Case Study: Renegotiating a Service Provider Contract to Market Terms Saves Time and Money
Industry: Public Utility
Summary
Capstan was retained by a utility company with 10 million square feet of space to advise management on a sourcing strategy that would lead to improved integrated services at lower costs. After completing the Capstan Process Maturity Assessment, we benchmarked the current contract and costs, and presented management with alternative sourcing options. The client selected contract renegotiation with the existing service provider, increasing the existing scope of services but obtaining significant price reductions and improved contract terms including fees at risk. Leveraging market intelligence from Capstan, a favorable new contract was negotiated, eliminating the time, expense and risk of transition to a new provider.
Client challenge
The company had grown over time by acquisitions, resulting in multiple service delivery models, union and non-union technical staffs and several service provider relationships. CRE management believed integrating services under one service provider could help it standardize processes, improve services to office users, and open the door to managing assets for the power generation side of the business. Management was keenly interested in what a “market deal” should look like, including pricing and fees at risk. CRE staff hot buttons for evaluating potential service providers were project management resources, technology platform, reporting and on-going innovation on the account.
How Capstan Helped
Capstan completed a Process Maturity Assessment to compare the client’s organization and processes against similar CRE groups. We then benchmarked staffing, management fees and overhead to contracts in our database, identified gaps and outlined potential cost savings and improvements. In conjunction with the client’s Sourcing and CRE teams, we met with the major incumbent provider, and described the service deficiencies and specific areas where costs exceeded market norms. We then facilitated negotiations on key contract terms and service improvement plans, avoiding a formal rebid of the contracts. The provider’s plans for improving the quality of staff, lowering the cost structure, upgrading the technology and reporting platform and providing a consistent maintenance technician delivery model were ultimately accepted by the client. After the contract was completed, we assisted in the development of new governance procedures and policies to support on-going performance management.wrote the proposal, were selected as consultants and hit the
ground running within one week and began meeting with the client team to
define requirements, stakeholders and schedules. We ran a brief RFI
process and then narrowed the list of providers for an RFP process that
included interviews in the U.S. and Europe.
Benefits to the Client
The client met its cost savings and service level improvement goals and secured a market-based contract without the costs of a rebidding process and the risks involved in a transition to a new service provider. A new governance framework insured continuing performance measurement and management.
