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Business Need

This large hospital system (Facilities & Construction area) had concerns regarding the cost of the current outsourced maintenance contracts to a local maintenance services provider (Provider). It was believed that in-house management of the services might yield better service and a lower cost.

The hospital system had contracted with the Provider for several years for maintenance-related services. Typically, these services included the full range of maintenance needs. Ten hospital sites were included within the scope of the review. Each site had a separate contract with a different expiration date. Over time, the hospital system believed that it was not receiving the best service at the lowest cost and sought other solutions to reduce cost.


Services Provided

We were asked to review and analyze the maintenance contracts for each site. In addition, we:

  • ┬áDeveloped an understanding of the scope of services provided by the Provider.
  • Analyzed and evaluated the penalties and costs associated with terminating any of the contracts before expiration.
  • Determined Hospital staff time incurred to manage the current contracts.
  • Determined potential maintenance activities and services that could be conducted by in-house staff.
  • Determined staffing resources required to bring management services in-house.
  • Determined information systems requirements.
  • Compared current contract costs with expected costs of in-house services.
  • Calculated long-term benefits and costs with in-house services and conducted a net present value analysis.
  • Summarized tangible and intangible reasons for each potential outcome.
  • Developed a thorough set of recommendations and next steps given the findings of the analysis.

Value Provided

Our analysis showed that the hospital system would save, even with some early termination penalties, more than $10 million over a 15 year time period by canceling all contracts with the Provider. We estimated that the net present value of this change would be $6.8 million. It was recommended that the hospital system sever its contractual relationship with the Provider and perform the services with their in-house team. The hospital system implemented our recommendations and benefited from the results as outlined in our analysis.

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