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.