Best Practices for Managing Service Providers & Questionable Invoices

What's in This Episode?

In our next Facility Management Coffee Talks episode, we review best practices for managing service providers and how to manage questionable invoices. If you are interested in more information about better managing your service providers, check out our ebook.

Full transcript:

Trey: Good morning everyone and welcome back to the continuation of series two for our Facilities Management Coffee talks. Once again, we've asked back Mike Parks, the Senior Vice President of Products Strategy for the Accruent Verisae Solution. Mike has a strong background in grocery. Mike, I know you told us before some of the information about how you started out cutting meat, and obviously became a very well hilled operator. Can you share with listeners, that haven't sat in, in the past, a little bit about your background in the grocery space?

Mike: Yeah, absolutely, Trey, and thank you so much for having me back. I started working in grocery in 1998, as a 16-year-old young man, as a box person for an organization that is no longer around called Alpha Beta. It was purchased through acquisition by the Yucaipa Group, and then Ralph's Food 4 Less, then Fred Meyer, and then the Kroger organization. I've spent some time in operations, human resources, capital budgeting, store operations, and most recently in my career before coming on the software side of the business, I worked under property, maintenance, energy, and facilities.

Trey: I love the fact that you're able to join us again, Mike. You know I like to joke. I hope you have a fresh cup of coffee for this podcast. Today's subject, that our listeners hope to focus on, is really all about service provider relationships. Tactically, how do we manage late, or we'll call them questionable invoices, from those service providers?

Trey: So let me ask you. When you were an operator, how did you approach those service provider relationships in advance of even getting the invoice?

Mike: Yeah, I appreciate it Trey. So, if I'm in charge of facility maintenance and property management for an organization, the relationship that I have with my service contractors is critical to my success and the success of my store operations team. If I've got equipment that is down, or unplanned uptime, or anything that is impacting sales or profitability of a location, I'm not being a good servant leader for that organization.

Mike: So, any relationship that I have with a service contractor is built upon mutual respect and trust. I think it's incredibly important to involve them in the decision-making process, make sure they understand what it is you're trying to accomplish, why you're trying to accomplish it, and how they can help you. Then, in any new program that I roll out, I want to make sure that I've got proactive communication and that I engage with that customer, and that service contractor to train them on that new procedure, and that there's a, what I would call, a period of grace.

Mike: I go back to I rolled out a computerized maintenance management solution for a contractor base in 2008. This was a contractor that was going from a paper invoice where a technicians would come into one my locations and do work and then send me a paper bill that said, "Johnny worked four hours today, and we went to CMMS solution where they were required to log in when they got to a location, pause a job when they went to lunch, or had to go get parts, log out when they completed a job, and give a very technical fault and action code." I knew it was a ton of change for my contractor community, and we decided that if we were gonna go live on August 1st on a particular year, we were going to all learn together for the first 90 days.

Mike: I was going to give them a weekly report on performance, how were they doing compared to what we were trying to accomplish. We were going to do a biweekly refresher training class with the service administrators and any contractor that wanted to attend. So that contractors that were struggling could better engage, but I also made it really clear that while we're all learning together on August 1st, on November 1st, the rubber hits the road. Meaning, this is what we're trying to accomplish, these are the rules of engagement across my enterprise, and beginning November 1st, I'm going to expect all of those contractors to comply with those rules.

Trey: So Let's take that on, on November 1st. Let's say they don't, lets say somebody shows up to repair a refrigeration unit, order repair in HVAC unit. All of a sudden, the invoice comes back and it's 30% over a not to exceed or it includes a trip charge that you didn't account for. How did you handle that conflict or that issue in the relationship?

Mike: Yeah, absolutely. So to be honest it was very black and white. As we went through this process change with our customers, we also drafted new master services agreements. And those master services agreements, thankfully, included every possible outcome that we could anticipate experiencing over the next 24 months with all this process change.

Mike: So typically the way our MSA was written, was that the first time a contractor didn't comply, if we had a not to exceed on an invoice of $500 and they went out and did the repair and it cost $1100 to do the repair. The first time they were out of compliance, we as an organization, we would meet them half way. So if the delta was $600, we would pay an additional $300 and we would ask the contractor to eat the additional $300. The second time, that they made the same mistake out of compliance, we would thank them for doing the additional work for free. The same thing was true if a technician forgot to clock in at a location. If he or she didn't log their hours and they went back to the back office and said, "I finished this job," and they spent three hours on site, the first time that that happened, we would meet them half way. We pay for 90 minutes of labor and ask them to eat 90 minutes. The second occurrence, we would thank them for doing the work for free.

Mike: Again, this was after that 90 day, we're all learning together process that we went through with the process change, constant coaching, and a weekly report card showing how are you doing in terms of getting up to speed and being compliant with the rules that will take effect on November 1st.

Trey: So it's interesting. It sounds like you tied some pretty aggressive process change tied to the implementation of a facility's management software package or a computerized maintenance management software package.

