The Engineering Services Contract – how to partner with your customers
The procurement processes at many companies can be very complex and time consuming. It can take longer to get a purchase order than to complete the work on some projects. One solution to this is to set up an engineering services contract, or a blanket contract.
Often times you have a customer that you do many small projects for. This could be any type of service, but for the purposes of this blog, we’ll focus on an engineering services agreement. They may not be huge projects, but you take away their “pain” by solving the little things for them. All those little things add up, but it is hard to write a requirements document to incorporate all the things that could come up, and it can take more time to write or process the purchase order than to do the actual work.
In situations like this it is great to have an engineering service contract in place. Service contracts can be set up for any type of work. It could be engineering services, consulting, trades work, repairs, etc. The way an engineering services contract works is that you take care of all of the legal and contractual things up front and have the funds pre-approved. When the need arises, the customer calls the supplier and “releases” the work to the supplier.
There are many different ways to set this up. It could be with an individual department or with the whole company or anywhere in between. You could have a “blanket” purchase order or contract that has been pre-authorized for a certain amount. This blanket is controlled by a designated person within the customer’s organization. They can “release” the work to the supplier as needed on a time and material basis. In order for the engineering services agreement to be efficient, it’s best for both parties to have a process for approving or releasing the work and documenting or signing off that it has been completed.
We have done this with several customers using what we call phase sheets. We keep a spreadsheet or log of all of the work that is requested and assign a number to each request. We fill out a simple sheet with a few key sections: Client – stating who requested the work, Scope – what the work is, and Cost – an estimate of time and/or cost. There is usually an owner or administrator of the service contract at the customer and they release or approve the work. Our employee executes the work and then turns in the request form with the actual hours once completed.
The engineering services contract should also define the frequency of billing to the customer. Typically we invoice biweekly for services completed to date. This can be modified if needed and agreed to by both parties.
This may still sound like a lot of steps, but it is not. It happens really quickly and in many cases makes things easier to track because it is all in one place.
Service calls can also be handled through blanket contracts. When an authorized person from the customer requests a service call, we complete the work and fill out the appropriate paperwork and submit for invoicing. It can all flow very smoothly and without multiple purchase orders.
We have found that whenever we can partner with our customers and set up these engineering service contracts, it streamlines the process and helps us to build strong and long lasting relationships with our customers. There is a familiarity with the facility and the work which leads to quicker and more efficient solutions for the customer. It speeds up the approval process and things don’t get bogged down in purchasing, and usually less people need to be involved. Often the engineer or person that encounters a problem at the customer’s site can reach out directly to our engineers and start the process. In some cases these problems can even be solved over the phone which is even more cost effective for the customer. More on that next week.
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