RFPs are Antiquated
February 12th, 2010 9:02 pm Category: Supply Chain Agility, by: Richard Guy
There is a better way to qualify consultants and software vendors and award business, rather than using the RFP process.
Request For Proposal’s (“RFP’s”) are used by many organizations to gather information and details about services and prices from various consultants and software vendors. These organizations believe that this is an efficient (for the RFP issuer, at least) method and process to acquire the best possible services at the lowest price. This is not true.
And what about government organizations that are often required by law to go through the RFP process? They do so with the belief that the RFP effort will improve accountability and reduce favoritism, corruption, and nepotism. Does it? I am about to share with you some ideas and thoughts from a consultant’s viewpoint. It is my belief that organizations can do better without the RFP process and even government agencies or businesses that do not have the flexibility, can take some steps that will enhance an out-dated process.
RFP’s do not create a healthy relationship
Initially, a majority of the effort involved with RFPs is creating an RFP instrument. The instrument is pushed from the issuer to the respondent, typically in a word document that is sent electronically with a deadline to respond. It is a one-way distribution channel. From my experience, the RFP document does not capture all the thoughts of the business. Some RFPs are rewritten and tweaked so many times, that sometimes it is actually difficult to uncover the true “needs” message from the final document.
There are also applications and services available that allows an organization to post an RFP on a website and ask for respondents to use this medium for their response. This may make sense if you are buying commoditized widgets, but not consulting services or special-use software. This may seem efficient in the organization’s viewpoint, but it is inherently one-sided. Many of these instruments set up communication rules that are rigid and sterile with the thought that they are being fair to all the vendors. What they ignore is the working relationship, which often has a major impact on the success of a consulting engagement.
Healthy, productive relationships start with healthy communications. It has been my experience that organizations that take the time to engage in a conversation with a potential vendor to explore a possible relationship have a far better chance of developing a healthy and productive business relationship and get services and/or software at a much better price.
What comes out of this relationship are conference sessions that generate ideas, thoughts, and brain storming that focus on developing a methodology or application design that is on target and meets the needs of the organization. Projects that promote an open and dynamic communication style from the beginning will be more likely to succeed. This communication process is powerful and creates a solid foundation for an ongoing business relationship. Allocate more time to engage and verbally communicate with the potential consultant and you will truly understand whether they can add value to your organization.
RFPs attempt to get something for nothing
Or at least something for real cheap. As someone once said: There ain’t no such thing as a free lunch. It is a law of economics. If you are searching for a business solution with a goal of the best possible outcome for you and your company, then think of this. You spend a few hours or days searching the Internet for companies that offer the type of services you are looking for. You may already be doing business with or have talked to a few companies, but want to compliment that list with several others. You sent out a standard formatted e-mail requesting more information about the company and their services. 60% of those e-mails go unanswered. You ask yourself why? Because, the busy companies will not waste their time with your solicitation. Why? Because they are busy helping other companies. Why are they busy? Because, they offer a solution that is in demand. A solution or service that is based on performance and price.
RFPs limit your options to those that are on your short list. RFPs limit your visibility to those solution providers that actually have the time and inclination (at that very moment) to respond. RFPs limit your responses to those that do not avoid RFPs, as is the case with many successful firms. The 40% of the e-mails that are answered are from companies that are sitting on the bench because no one is using their services. Hmmmm, I wonder why? Intelligent and professional organizations will not give you something for nothing. I am sure, they would be pleased to engage in a conversation with you or your team if there is a real opportunity for them to help you. You can get value and information from these companies, but not with an RFP.
Qualified suppliers ignore RFPs
Many suppliers of professional services believe that the RFP process is “fixed,” as in “rigged,” and another vendor has already been chosen. This may or may not be the case, but since the perception for many vendors is no hope to win the business, the smart allocation of their valuable resources is not to respond.
Surveys have been conducted to understand why qualified suppliers ignore RFPs. These are some of the responses from these surveys:
“…the winner is often decided before the RFP even goes out.” – J. H.
“…you can assume a presumptive winner has been chosen.” – M. H.
“…often RFPs are all but awarded when they go out.” – T. M.
Effective and experienced consultants know better than to waste their time on low-probability activities, so they typically read the request in part, and then trash it. This process not only eliminates a significant number of consultants that might have been well-qualified for the project or application, but it is quite likely that it eliminates the best candidates for the project.
Consider the example of hiring a key executive or business manager. Posting a job opening and reviewing the resumes that are submitted will rarely, if ever, yield the best candidate. The best candidates are gleaned from a careful, personal vetting process.
RFPs reward the wrong things
Answer right, and win the business. Firms who are forced to respond to a lot of RFPs hire specialists who know little about the craft, but do know how to write RFP responses. In even more cases, RFPs reward “gamblers” who have the time to throw excessive man hours at responding to an RFP. These vendors are very successful in winning business through the RFP process. Someone pays for all of this work. The RFP costs are embedded in the rates the client pays. These rates are typically higher than their standard rates. You will pay the piper.
