Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.

Pricing Tips for Facilities Management Proposals

Facilities management or outsourcing arrangements have many make or break elements. These include hiring existing employees, taking over prevailing equipment leases or buying equipment in the plant, and renting current space being occupied as well as providing the requisite graphics and printing services. Last month's article offered some guidelines for these other business elements. This article will suggest some proven pricing matrix models that help to assure predictable costs over the multi-year life of the agreement. These matrices will serve initially to help weed out the prospective vendors. And then, of course, will serve as the basis for subsequent billing for the duration of the contract.

Pricing matrices have been in use by printers large and small for eons for those printing products that are highly standardized. The classic example is copying where the matrix has the number of originals to be copied on the Y-axis and the number of copies needed on the X-axis. The price expressed in the matrix is per each impression or "click." In billing or estimating a job, the number of originals (say 22) is multiplied by the run length desired (say 75) to give total impressions of 1,650. The per unit price of $0.052 applied to the total yields a price of $85.80. Table A illustrates this matrix. As the number of originals and/or run length increases the incremental per unit price comes down.

TABLE A:

Single Color Copying Pricing Matrix
		Quantity of A4 (8.5" x 11") Copies Ordered
		< 10	11-49	50-99	100-249	250-500	501-999	> 1,000
	< 10	$0.075	$0.068	$0.061	$0.055	$0.047	$0.040	$0.033
	11-49	$0.068	$0.065	$0.060	$0.054	$0.047	$0.040	$0.032
	50-99	$0.062	$0.061	$0.059	$0.052	$0.046	$0.039	$0.031
	100-249	$0.056	$0.055	$0.053	$0.051	$0.046	$0.039	$0.031
	250-500	$0.049	$0.048	$0.047	$0.046	$0.045	$0.038	$0.030
	501-999	$0.042	$0.041	$0.040	$0.040	$0.039	$0.034	$0.030
	> 1,000	$0.034	$0.034	$0.033	$0.032	$0.031	$0.030	$0.029
Note: Price includes 20# white bond, collating, stitched in upper left corner (up to 100 pages). Extra charges: other standard, color stock +$0.004. Tape binding for $0.38 per book. Three hole punch for $0.19 per book.

Commercial printing specifications quickly add what seems like a third or fourth dimension of complexity to a standardized pricing matrix. While a number of printers/print buyers have come up with a solution that meets their particular needs, one of the more all inclusive and effective matrices is in use by the United States Government Printing Office. This matrix is being used for their "S" (single award) term (normally annual) contracts. In this Direct-Deal Contract instance a specific printer produces all of the single and two color printing for a variety of finished sizes on a multitude of stocks with an assortment of finishing and packaging options for a particular Federal Agency.

It is interesting that this type matrix could be applied to copying, duplicating, conventional lithography, and digital printing. Laundry lists are provided for prepress services including hourly rates for PC and MAC manipulation. A dozen or more stocks could be included with per unit pricing offered "per 100 leaves." Binding services are detailed as 3-hole drill, padding/shrink wrapping in various standard quantities, perfing/numbering (per 100 leaves), carton & skid packing. Storage of furnished materials is charged per carton or skid. Business cards or letterheads may be priced per standard order with embossing per order. For multi-year applications an annual inflation percentage can be offered.

It is easy to see how the Excel spreadsheet concept makes each phase of this quantification quite easy. It may be more helpful to follow in more detail how this is applied to the printing section. Table B shows how each separate job would be billed. For example, according to the finished trim size, the make-ready would be charged per page times the unit price. Make-ready costs include page imposition (per page film costs are in prepress), plate-making, and all press preparation costs, such as removing plates of previous job, cylinder and ink wash-up, plate mounting, paper loading, and guide adjustments.

TABLE B:

A meeting of all prospective print vendors might be held to show samples of most work and answer specific questions. For example, how much 5.5 by 8.5", 6 by 9", or 7 by 10" work is included in the "under" 8.5 by 11" category? Inspection would also show that all of the larger jobs (>9 by 12") were 11 by 17" posters.

