Municipalities and other bridge managers:
- Are you concerned about finding contractors, repair people, equipment suppliers, and other services when you need them, especially in an emergency?
- Do you have a cumbersome procurement process that makes it impossible to get quick access to vendors?
- Are you looking for ways to gain control over your budget and spending by building efficiencies?
Contractors and suppliers:
- Do you want to develop regular revenue streams?
- Are you looking for ways to ensure that your business gets paid on time for the work it does?
- Do you strive to provide better, more consistent service to build and deepen your client relationships?
If you answered “yes” to any of these questions, then retainer agreements could be good for you. They’re a proven way to build better relationships between municipalities and other bridge owners and the businesses that provide services to them.
What is a retainer agreement?
At its simplest, it’s a type of contract. It outlines a business relationship between a municipality or bridge owner and a company or individual that provides services, supplies, or equipment. It’s a type of hybrid agreement that falls between a one-time contract and a long-term one. In most cases, it defines the type of services — or access to services — that are to be supplied on an ad hoc or regular basis for a specified monthly fee called a retainer.
Some retainer agreements are relatively simple, while others are more complex, going into detail about the types of services that are to be delivered by the supplier, along with timing and quality requirements. Penalties are often defined if obligations aren’t met. Additional subcontracts or agreements may be amended onto the base agreement. In most cases, the monthly retainer payment is a defined amount of money, although an additional fee schedule is amended to some contracts.
Types of retainers
Retainer agreements take many forms. Some of the more common include:
- Classic retainer. The supplier charges the client a certain amount each month and provides a defined amount of professional time or service in return. This is a “use it or lose it” proposition. Any unused activity at the end of the month is lost forever. This structure is generally considered favorable to the service supplier.
- Retained services. In this model, the client pays a defined fee and is guaranteed a certain amount of time or service in return. Any unused activity is rolled over to the next month. This model is generally considered more favorable to the client.
- Value retainer. There is no specific time or level of service defined in this type of agreement. Instead, the client gets access to an expert on an as-needed basis, with few limits. Depending on the individual situation, this type of agreement could benefit either the vendor or client.
- Sought-after services retainer. The client pays for immediate access to services, not the actual services, which are covered under a separate menu or addendum. It gives the client the opportunity to “go to the head of the line” when they need help. This type of contract can be valuable for bridge managers who need access to a unique knowledge base, rare skill set, or unusual type of service. It provides significant passive income for suppliers.
Benefits of a retainer for municipalities and other bridge owners
Dependability. Surprises and instability are anathema for local governments and other bridge managers. Bridges are central to the social and business life of a community. If access to a bridge is limited — or if it closes completely — it’s difficult or impossible for residents to get to work or school, shop, or conduct business in person. These things can reduce the quality of life in communities and have a negative impact on the regional economy.
Having retainer agreements in place to cover bridge-related services ensures municipalities and other bridge owners have ready access to the people, supplies, and equipment needed to handle regular maintenance, make repairs, and keep bridges open and running efficiently. It eliminates the need to research, find, and connect with qualified vendors ad hoc and contract with them in real time.
Another benefit: Most bridges are maintained on tight budgets. Having a retainer with defined costs can help keep budgets in check.
Relationships. Do you go to a different doctor every time you come down with an illness, or do you have a relationship with a physician you know and trust? Of course you prefer to partner with a regular doctor, who understands you and your health issues. You don’t have to explain your personal situation to someone new every time you go for a checkup or get sick. Plus, a regular doctor understands how your diet and exercise program, the prescriptions you take, and your lifestyle choices affect your overall health. This allows them to provide valuable insights that can help you live a better and longer life.
In the same way, a retainer agreement encourages relationship-building between a bridge owner and the vendors that provide regular service on the structure. Long-term relationships make it more likely that the people working on a bridge will consistently identify declines in its condition or new structural problems. They’re also more likely to provide insights on opportunities to do proactive maintenance that could save money in the long run and extend the life of the bridge.
Regular suppliers will also find ways to do maintenance and repair tasks more effectively. (Vendors who are paid to handle tasks on a one-off basis have less incentive to deliver quality service and build efficiencies than vendors on retainer.) Over time, these efficiencies could lower costs in future retainer agreements.
Remember: A retainer will help you sleep better at night, knowing you have a relationship with someone you can call at any time who can provide expert help when you need it.
Tip: Include the name or title of the person who will be your primary contact in your retainer agreements. Set rules about how quickly you expect your calls, texts, or emails returned. This will help guarantee that you’ll have ready access to someone when you need help or support.
Define the experience level and qualifications required for the people who will service your account. This will help ensure that there will be no bait-and-switch, replacing the top-tier people you expect with lesser-quality workers. Also, define how you expect your teams to interact on different types of projects.
Expansion. No matter how well you plan, there are times when you need additional workers to help on certain projects or highly experienced people to handle specialized tasks or unique equipment to get the job done. A well-crafted retainer agreement can get you easy access to these things with little notice. You won’t have to scramble to find untried vendors and manage the risks associated with depending on them.
Tip: If a vendor on retainer cannot provide the services you need, they will likely have relationships with others who can. Most will be happy to connect you with them and may be able to add them on to a current agreement, making procuring their services easier.
Benefits of a retainer for contractors and suppliers
Regular revenue: Bridge development, maintenance, and inspection businesses are significantly impacted by weather and seasonality. In many parts of the country, it can be difficult to find work and maintain a consistent payroll during the depths of winter or the height of summer.
If developed thoughtfully, retainer agreements can provide regular, dependable revenue. Not only that, they help keep employees busy working on projects all year long. Get input from all members of your team to ensure that retainer agreements optimize utilization of your company’s human and other resources at a consistent level.
Dependable payments. Most businesses are dogged by delayed payments for the work they do, which can have a big impact on cash flow. This is often the result of the difficulty of processing one-off invoices through an accounting department.
Retainer agreements are based on a regular series of monthly payments, which can be automated through a payment system, making it more likely that vendors will be paid on time.
Improved service. In today’s competitive business environment, everyone is looking for the edge in delivering better service so they can retain clients and build on existing relationships.
The long-term connections developed through retainer agreements allow you to understand your clients better and provide them with higher levels of service. Instead of spending your time getting to know a new customer prior to each project, you can focus more on offering advice and insights on how to get the job done better. This is a great way to ensure that your clients won’t be checking out your competition and will keep working with you.
Many online legal document services offer templates for retainer agreements. However, we don’t recommend using them. These contracts are the basis for serious, long-term business relationships. It makes sense to consult with your legal counsel to ensure that the contract meets your needs, is acceptable to both parties, and provides adequate protection. It’s also a good idea to have an accountant or tax advisor check these agreements to make sure they provide optimal long-term financial benefits to all parties involved.
It’s not hard to transition an existing one-off relationship into a retainer-based one. Most clients and vendors will welcome the change because of the benefits it can provide to both parties.