Pass-through. The pricing model that gets weaponized.

The logic of pass-through is straightforward. The seller pays an outside vendor for a service. The vendor invoices the seller. The seller flows that invoice to the buyer at face value. Software licenses, telecom contracts, payroll processing, cloud hosting and outsourced help desks are the most common pass-through categories. The pricing argument is meant to be over before it begins because the seller is not making margin on the line.

What the buyer actually receives often differs. Sellers add an administration fee on top of the vendor invoice, which is a mark-up by another name. Sellers allocate a portion of an enterprise license to the buyer using a methodology the buyer never sees. Sellers continue to charge for vendor services after the underlying contract has ended or after the buyer has stood up a replacement. Sellers refuse to share the vendor invoice itself, citing confidentiality, and ask the buyer to take the allocated number on faith.

A buyer-side audit of pass-through lines asks three questions. Is there an underlying third-party invoice that can be inspected. Is the allocation method documented and defensible. Is the buyer's portion still being consumed. Pass-through done correctly is the cheapest TSA service. Pass-through done badly is where the seller's margin gets hidden.

Where the term appears

In the pricing schedule of the TSA, where pass-through lines should be labelled and tied to the underlying vendor contract. In monthly invoices, where pass-through charges appear as named third-party services. In governance committee disputes, where the buyer challenges an allocation or asks to see the source invoice. In exit planning, where pass-through services are the easiest to assign or terminate because the underlying contract is already separable.

Related terms

Cost-Plus Pricing · Mark-Up · Service Catalog · TSA Extension Fee · Transition Services Agreement