the contract renews. Mitigate and lessen these as much as possible. When it is no longer possible, ask for a price cap or tie the rate to a specific index from a neutral party that you can audit later. Tying labor rates to union rates will not do any good if the union will not release the information.

Hyperlinks are becoming more

and more prevalent as we move increasingly toward online agree- ments. These links can change any time behind the scenes and should be avoided at all costs. To protect yourself as you clean up your con- tract, go to the hyperlink, print it out, and attach it as an amendment to the term agreement so what you sign will not be changed. Make sure you agree with it before you sign the contract. Twelve-month service contracts can also have negative effects. There is no one-size-fits-all for contracts. A “maximum 12-month term” pol- icy is, typically, the result of previ- ous bad experiences on the part of the ASC or administrator, but it can result in significant overpayment because often those one-year con- tracts will auto-renew and your rates will increase. In addition, when you ask for a one-year contract, your vendor might not give you their best rates because, in their view, the short-term contract means you are not a loyal customer and might move to a different vendor when your contract expires. Properly writ- ten and managed, longer term ser- vice agreements will save you more money and time. You will get the best pricing and predictability into your cost over that period. And, as I mentioned before, make sure any auto-renew is month-to-month. Fuel charges are like price increases. Ideally, you should remove

fuel charges in your service agree- ments, cap fuel charges or tie fuel charges to an environmental index to reduce costs and avoid spikes. Other good points to consider

when negotiating a service contract: ■■

Your vendor might offer you a cer- tain percentage off, but that does not necessarily mean it is the best deal. Someone across the street might still be paying less. Just because you are getting a 20 per- cent discount does not mean it could not be 40 percent and on par with other businesses in your area. Using a third party with bench- mark pricing data and category- specific negotiators can often help you get the best-in-class rates.


If you work with a group pur- chasing organization (GPO), you might have a false sense of secu- rity. Your GPO might not get you the best cost overall because you might be paying for items that you don’t use. For example, you


might be paying for a fax line even though you have switched to e-fax. Also, double-check your invoices to ensure that you have actually been added to the GPO pricing; this goes back to effective interdepartmental communication.

Keep a contract database. Even if you use a spreadsheet, keep a data- base so the person in accounts pay- able can see it.

There are dozens of spend areas where you can save money if you devote the time needed to review them.

These include waste/trash

removal (including medical waste), telecom, utilities, maintenance con- tracts, alarm/security, payroll


cessing, armored cars, bank fees and many more of these necessary “costs of doing business.”

Dan Schneider is the chief executive officer of SIB Fixed Cost Reduction in Charleston, South Carolina. Write him at


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