Running rates are charged per 100 quantity per page. This includes all costs normally associated with the hourly rate plus ink. Note how second color rate is added to the single color for both make-ready and running only for those pages containing a second color.

The actual numbers shown in Table B are the volume figures that would be multiplied by each vendor's price that would be submitted in a blank Table B type form. These numbers may be the actual historical product mix experienced or perhaps a quarter's worth of volume or purely hypothetical. The contract would state that neither these quantities nor any specific volume is guaranteed.

The standard servicing turn around time might say that any job(s) aggregating 10,000 pages (originals times run length) would have a turn around time of 48 hours. Each additional 10,000 pages or partial thereof would add another day to the schedule. Any jobs requiring a faster turn around time would be subject to the service premium percentage. The basis of award suggests that 30% of all work would need faster than the standard time. Therefore, the total contract value (each line item unit price extended by its corresponding basis of award) would be bumped up by the servicing premium percentage.

This Basis of Award is critical information for winning the contract. An "incumbent" vendor that keeps good records can readily determine if the basis is hypothetical or real. That vendor may choose to shade select prices up or down to make their extended price total more competitive but not hurt the profitability on the known actual specification mix. The GPO keeps an eye out for this type of potential "unbalanced" bidding and will disqualify any blatant attempts.

Any print buyer wanting to follow this process in soliciting bids from a number of qualified printers might do a little research on the GPO web sight www.gpo.gov. and borrow some of their excellent ideas. While detailed abstracts are available on many term contracts, there are also a number of federal government publications available that have easy applicability to their commercial printing specifications. These would include the GPO Paper Specifications Standards No. 11, Feb. '99 at www.access.gpo.gov/qualitycontrol/paperspecs/index.html, GPO Contract Terms, and GPO Printing Procurement Regulations (Rev. 5-99).

As a caveat from the writer, you may come across specifications that are similar to your own, with different basis of award obviously, and want to use them in seeking bids for your own requirements. Don't be disappointed when your selected vendors do not bid as low as those vendors on the GPO abstracts. This would be a very humbling experience to prove that the GPO buys printing extremely cost effectively. You should be quite pleased as a taxpayer.

A final requirement for some facility management arrangements is to provide print procurement services for specialty products beyond those "utility print products" discussed earlier. The print buyer knows that the chosen printer might well feel qualified to produce a number of these higher quality commercial jobs or specialty magazines, books, or newsletters. There probably is not sufficient volume to warrant a matrix bidding approach but rather an individual job quotation. And yet the print-buying client wants a predictable cost management system that will verify that fare value is being received despite the unique specifications. The following technique will help to meet that objective.

The common denominator used by many print buyers in trying to rationalize process color printing prices is to isolate the cost per thousand A4 pages printed. The A4 designation refers to 8.5 b y 11" finished size. Multiply the pages in the finished document times the run length. Develop a trim size adjustment factor by multiplying the length by width of the particular job and dividing by 93.5 (8.5 X 11 =). Multiply that fraction by the aggregate page-run length then divide by 1,000. The total cost divided by this number yields the equivalent A4 cost per thousand pages.

Some people set up additional criteria to narrow the range for these prices. For example, reprints of the same job are less expensive than the original due to the prepress investment. This differential is less pronounced if the work was digital and produced computer to plate. Another example might be if the job required perfect binding, which would be more expensive than cutting and/or folding only.

As the database of bids or costs is expanded, the statistical sampling becomes more significant and the opportunity to arrive at a comfortable predictive pricing range improves. Ironically, the database remains credible over an extended period of time as printing and graphics prices have remained relatively stagnant versus inflation as technology as provided the efficiency gains to hold the pricing line.

These techniques are easily applied using spreadsheet software. While corporations are choosing to partner with fewer and fewer vendors, they still need systems and procedures that provide the monitoring and managing resources to keep vendors at "arms length" for fair and equitable negotiations of services.

Article prepared by C. Clint Bolte, C. Clint Bolte & Associates, Chambersburg, Pennsylvania. For additional information please call 717-263-5768, fax 717-263-8945, or e-mail to clint@clintbolte.com.