In addition, does the organization receive a solution or service that is best in class? What they receive is exactly what they asked for. They may receive all the deliverables outlined in the scope, but to add additional functionality to software, or expanded scope will cost more. RFPs make everything a commodity. By definition, extraordinary work it is not.
RFPs provide a false sense of confidence
Just because you put a lot of time, energy and money into something does not make it great. It just helps you to convince yourself that it is great. If I managed to group, whether it was IT or operations, I would question why they always recommend an RFP p
rocess. Are they afraid to step out of the box and try something different? Are they so set in their ways that they resist change? Can the RFP process be a liability to your company and actually make you pay more for services than you should? I think so.
Is there a more efficient process?
Yes. Organizations need to follow the basics. Ask questions such as:
- How much does this sorta thing cost?
- Do you have capacity?
- What is your approach?
- Are you qualified?
- What is an example of a similar problem that you have solved?
All of these questions can be answered through referrals, web site research, a couple phone calls, and emails. For example, if you are in charge of supply chain improvement at your company and do not already have a list of focused consultants that would likely be a good fit for your business, then you may be missing an opportunity to add significant value in your organization.
Personally solicit vendors who you would like to work with. Start by communicating with the sales and marketing people of vendors. You may look at them as “sales” people, but they play an important role and a good consulting firm has well-informed and experienced sales staff. They have the power and keys to provide you with valuable information about their company, their services, and their products. They also have direct links to others in the organization that will be useful to meet. Ask them to introduce you to the experts, meet the people who will be providing the consulting, the support services, etc. Ask to meet the management team. If you cannot get access to these people early on in the discovery process, then you certainly will not have access to them once a project starts. You never have access through an RFP.
There are companies and agencies that have legitimate needs and are willing to pay for services and software, but are required by law, or policy, to submit RFP. This may be a formality or a company policy, but this should not prohibit you from developing a relationship and internal process to provide you the best services or software to meet your budget. The most successful projects are a collaborative effort between the company and the vendor or consultant.
A word for those that must follow an RFP process. Since there is a general feeling in the suppler arena that RFPs are a big waste of time, is it any wonder that potential vendors do not respond? This leaves legitimate buyers for services and software in a pickle. Their reputation is soiled by those who issue bogus or pre-won RFPs. How can you prevent the hard work of your RFP from being greeted by the lonely silence of an uninterested vendor community? How do you get on the radar of capable suppliers? Sometimes just being aware of the problem gives you a solution. Knowing that vendors have this negative perception, you can take steps to remove their fears by following a few simple steps. First and foremost, make it personal, talk to potential vendors. Ask the important questions and prescreen their responses.
- Are they interested in developing a relationship with your company?
- What work have they delivered in this area?
- Are they flexible with their work process and approach to match your needs, or does their product do everything for everyone?
- What makes them different from other service or software providers?
Share your timeline. Share your concerns. Share your budget and asked if they can deliver a solution within these constraints. Be honest with the overview of your needs, and your questions and your feedback to the potential vendor. Be flexible with your process, and listen to the supplier. Most suppliers will respond in a like way, and provide you honest feedback on your RFP. There may be a faster, better, cheaper approach than you have so meticulously spelled out in the RFP.
If there does not appear to be a future relationship, then move on. It is also fair to ask vendors if they are aware of any companies that can provide you the services or software that you are looking for. You may be surprised at their answers. Most legitimate companies will recommend another company and sometimes even a competitor.
It is also helpful to let the vendor know if there is internal competition or not. This allows the vendor to assess whether this is a fishing expedition for your internal IT department to get ideas and a strategy, or if it is a real opportunity. In addition, if there is no external influence on the formulation of the RFP from another supplier, then declare that. Some RFPs are written with so much detail that it is fairly obvious that the document was prepared by third party for that party’s benefit. Do not let the vendor selection date slide. You have asked for a vendor to respond by a specific date, therefore you have a commitment to meet your decision date too. Not selecting a vendor by the selection date says much about the company. Keep the relationship professional and build trust with meeting deadlines.
Now, this does not guarantee that you will get an enthusiastic response from the most-qualified suppliers. You will, however, remove some of the chief fears that they have about you as a buyer. Anything that you can do to raise the vendors’ trust level will encourage them to respond.
There is a better way to award business and qualify consultants and software vendors, rather than using the RFP process. Engage and communicate with the consulting firm or vendor on a personal level, be honest and realistic on costs, dates, and deliverables. Build in some flexibility, and reasonableness, and follow a communicative and collaborative process. You will help your company improve, have more fun, and see some amazing results.
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Contributed by Richard Guy, Profit Point’s Director of Sales.