Mike: Absolutely. I think that anytime that you're purchasing a software solution or making a major investment in your business, it is critical that you identify the expense initiatives that are going to accompany that process change. Too many times throughout my career, particularly being on the software side, customers purchase a solution, like a CMMS or a mobile workforce management solution, and they don't articulate and formalize the process improvements that they are going to utilize that system for to reduce expense and reduce exposure.

Mike: I've got a really good friend, his name is Aaron Paul Black, who tells me that aspirations from mediocrity seldom go unfulfilled.

Trey: Sure.

Mike: It's really important to say what is my goal, what do I want to get, when do I want to get it by, and how am I going to get it. I think that's critical in any department of a solution.

Trey: So that brings me to education. And it's clear when you roll out a new solution or a new process, you educate all your internal stakeholders as well as all your service providers. But as a best practice, how often should you keep reeducating or should you keep messaging to those folks to make sure they understand the impact of non compliance, or in this case a iffy or out of compliance invoice?

Mike: Yeah, so I guess a couple things to unpack their. First, I think education's important, but I also think it's important to involve the store operations group and my contractor base in the process that I'm going to put together. I'm not going to sit at my desk with some people that work for my team and identify a goal for word process for contractors without engaging with some of my key contractors and getting their buy in on the go forward process. Because I want them to own the results and I want them to see that this is going to be mutually beneficial for us.

Mike: Then once we identify what is we are going to do, how we're going to do it, and how we're going to measure success, I have to formalize that in masters services agreement, in a formal contract with that contractor between them and my enterprise, and I have to make sure that I identify things. Like one your questions was, "What if a contractor submits a late invoice?" And it's one of the things that was always most frustrating for me because we want to make sure that the expense for the equipment that we maintain is attributed to the right period and certainly to the right fiscal year. If a contractor came to us with a late invoice, we haven't written into our masters services agreement that they had 90 days to submit an invoice from the date of service. So if they did work on September 1st, and the first time they submitted an invoice for that work was on January 4th, it was outside of that 90 days we were no longer liable for payment of that.

Mike: Now to make that legal, you have to make sure that it's clearly pro wowed in your master services agreement, and it has to be signed by both you and the authorized signing party of your service contractor.

Trey: So it sounds like, let me play a little bit of this back for you because I think our listeners will find it interesting. It sounds like you have said establish a set of rules for service providers, give them some flexibility as their getting up to speed, but overtime you have to ensure that they follow them. Is that correct?

Mike: Yeah, that's correct. I guess the one thing that I would add is that I would work with my key contractors in establishing those rules. So I would go to a contractor and say, "I want to have best in class service contractors." and when I say, "Best in class," there's some things that I want to do that are going to help me manage whether that's happening or not. And they might be how long it takes the contractor to fix a critical repair, or am I driving the average order across repair down, am I reducing the unplanned downtime of my equipment. And so based on my goals, I would engage with my contractors on what are some things that we can do together potentially through utilization of the system to assist both our business in accomplishing these goals. I want to make sure that I get their buy in.

Trey: So that gets really interesting. How do you profile what we're calling key contractors? Are these a small, medium, large group? So that it's represented across your entire community of contractors. What would be the best practice there?

Mike: I think it depends on where you're coming from as an organization. So if you don't have a computerized maintenance management solution and masters services agreements today, right, wrong, or sideways, it's often based on interaction and feel with that contractor. You have contractors that you trust, that you feel do a good job for you, and so you engage them in that process. Now once you have data and you have some KPI's set up for performance, you should engage contractors that, A, you're spending the most money with. And you should be spending the most money them because you've awarded them the most business for a reason. They're meeting your KPIs, but you should also engage with some smaller contractors that are outliers in performance. So contractors that have five or ten or twenty technicians in the field that are over performing compared to your KPIs and some smaller contractors that you're testing out doing service for you that are under performing. Because you want to understand why those contractors are struggling to meet your KPIs.

Trey: So you know we do none of these things in a vacuum as an operator. Obviously, we have these contractor relationships. Are there other stakeholders we need to be to get engaged as we're building out these processes and these rules to enforce?

Mike: It depends on the organization. Depending on the equipment that is in scope and the potential liability, the risk administration organization or whoever's responsible for compliance at your organization should potentially get involved. Obviously, I would highly recommend running any language that you write into an MSA or a CSA through a legal council either internal or external. And then, depending on the reporting relationship that may be up through the CFO or through the vice president of operations, ensuring that those people are also engaged in process.

Trey: That's fantastic. So we covered a lot today. I really enjoy the importance of enforcing the rules that you put in place, but also the flexibility you gave some of your contractors as they're learning these new processes. Mike, thanks for the time. To our listeners, we will continue to dive into best practices. We will find the industry experts and always look forward to your feedback on what the subjects are that you'd like to hear in our podcast as well as the industry trends that have your attention today. Thanks again, Mike, for the time.

Mike: Hey, thanks very much for having me Trey. Have a great day.