I own a company which up until recently has been performing service work for American Home Shield as a service vendor for their home warranty customers since January, 2006. By our second year into our contract we were elevated to "preferred" status and was receiving so much business from AHS that we had to purchase another service van and hire another technician.
We were guaranteed under our contract with AHS to receive enough service work per year at the rates we quoted to them in our contract that AHS had been providing almost fifty percent of my company's sales volume. We had a good working relationship with AHS' vendor coordinator and were quite happy doing business with them for the first year or so. They paid promptly and we were ecstatic about the increase business from our relationship with them. Customers were extremely happy with our work and recommended us to their friends and family.
About a third of the way into the third year of our contract (April,2009)AHS replaced our experienced vendor coordinator with a new hire and we were summarily informed by the new coordinator that if we did not lower our rates significantly and that we would be demoted from "preferred" status, so we renegotiated our rates down by 20% in order to satisfy them. We were also told that we were replacing too much equipment rather than repairing it even though the equipment being replaced was obsolete and unserviceable. Six months later our vendor manager left the company and was replaced by another new hire who also came back to us and threatened to do the same thing again!
Again, we complied. By this time the rate cuts had drastically impacted on our cash flow and we were in many instances performing and getting paid for service work for less than it cost us. We are now no longer doing service work for AHS and have laid a man off and making payments on a van that is sitting in the parking lot unused.
AHS *** companies in by promising the moon and the stars if you do work for them. Once you become dependent on that work to keep the lights turned on and office doors open they smack you down. I have learned that most of the other reputable local contractors in my business refuse to do business with AHS.
What AHS expects from their service vendors;
Band aid what ever you were sent to repair the best you can for as cheaply as you can but "just keep it running"
Unlike all other home warranty companies in the business, replacement of obsolete equipment (parts no longer available) counts against the vendor even if AHS purchases the equipment and pays the vendor their "book price" flat-rate for labor.
We can not be the only company that has done work for them that has experienced what I have just described. In my estimation, the constant downward price pressure AHS exerts on its service vendors promotes a climate in which good service providers are forced out of the system in exchange for companies that are willing to do marginal work and/or obtain claim denials for a cut-rate price.
You get what you pay for.