Performance Bonds – The New Standard for Copy/Print ContractsEthan Davis
Before you check the box and simply re-up your printer and copier contracts with a few tweaks and improvements, you should consider one new aspect that can make a significant difference in the amount of risk your organization incurs, how much you can save in your negotiation and the real world performance of your machines.
The New Standard
We believe “The Performance Bond” is a new standard for printer/copier contracts. This type of performance guarantee is issued by an insurance company or a bank to assure satisfactory completion of a project by a contractor. Surety bonds are common practice in the construction industry to guarantee delivery times and make sure costs don’t creep. We recommend the same type of bond be required for your printer and copier agreements.
With a performance bond, in the event your vendor doesn’t deliver, or if the performance of the agreement falls below certain thresholds, you have insurance that covers the district for non-performance. You’ll have “hooks in the contract” that codify and ensure service levels in fleet performance and pricing; and a guarantee that all those levels will be met or the district can be compensated in the form of an insurance claim.
Protect Performance and Savings
The performance bond provides unique protection to the district. One example is a school district we worked with recently that had a software package included in their original agreement. Unfortunately, the software did not do what the vendor said it would do. Despite several attempts to make it work, the software was never deployed as promised. Instead of shelving the software as a loss or hassling with rounds and rounds of debate with the vendor, the district simply cashed a portion of the performance bond and recovered the cost of a new software option. It was installed immediately and the district was up and running without delay
Make it a Requirement
A performance bond is not a standard practice for printer/copier contracts. As a result, the first step is to make a performance bond part of your RFP requirements. In short: In order to be considered for your business any current or potential vendor must provide a performance bond against the contract at the end of the process. You’ll need to stipulate that as a part of the proposal process. Be clear and up-front about this new standard. We often work with our district clients to begin that dialogue and work to add the performance bond as part of the RFP. Also, working alongside legal counsel, we work to be sure the provision is added to the final contract language.
Make it Measurable
Performance guarantees should be quantifiable in numeric values because that is what the insurance company is going to look at when the performance bond is issued. We advocate for a variety of very specific metrics and criteria for how things are going to be measured in terms of delivery and service.
One important measure is the number of impressions between calls. Instead of simply providing a guarantee of “95% up time” where no one really knows what accounts for the calculation of actual up time, we stipulate an impressions between calls guarantee that ensures that each device will operate for a specific number of impressions between service calls. From there, remedy is simple: if the machine doesn’t perform the vendor will replace it. This decreases the risk to the district of non-performing devices, shortens the time it takes to get device replaced, and reduces the number of service calls that happen before a machine is deemed to be a lemon.
Make it Guaranteed
The third aspect of a good performance bond is a life cycle impression guarantee. This is a provision that ensures a certain number of total impressions on any device. Imagine a car dealership that guarantees that the automobile you just purchased (or leased) will go for 200,000 miles…guaranteed. The idea is the same for a life cycle impression guarantee; the vendor provides surety that a device will produce a specific number of impressions over a period of time (e.g., 3-5 years). Again, this not a standard metric in most printer/copier contracts; but one that all of our clients now benefit from. You’ll avoid a common sales conversion tactic: a device can underperform, but the vendor will claim it’s worn out instead and simply sell you a new one. We advocate instead for a guarantee that the machine will go for a certain mileage, or else they’re required to replace it.
A performance bond is the new standard for printer/copier contracts. The requirement should be a part of all RFPs moving forward and the provision should be included in all new printer/copier contracts, leases and purchase agreements.
But it takes a new and different management perspective to move forward as opposed to the status quo, and a certain amount of savvy and determination when negotiating with your suppliers and vendors.
That’s where we come in. Optimizon is a professional business consultancy that specializes in K-12 as well as the intricacies of a district-wide printer/copier environment. We’ve done over 300 of these types of agreements and every vendor we’ve worked with has eventually agreed to the provision. Indeed, a performance bond has become a standard for us and all our clients.
We’d be pleased to explore how we can work for you to ensure that you get the right pricing, the right capabilities and the right programs in place to optimize your environment and enable continued savings district-wide. Find out more at Optimizon.com. And just click here to schedule a free consultation.