Look for the Hidden Costs in Contracts

Despite the best of intentions, there is often a “disconnect” between the people who design, manufacture, distribute, sell, and install electronic security products, and those who specify, purchase and use them. As someone who has spent roughly equal amounts of time on both sides of the chasm, I will do my best to help bridge that gap by way of this column.

At one point in a conversation, as these two groups try to come together, you will usually hear a phrase such as, “I don’t know if I’m asking too much” or “If it’s not unreasonable…” While it is important to assert yourself and protect the interests of your organization, we are also aware of the need for a “win-win” solution to our problem so we’re not written off as a pest by the people we deal with. In this spirit, I have set some common ground in this first column by defining some expectations folks on either side of the divide can reasonably agree upon.

What Is and Is Not Reasonable

Reasonable: The product should work as specified. This means every feature promised in a manual, specification sheet or other form of written documentation — even the back of a napkin or an E-mail message — should perform as advertised. You have the right to test each and every software feature, separately and simultaneously, and expect them to consistently do what you need them to.

Unreasonable: Verbal promises. Come on, we’re all professionals. If there’s a critical component to your system, or a key feature you are looking for, make sure to get it in writing. Understand this may mean you have to document it yourself and attach it to the order. If you are promised “lifetime free software upgrades,” make sure you know whose lifetime you are talking about. If you are promised the release of the product you’ll be getting will wash your windows, and clean windows are important to you, make sure it’s documented.

Reasonable:If you buy multiple products, they should all work. We all know there can be issues with product reliability from all manufacturers, particularly with cutting-edge product lines. Nonetheless, you shouldn’t sign off on a system until 100 percent of it is up and runniMost systems purchases are accompanied by a formal written agreement — clearly a wise decision considering the cost and complexity involved.

A contract is there to ensure both parties understand and agree to the work that needs to be done, that expectations are met and the end user gets the value they are looking for. The contract also allows the integrator to make a reasonable profit.

Unfortunately, the act of generating a contract in most organizations can lead to a lot of input and a lengthy document. While most of the input is based on hard-earned experience, there are items that can drive up the cost of an installation without providing added value to either party. Conversely, there are terms that can be included that can save both parties money and aggravation.

I’ve been getting a lot of feedback from integrators lately on these “Bridging the Gap” columns. Based on what I have heard, I am confident any legitimate integrator will be comfortable with any of these contract terms. If you’re asking for some of these things in your agreement and the integrator has concerns, you may want to look at another integrator.

Training, Bonds are Considerations

Training is a good place to start. End users should use the agreement to clearly describe the level of training appropriate for their staff. If direct factory trainers are needed on-site — or a certain kind of training material needs to be left behind — be clear and up-front about it.

For a legitimate, qualified integrator, this represents little to no incremental cost and they will be happy to accommodate you. They will have contacts at the factory that can make this happen. They have also done it many times before and understand what goes into a training binder. However, an inexperienced or understaffed integrator may have concerns or may promise things that they can’t deliver.

Bonding is often put into agreements, and this is an area that can add considerable cost. A performance bond is essentially an insurance policy that covers you in the event the integrator is not able to complete the project. Like any insurance policy, the bond costs the integrator money and they will likely pass it on to you. Integrators with better track records can pay considerably less for a performance bond, giving you a good point of comparison.

In many cases, you’re better off saving the money and structuring the payment schedule to allow you to disburse payment when milestones have been achieved. This gives you the same kind of insurance, as you’ll retain enough money to complete the work should the integrator drop the ball.

Insurance, Warranty Can Add Costs

Unlike bonding, insurance won’t usually add to the project cost and should be considered carefully.

If the insurance you are asking for is “usual and customary,” the integrator will need to have it in place for any customer — so your project won’t necessarily add to the cost.

If you ask for “exceptional” coverage, you may have to pay and should consider the value. For example, I was recently asked to carry an excessive amount of “Valuable Papers” insurance for a project. In this day and age of electronic drawings that are easily replaced and widely distributed, the value of any documents held for a client is minimal. Our usual coverage amount of $5,000 is more than sufficient, so any insurance in excess of that would be passed on to the client.

Equipment warranties often add hidden costs as well. The manufacturer generally provides a “depot service” warranty for their products, allowing for a product to be shipped to them and returned once repaired.

While advance replacement is occasionally provided — allowing for a product to be swapped for a loaner or replacement unit — I don’t know of any manufacturer that routinely reimburses the integrator for the labor involved in swapping out a unit under warranty. If your agreement calls for this under the warranty period, you’re probably paying for it.

Also consider service response time. Your agreement may call for a technician on site within four hours or one business day. While essential for critical applications, I know of many customers who ask for this feature and then decline to use it — “No, I’m busy today and tomorrow. Send someone out on Friday.”

Integrators take their service response times very seriously. If you’ve got some flexibility, consider asking for a less demanding response time if it will save you money.

A well-written agreement is worth its weight in gold and will go a long way in reducing misunderstandings and ensuring that you get what you pay for. Careful attention to the hidden costs can be equally beneficial by ensuring that you don’t pay for things you don’t particularly want to get.
ng for a specified time period, usually 30 days. If this isn’t possible, insist there be spares on site during the burn-in period, at no expense to you.

Unreasonable: Things fail, and most products come with “depot” service type warranties. This means, unless you have a service contract, no one is going to visit you to replace your product free of charge during the warranty period. You should expect to pull the product, box it up, ship it to the repair center and wait a reasonable period for the repaired unit. If it is so critical that you can’t live without it for a week or two, consider purchasing a spare or a service contract.

Reasonable: If you have questions, concerns, or problems with your system or any individual products, you should be able to call someone for help. Sometimes, this gets complicated as we move to integrated subsystems from multiple manufacturers, but it is important to remember that isn’t your problem. You were promised a working system, and it’s not your job to make it that way. It may not happen on your first call, but there should be a point where companies stop pointing the finger at each other and start solving your problem. Integration isn’t just about the products; it also means that technical support groups should work together as well.

Unreasonable: Don’t expect everyone to immediately jump on an airplane and come to your rescue whenever there’s a problem. Before they will send someone to help, you will need to do your part. Be prepared to perform the troubleshooting steps they ask for and get back to them with the answers. Give them time to get the right people involved. It’s difficult anticipating every possible application and environment in which a product may be used, and sometimes, they truly haven’t seen that problem before.

Everyone Wants a Little Satisfaction

The common theme here is that, at the end of the day, everyone is after the same thing. Customer satisfaction is critical to the longevity of every manufacturer and integrator, and no customer wants to be impossible to satisfy. Remember, even after the bill is paid, your status as a “reference account” is extremely valuable. When folks do right by you, be vocal about it.

But if all else fails, in the upcoming months we’ll look at some strategies for escalating the issues and making sure your voice is heard, loud and clear.

Click Here to download this article in PDF Format

This entry was posted in Published Articles,Specifications. Bookmark the permalink.