If you haven’t realized it already, your purchase service contracts (i.e., tasks, jobs, or services performed by outside contractors) are more complex than ever before. More importantly, there is no easy way to measure, manage, and control these contracts without understanding their characteristics, since no purchase service contracts are identical. Yet, there are 5 ways benchmarking can improve your purchase service contracting cost, quality, and performance – almost overnight!
5 Ways Benchmarking Can Improve Your Purchase Service Contracting
Benchmarking has its champions and its detractors; however, SVAH has found benchmarking to be a powerful tool to:
1. Evaluate the appropriate terms and conditions for a contract, such as, how many years the appropriate term is for an elevator maintenance contract, what discounts are prevalent for parts replacement, and what the average rate would be for after hour service.
2. Analyze whether your current purchase service contracts are cost effective. It is understood that you can’t easily benchmark the price of other hospital, system, or IDN’s purchase service contracts outright, since no contract terms, conditions, and statements-of-work are the same. However, you can benchmark your activity-based cost of a contract to determine that contract’s overall cost compared to a peer hospital, system, or IDN’s same metric (e.g., patient days, tests, per employee, square footage, etc.).
3. Discover metrics (i.e., a system or standard for measurement) that enable you to improve your purchase service contractors’ performance. Let’s say, you are using a performance metric for your linen service contract that no one else is using. This fact will enable you to change your metric to be more universal and therefore able to be compared to a peer benchmark.
4. Identify serious quality issues that aren’t readily visible to the naked eye. If your benchmarks show that your contractor is getting their job done in half the time of your peers, then there could be a quality issue with their work that needs to be investigated.
5. Discover purchase service contracts that are over or under performing. How would you know if other hospitals, systems, or IDNs are paying half the hourly rate than your facility on their biomedical service contracts in your region and not charging an overtime rate? Only through benchmarking can these facts surface!
These five benefits of comparing your purchase service contracts with your peers should be an ongoing process, not a onetime event. This is how you will uncover vital information to either write a new contract, renew an existing contract, or monitor a current contract’s performance. It could mean the difference between flying blind or having a GPS to guide your way to purchase service contracting success.
Benchmarking: The Search for Industry Best Practices
The classic definition of benchmarking is, “The search for industry best practices that lead to superior performance,” not searching for just the best price paid for a comparable contract. As I have already stated, it is impossible to benchmark prices paid for a purchase service contract, because no purchase service contract elements are the same.
However, you can benchmark countless attributes of any purchase service contract compared to your peers, including cost per a predetermined metric, which would lead you to the best value paid by a peer. So, all and all, it is important that you benchmark all of your purchase service contracts if you are looking to purchase best value vs. best price available in the market today.