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