Sandy Sbarra, Scotwork North America Inc.
There seems to be an unwritten law that requests for proposal (RFPs) need to be complicated, stressful and a time waster. It’s about time you break this counter-productive thinking and develop an RFP process that allows you to efficiently find the best candidate. This month, I bring you a series of logical steps that can streamline your RFP process and relieve unnecessary pain for you and the bidders.
1. Clarify what you’re sourcing
First, figure out what you’re sourcing and how effectively it can be evaluated. In most cases, products lend themselves to RFPs better than services, whose evaluation criteria are usually much more subjective. Either way, develop a specific scope or statement of work (SOW)—the more specific the better. Your SOW will serve as a blueprint and may include custom components or specifications. With services, clearly stipulate what will be done and by whom; the frequency; and what certifications or qualifications may be required by those performing them.
2. Set realistic action dates
Establish action dates that are realistic for you as the issuer and for the receiver. Allow a reasonable amount of time for the respondents to consider and evaluate your needs and to construct a detailed response. Insufficient response time leads to incomplete responses and some participants dropping out.
Give your team ample time to receive, evaluate and compare the bids and to announce a group of finalists. When sourcing basic items like stationery or hardware, naming finalists may be overkill since your decision will be based on the best and final bids. If you intend a “best and final” process, stipulate that and don’t deviate from it or the bidders won’t believe you when you do mean it on another RFP.
3. Develop explicit terms of engagement
Ensure that the terms under which you’ll evaluate all bids and award the business (or dissolve the process) are absolutely clear so no one has an unanticipated negative experience—which may discourage participation in your future RFPs. Stipulate that you reserve the right to award the contract to multiple bidders or to dissolve or expand the process in the event of extenuating circumstances or inadequate responses.
4. Allow flexible responses
Stay away from rigid and condescending language like, “failure to submit exactly what is requested will automatically disqualify the bidder.” The world (including your company’s business) isn’t always that black and white. And think twice before requiring responses on spreadsheets, which may only work for certain types of RFPs—like specific properties of a product. Forget about spreadsheets with RFPs that involve service and labor and for free-forming products. For example, the fabrication of wings can be completed through various formulations, making a coherent spreadsheet response impossible.
5. Don’t inhibit creative solutions
Even if you’ve correctly thought out a specific SOW and have set specific criteria, a valid RFP should include a section where respondents can propose alternative ideas. Often, the bidders’ capabilities and experience enable them to offer creative and effective solutions that you hadn’t considered.
6. Witness all presentations
Take the time to observe all candidates’ presentations. Don’t leave it to an internal client—who may have a much different viewpoint on the bids’ value than you will. If the quality of the bidders’ proposals is highly subjective, give your internal client’s wishes a lot of weight. Remember, that person will have to work with the successful bidder and thus must be on board.
If you disagree with your internal client’s choices, give sound objections rather than just gut feelings. For example, you could say, “I understand why you like this supplier, but I’m concerned that as a small company, it may not endure during tough economic times.” This statement will win the individual over far more effectively than if you say, “I just don’t like this firm. My instinct is telling me that this company’s people and approach aren’t right for us.”
7. Don’t demand immediate ownership of ideas
If you insist on owning the ideas of every respondent, you’ll discourage participation from bidders with the most innovative solutions. Plus, those that do bid may not show you their best proposals in order to protect their intellectual property. Consider a less restrictive demand like stipulating that your company will own the ideas only if the business is awarded.
8. Leave room for negotiation
Give yourself the opportunity to negotiate with RFP finalists. Again, unless you are buying hardware or stationery, most bidders are taught—despite what the RFP issuer may say—to never offer their best bid when submitting an initial response. They’ve come to understand that, in all likelihood, you’ll insist on some level of negotiation once the business is awarded or finalists are selected.
When I was a buyer many years ago for a global services firm, we once deadlocked with the winning bidder (the incumbent) for months because we didn’t believe the initial bid was its “best and final.” Always reserve the right to negotiate with bidders (though not with government seal bids). Use effective negotiation skills and ensure your demands are credible so you don’t deadlock—where nobody wins.
9. Secure enough viable bidders
Make sure you have enough respondents to ensure a rich selection of capabilities and name at least three finalists. With only two bidders at the end, it’ll be too easy for them to assess their balance of power—to resist attempts by you to negotiate if they can tell it’s unnecessary.
Plus, identify the bell curve of bids. Recognize that nearly every bidder that falls outside the bell curve (especially non-incumbents) is probably “buying the business.” For example, if the average bid is $200,000 (with most ranging from $175,000 and $225,000 depending on the quality of materials) and you get one bid for $110,000, it probably comes with hidden add-ons or the result will be sub-standard. Bids that appear too good to be true almost always are.
10. Award some business to new players
If multiple awards are possible, your objective should be to give at least 20 percent of the business to someone new. If you’re taking bids for a similar RFP year after year and offering the award(s) to one or the same respondent(s) each time, the unsuccessful bidders will view the RFP as a ploy to exploit them by exerting leverage on the incumbent(s). And no one likes to be used. Since bids can be expensive and time consuming, you’ll lose qualified respondents overtime or you’ll receive bids from them that are useless and non-competitive.
RFP efficiency pays off
Follow these key steps and you’ll get through the RFP process more efficiently and with a lot less difficulty. They will also enable you to attract more and better-qualified bidders—all of whom will see that you understand this process, appreciate what they have to offer and recognize that their time is valuable. You’ll do business with higher-quality firms and help ensure that you get the best value.
Sandy Sbarra is Vice President and Lead Tutor for Scotwork North America Inc., part of the world’s largest negotiating skills training companies. In addition to his 12 years at Scotwork, Sbarra brings extensive experience as a procurement specialist for firms including M&M/Mars and Western Union. Contact him at (973) 428-1991.