treated right away, soon the birds are nesting and raising their young on the building. The cost to cure and correct that problem is far greater than if we had been allowed to provide some preventive measures as soon as we spotted roosting,” explains Vance. “That happens with termites as well. One client, a multifamily management company, neglected to have one of their properties on a termite inspection program and it resulted in a $10 million rebuild because the termites had literally eaten the building. The cost of the prevention program would have been so much less.”

5) Partner with ProvidersEven when being budget-conscious, don’t just accept the lowest price offered without knowing what that cost entails. If any vendor’s offer looks too good to be true, it probably is, Bartell advises.

“If the scope of work is the same, but you get a bid that’s 95% or less of what you currently spend, figure out why that is. What did they miss or what did you not communicate to them?” Bartell explains. “Services like cleaning are so labor-intensive that unless someone has a particularly new technique, it’s pretty hard to have a major change. They may have that secret solution that helps them work faster and more effectively, but you need to investigate.”

If a drastically lower bid comes in for your building, ensure the provider isn’t cutting corners with important services or sacrificing green goals.

6) Look at the Long TermThough much can be gained from adjusting contracts to build in incremental daily savings, there’s a lot to be said for long-term savings as well. Quast recommends looking at perennial plants indigenous to your area the next time you need landscaping work done so you can avoid the cost of replanting annuals. Paving is another area where creative negotiation can help stretch your maintenance dollars, Quast adds.

“We look for longer-term contracts that enable paving contractors to spread out costs over a period of time,” Quast says. “Rather than having to pay a large bill out of my pocket to fix remedial things, sometimes contractors are willing to advance the money and spread out the cost in even payments to improve the parking lot. Then they can get their money back with some interest.

“It’s about how you design contracts,” adds Quast. “It’s a matter of vendors and contractors understanding the business we’re in and how we do what we do.”

Pest Control

■ Focus on high-risk areas vs. low-risk■ Cover only typical pests■ Emphasize prevention■ Use “time and material” contracts vs. fixed cost ones

Landscaping

■ Practice xeriscaping (using indigenous plants that require less water)■ Use perennials instead of annuals■ Water when plants need it, not on a fixed schedule that doesn’t account for rainfall

Cleaning

■ Implement day cleaning■ Reduce daily tasks in staff areas■ Give employees responsibility for personal spaces■ Switch to concentrated formulas with non-toxic ingredients

Janelle Penny janelle.penny@buildings.com is senior editor of BUILDINGS.


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