Renegotiating Service Contracts
Case Study: Finding better pricing for Service Contracts (January 2011)
Our client, a Church with two locations, was paying $700 a year for a service contract for their Avaya Partner phone system. The maintenance firm was located about 1.5 hours away and very seldom had to make a service call over the previous lifetime of the service contract. The vendor contract auto-renewed for 3 years if not notified in writing 30 days prior to expiration, and each renewal added about a 15% increase in the annual price.
In the course of our normal analysis, we came across this contract and inquired. The Church administrator wasn’t really sure what it was and asked us to investigate. Upon doing the necessary research we were able to ascertain the details from the incumbent company. We then wrote an RFQ and sent it to local phone system vendors, soliciting bids. The winning bid, from a local company about a mile away, was for $30 a month. We asked for a discount to pay annually at the beginning of the year. The new vendor was awarded the contract for $300 a year on an annual basis for 3 years. Our client was very pleased that we did the diligence for them which resulted in a reduction of over 50% in their annual cost. This was in addition to the 50% savings we had already set in place with their recent telecom optimization.