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Nothing is more aggravating than to receive poor service
after you have entered into an agreement. It seems that
vendors take their customers for granted, giving poor service
and failing to give timely responses to your concerns about
lack of value. Once again, especially in a term agreement, you
would be cutting off your nose to spite your face, were you to
engage in the expensive effort of litigating a solution to
your problem. I experienced this problem with a lighting
service and photo copier contract. In the instance of the
lighting contractor, user departments were disappointed about
the poor service they had received from a nationally known
vendor, and did not want their budget dollars to go to this
firm when the contract was up for renewal. However, we were
unwilling to do the work in-house and could not find another
vendor who could cover all our facilities. The ideal solution
was the Penalty Clause for Non-Performance. What this means is
that the vendor agreed to provide a specific level of service,
limited by acts of God, vandalism or other acceptable
criteria. Performance demanded of the user, us, was to allow
the vendor to resolve any complaint within five business days.
Failure to complete the contract as initially agreed, coupled
with a failure to respond to a verbal request within the
specified amount of time (a second chance, so to say), did
result in a penalty to the vendor, equal to 50% of the monthly
cost of ALL of our facilities, or about twenty times the
monthly service cost to the facility that had received the
incomplete service.
Seems like a steep cost? No doubt about it!
Why did we agree to those terms? Simple. The logic is that we,
the user, do not wish to receive complaints about vendors
failing to live up to the terms of our agreements. All we want
is to receive the service contractually promised.
The
provider wishes to obtain our business and agrees to the
terms, as proof they are confident of meeting the terms of the
agreement. Let's call it their "Custom-Made-Warranty." It is
not the purpose of the user to turn a service into a profit
center, just as much as it is not the purpose of the provider
to provide no-cost service. If everyone performs as agreed
upon, no claims are made or paid. The performance penalty is
intended to cause the provider to focus upon you, the
customer. In all candor, I had to exercise the clause on one
occasion with each vendor. You may be surprised to discover
just how easy it is to get their attention to a service
matter, when their revenue stream is damned up.
RESULT: In this example, you will probably not realize a
direct budget savings. You will most certainly obtain a higher
level of service for your budget dollar, which in turn may
allow you to reduce your managerial efforts in this arena. In
the past, your firm may also have been forced to pay for
secondary suppliers of an agreed upon service, as it was
cheaper to pay two vendors than to take the bums to court.
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