March 13

4 Big Purchased Service Missteps That Your Contract Team Should Avoid


More and more healthcare supply chain organizations are targeting purchased services as their next big supply chain savings payday. While this is a prudent course of action to take, there can also be pitfalls that you must avoid so you can reap the full benefits of this relatively new savings source. Here are the four mistakes you want to avoid:

  1. Not benchmarking your purchased services: Centralizing your purchased service contracts under your supply chain department is a good first step in managing and controlling your purchased services. However, until you benchmark your purchased services against your peers’ you won’t know how to prioritize them, or how to gauge the elasticity of your ideal contract price. By elasticity I mean how far you can go with your bidding/negotiations on each purchased service contract to assure your healthcare organization they are receiving the lowest price.
  2. Not bidding out your purchased services: Negotiating your current purchased service contracts with your current vendors or jumping on a GPO purchased service contract almost guarantees you won’t obtain the best deal for your healthcare organization. Only by bidding your high value contracts (i.e., contracts over $100,000) can you be assured that you have wrung the towel dry on these savings.
  3. Not Writing a Statement of Work (SoW) for Bidding: No purchased service contract should be or can be the same for all healthcare organizations, because of their unique requirements. That’s why a statement of work (a document routinely employed in the field of purchased service bidding; defines the services’ specific activities, deliverables, and timelines for a vendor providing services to the client) is critical when you are bidding your purchased service contracts. Otherwise, your vendors will decide the specifications for your healthcare organization which isn’t a good thing. Also, without an SoW it is impossible to compare apple to apple proposals from your bidders.
  4. Not Providing Incentives for Improvements: Purchased service contracts for your healthcare organization work best when you incentivize your vendors to share (50%/50%) in the savings for their improvements beyond your contract terms. This is how your vendors become true partners in creating a culture of improvement, not just maintaining the “status quo”.

Purchased services are a new discipline for healthcare supply chain contract managers to add to their expertise. Avoiding these four purchased services mistakes will go a long way to build a strong foundation for your purchased services management.


benchmarkings, healthcare, purchased service contracts, purchased services, savings, supply chain, supply chain savings

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