A reader writes: "I just started with a company that has an older contract that has been renewed several times. The new manager of the account wants justification for the current charges. Any help would be appreciated."

Congratulations on your new position and on your company keeping this account for over fifteen years with regular increases. Unfortunately, no one at your company nor the customer has any idea of how the current pricing was determined. Due to file purges, neither you nor the customer has the original estimating process and therefore have been making incremental increases and adjustments for changing in floor surface, square footage, wage rates and frequencies. It would be difficult to reverse engineer this account and there really is no need to do so. This is a great opportunity for you to "re-engineer" this contract and determine new base points. I suggest the following:

1. Re-measure and document the current square footage and floor types as well as conduct a fixture count (toilets, sinks, urinals, shower heads) so that you know the actual area being serviced.

2. Determine the current tasks to be performed and frequencies (using annual numbers) to fulfill the specifications and desired outcomes.

3. Use either your own or an industry time standard for each task to be performed. Example: vacuuming carpet using back pack unit at XX minutes per 1,000 square feet.

4. Determine the total annual DLH (direct labor hours) necessary to fulfill the specifications. Don’t forget infrequent project work such as stripping/recoating or carpet care. I noted that you provide six hours per day in day porter service which needs to be added to your totals.

5. Determine the total annual IDLH (indirect labor hours) such as management including project manager, supervisor, quality control and other background staff. One suggestion is that if a person is shared with other accounts only allocate the time he/she expends on this contract.

6. Add in your Consumable and Expendable supplies which should simply be to check your past consumption.

7. Add in G&A, insurance, benefits and expenses not captured elsewhere, other overhead, profit margin and any additional costs related to this contract. Be prepared to defend and negotiate your final numbers since they may or may not match your current pricing. There is a lot more to do but at least this should get your started.

Your comments and questions are important. I hope to hear from you soon. Until then, keep it clean...

Mickey Crowe has been involved in the industry for over 35 years. He is a trainer, speaker and consultant. You can reach Mickey at 678-314-2171 or CTCG50@comcast.net.