While the typical benchmarking clause in an outsourcing agreement provides the opportunity to benchmark the services, many clients find third-party benchmarks to be expensive, disruptive and time-consuming. In addition, the outcome can be unpredictable, as results may just as likely confirm that a vendor’s price is market competitive, and no savings are to be had. Further, third-party benchmarks by their nature pit client against vendor – making them all but impossible to complete – and risk damaging what otherwise might be a good working relationship.

There is a better way. Clients looking to confirm market competitiveness are increasingly relying on screening benchmarks (often referred to as “pre-benchmarks”) that help them understand the market at a fraction of the cost of a third-party benchmark. Further, because these benchmarks are done without executing the third-party benchmark clause, clients still reserve the right to execute the third-party benchmark clause, if the early results look promising.

Clients that perform these “pre-benchmarks” are armed with market knowledge that helps them determine the best course of action for their particular situation (which more often than not, doesn’t include executing the third-party benchmark). Clients that use screening benchmarks have a wide range of alternatives available to them, including renegotiating with their existing provider or rebidding the services.

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