Milestone markers

Unless you just signed a new contract, now is almost always an appropriate time to seek better prices and terms. However, the ideal time to renegotiate varies on how long the contract has been in effect. There are four distinct phases to a contract's life span.

Phase One begins when the agreement is signed and runs six months into the contract. This is usually a bad time for repricing because the short duration of the new deal provides no negotiation leverage.

Typically, you don't need to take action in this phase, but if your company undergoes a merger or acquisition, this might give you repricing leverage.

Phase Two begins about seven months into the contract and continues until 12 months before the end of the contract. There are two reasons to initiate repricing during this phase. The first reason is a change in your telecom usage due to a merger, acquisition or rapid growth. In this scenario, you have something the carrier wants - more committed business.

The second reason to reprice involves external circumstances, such as regulatory changes, competitive pricing pressures or technological advances.

Benchmark your tariffs every six to 12 months. Keep in mind that carriers are more motivated by the fear of loss than the hope of gain, so you won't get the best prices unless there's a genuine perceived threat of lost business.

Phase Three lasts from 12 to six months before the expiration date of the contract. This is the ideal time to begin the procurement cycle because it gives you enough time to solicit requests for proposal (RFP) from all potential carriers and switch to a new carrier if necessary.

In this phase, the carrier's strategy is to give you better rates only if you commit more business or extend the contract duration, even if the carrier is contractually obligated to give you better rates.

Phase Four covers the last five months of the contract. At this point, you have waited too long to get the most from an RFP. If you let your deal expire, your incumbent carrier can threaten to revert you to full tariff pricing, which could represent as much as a 75% price increase.

If your contract is at this stage, consider hiring a consulting firm to expedite the RFP.

Machtig is an executive vice president at Telwares, a Destin, Fla., telecom procurement and negotiation services firm. He has authored several best-selling books and special reports, including "How Fortune 500 Companies Can Improve Telecom Contract Prices and Terms." Machtig can be reached at machtig1@ aol.com or (612) 325-9999.

Additional articles in the series:

Knowledge is power

RFP pointers

Negotiation tips

14 tips

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Includes links to additional resources on saving telecom money.