When "The Little Things" Add Up, Consider a Service Contract

Posted by Wendy Smith on Oct 31, 2017 4:06:59 PM


One of the most efficient ways for an engineering services company to work with a client is by having an Engineering Services Contract or some type of “Blanket Order” in place.  At some companies, it can take longer to get a purchase order than it does to complete the actual work that is requested.  Having a blanket order or an engineering services contract in place streamlines the process and allows work to be authorized and initiated quickly.

At Optimation we have several customers that we have had long term relationships with and we are the “go to” vendor to solve multiple issues. They may not be huge projects, but we take away their “pain” by solving the “little things” for them.  All those little things add up, but it would be difficult and time consuming to write a detailed RFQ and generate a proposal for each little thing.

In situations like this it is great to have an engineering service contract in place. Service contracts can be set up for any type of work. It could be engineering services, consulting, trades work, repairs, etc. The way an engineering services contract works is that you take care of all the legal and contractual things up front and have the funds pre-approved. When the need arises, the customer calls the supplier and “releases” the work to the supplier.   

There are many different ways to set this up. It could be with an individual department or with the whole company or anywhere in between. You could have a “blanket” purchase order or contract that has been pre-authorized for a certain amount.  This blanket is controlled by a designated person within the customer’s organization. They can “release” the work to the supplier as needed on a time and material basis. In order for the engineering services agreement to be efficient, it’s best for both parties to have a process for approving or releasing the work and documenting or signing off that it has been completed. 

We have done this with several customers using what we call phase sheets. We keep a spreadsheet or log of all the work that is requested and assign a number to each request.  We fill out a simple sheet with a few key sections:  Client - stating who requested the work, Scope - what the work is, and Cost - an estimate of time and/or cost.  There is usually an owner or administrator of the service contract at the customer and they release or approve the work.  Our employee executes the work and then turns in the request form with the actual hours once completed. 

The engineering services contract should also define the frequency of billing to the customer. Typically we invoice biweekly for services completed to date. This can be modified if needed and agreed to by both parties. 

This may still sound like a lot of steps, but in practice it isn’t. It happens really quickly and in many cases, it makes things easier to track because it is all in one place.

Service calls can also be handled through blanket contracts. When an authorized person from the customer requests a service call, we complete the work and fill out the appropriate paperwork and submit for invoicing. It can all flow very smoothly and without multiple purchase orders.  Not only does the work get completed faster, but it requires fewer steps and less hassles for the customer trying to get the work accomplished. They can release this and move on to other pressing items on their list.

We have found that whenever we can partner with our customers and set up these engineering service contracts it streamlines the process and helps us to build strong and long-lasting relationships with our customers. There is a familiarity with the facility and the work which leads to quicker and more efficient solutions for the customer. It speeds up the approval process and things don’t get bogged down in purchasing, and usually less people need to be involved. Often the engineer or person that encounters a problem at the customer’s site can reach out directly to our engineers and start the process. In some cases, these problems can even be solved over the phone which is even more cost effective for the customer.

Topics: Engineering Services

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The goal of this blog is to be helpful to readers by providing useful information about applications in industrial engineering, design and skilled trades, as well as industry knowledge. We're passionate about manufacturing in the United States. We have a little fun with it too.  

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