The following document sets out what the Cost Cutting Service will undertake and deliver and what is required of the client. It will detail the timescales involved and the fee structure. The document represents the service level agreement (SLA) that the Cost Cutting Service promises to deliver to its clients.
Essentially the Cost Cutting Service will act as an agent for the client. They will analyse all costs or those costs as highlighted by the client. The Cost Cutting Service will then represent the client in negotiating discounted products and services or they will be the introducer in areas where the client will be required to go in far more details than invoices will hold.
THE SUPPLY OF INVOICES, QUOTES OR SUPPLIER INFORMATION, TO THE COST CUTTING SERVICE, ACTS AS ACCEPTANCE OF THESE TERMS OF BUSINESS.
This document will also act as the confidentiality agreement between both parties.
The terms of business in this agreement recognises a relationship between the Cost Cutting Service and the client that will last 18 months from the initial meeting. This allows 6 months for initial meetings, reviews, recommendations and implementation before a 12 month period where cost savings are realised.
After the initial 18 months period has elapsed the client will be offered the chance to continue the relationship which will include regular audits of existing costs and full reviews of any new costs.
3. Cost Cutting Service’s Responsibilities
The Cost Cutting Service will only analyse costs and provide recommendations as directed by the client.
After analysis of costs the Cost Cutting Service will provide the client with a report detailing the cheaper and/or better quality service or product with the recommendation that the client can either accept or decline. Reports will be produced by cost area and not at the end when all costs have been analysed so that savings can be realised as soon as possible.
The Cost Cutting Service will undertake audits to ensure that cost savings are being realised and that the level of service is at a high level.
The Cost Cutting Service will provide a strictly confidential service as detailed in Section 6 – Confidentiality Agreement.
4. Client’s Responsibilities
In order for the Cost Cutting Service to provide an exceptional service and to negotiate improved deals with suppliers in both cost savings and better service the client is expected to provide the following:
• Clear procurement objective and strategy
• Order of priority costs
• Totals of yearly cost expenditure
• Last years invoices for costs to be analysed
The client is also expected to pay fees on time as detailed in Section 5 – Fee Structure.
For a period of 12 months after any specific cost saving recommendation that is not accepted by the client, the client is still liable to pay the Cost Cutting Service a fee (as per section 5) in the following situations:
• if the client approaches the supplier directly, by-passing the Cost Cutting Service.
• if the client has used the quote and/or recommendation by the Cost Cutting Service to negotiate a discount with their current supplier.
If the client refers other business’ to any suppliers as recommended by the Cost Cutting Service then the client has a duty to inform the Cost Cutting Service and refer the business to them in the first instance to ensure competitive discounts are achieved and to manage the relationship with the supplier.
5. Fee Structure
The fee structure includes all costs incurred by the Cost Cutting Service. This includes consultation time, travel, telephone calls, reports and correspondence to and from clients and suppliers.
At no time are our clients invoiced for any services if no cost saving to the business is recommended. The fee structure is split as follows:
• Free Consultation
a) The only cost to you is your time, so we will ensure that meetings and calls are kept precise and to the point so that you can quickly continue with your core business activities.
• Performance Related Fees
a) Fees are based on the reported and actual savings generated by the recommendations (as made by the Cost Cutting Service) that a client decides to proceed with implementing.
b) The percentage of cost saving charged to the client is 30% for the first 12 months saving.
c) Fees are payable as stated below based on an audit which will compare the estimated original supplier cost against the actual new supplier cost, unless otherwise agreed in writing by both parties.
• If directed to look at a specific cost and savings are found but the recommendation is not followed through there is an administration fee of £50. This is not applicable if no saving is found or if new suppliers are sourced resulting in a cost saving.
• Timescales for Payment of Fees
a) Day 1 of New Contract/Supplier = 30% of yearly fee based on our initial quote’s reported saving
b) Month 8 of New Contract/Supplier = 30% of Actual Saving to date less amount paid on Day 1
c) Day 365 of New Contract/Supplier = 30% of Actual Saving to date less previous amounts paid
d) If full invoices are not supplied for calculations in Month 8 and Day 365 then Fees will be based on our initial quote’s reported savings.
e) Credit Terms are 14 days from invoice date.
f) Our engagement provides for interest to be charged on the invoice at the expiry of 14 days from the invoice date.
6. Confidentiality Agreement
Cost Cutting Service shall not make use of, divulge or communicate to any person any of the confidential information relating to the client which they may receive or obtain whilst acting as an agent for the company.
Confidential information includes but is not limited to:
• Business strategy and development
• Products, business methods, processes and know-how
• Business contracts, lists of clients and suppliers
• Financial reports and data
These restrictions will continue to apply after the cessation of the business relationship between the Cost Cutting Service and the client, without limit in point of time.
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