Learning to Talk Trash: How to Negotiate Better Waste Management ContractsHospitals spend an average of $700 per bed annually on waste management services.
Learning to Talk Trash: How to Negotiate Better Waste Management Contracts
Hospitals spend an average of $700 per bed annually on waste management services.
But let’s face it—some waste management agreements are just garbage. Here are some down and dirty tips and tricks to help you clean up in Waste Management negotiations.
Don’t Waste Time—Do Some Research
Dig through your options. Check out the suppliers in your region. Waste management services are provided by municipalities and private companies. Know who the local suppliers are, and review their market share in your region. Consider using a national vendor that may be looking to gain some market share in your area. Utilize TractManager’s National Spend Dashboard to find other service providers in your region to consider.
Don’t let your pricing structure turn you into Oscar the Grouch. When looking at waste management agreements, the pricing structures can seem confusing. Through our research we’ve been able to determine that there are two basic fee structures for trash pickup:
- Front End Loaders (FELs) are serviced (picked up) on a regular schedule. The fee schedule depends on the container size, pickup frequency, and geography.
- Compactors are serviced on demand; trash is picked up when the compactor is full. A monthly service charge applies, with the fee schedule based on the compactor rental fee, cost per haul, and disposal cost (per ton).
Be sure pricing is itemized for FEL and Compactors. Try to itemize all potential miscellaneous fees for transparency.
Reuse. Reduce. Recycle. Recycling rate structures often follow the same convention as Municipal Solid Waste (MSW) and are generally at a lower rate per unit. Recycling service costs are typically 15%–25% lower than MSW services for equivalent service frequencies and container sizes.
Fuel surcharges can get messy. Vendors should add fuel surcharges only if the cost of diesel fuel exceeds a certain amount. To obtain a list of what would be considered reasonable, ask us for either a Benchmark Report or a Category Overview report.
Rummage through benchmark data. Take advantage of TractManager’s benchmark data and the insights gained from it to negotiate a better deal. TractManager’s purchased services experts use our national industry data to calculate regionality coefficients for solid waste services to ensure that the benchmark data is customized to your purchasing scenario.
Don’t litter your contract with bad clauses. Like many purchased services categories, your contract’s business terms and conditions will be what truly sets your healthcare organization up for success. Here are a few of the key clauses we recommend focusing on:
- Contract Term & Termination. Contract term length should not exceed three years, and auto-renewals should be negotiated out. Sometimes you are able to negotiate termination for convenience. We recommend targeting a 60-day out clause without cause and without penalty.
- Insurance Requirements: Because there’s a potential for damage associated with waste removal equipment, your legal department should identify minimum insurance requirements.
- Logistical or Architectural Requirements: Disclose any logistical requirements to scope the service appropriately: security requirements, gate access, turning radius, and vehicle height and weight limits.
- Information Security: The waste management industry, like many sectors, is undergoing a revolution. They are starting to incorporate technology into FELs and compactors to monitor how full a unit, thereby increasing efficiencies and reducing pick-up frequencies. Keep in mind that these technological advancements will have to run on your network to report back to the waste management service provider. So, if you have these new technologies being implemented, you will want to look at information security being added to your agreement.
Some Neat Negotiation Strategies
Audit your contracts to monitor the agreements and review additional fees.
Leverage your benchmarked data during direct negotiations.
Foster competition by running an RFP. If you’re not sure your organization is ready to switch providers, consider having two vendors. Split the business with a new partner on a trial basis to ensure they are the right partner for you.
Consolidate suppliers. In some cases, you may save money by engaging fewer vendors.
If you’re not eager to talk trash with waste management vendors, let our expert contract negotiators get you the best contract terms and pricing.
TractManager’s experts shared these waste management services contract negotiation tips during one of our recent Table Talks—informal discussions about Strategic Sourcing strategies. Please join us for the next Table Talk session to discover additional best practices.
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Top 10 Negotiating Strategies
Skilled negotiators are like musical virtuosos. They have an extensive repertoire of tactics from which to draw, and they know when and how to make them a part of their performance. But negotiating healthcare contracts for capital, purchased services, and IT services can test the artistry of even the most masterful negotiator.