RFP, which stands for request for proposal, has become an increasingly common tool for procurement. Once primarily used in government to put all possible suppliers on equal footing, it has now become a screening device for the private sector as well, to the despair of Susan Abbott, a customer insight consultant in Toronto.
Listen to her talk about RFPs, and it’s easy to conjure up other more applicable names for the acronym – such as Really Frustrating Process for the suppliers forced to deal with the often-murky terms of an RFP, or Really Futile Process for the companies she believes are losing out by going this route.
“The process makes sense in large six-figure accounts, but I see it drifting south all the time. I have been asked to present RFPs under $10,000,” Ms. Abbott said in an interview.
Dealing with an RFP is not a simple process. In some cases, she said, she can knock off her response in a few hours, but some take a couple of days. So she doesn’t respond to many – which highlights two basic problems.
The first is that sometimes companies miss out on possible suppliers because they can’t be bothered to get tied up in an RFP competition. This is particularly true when suppliers sense they may have been invited to bid simply to provide a façade of competition because the contracting company intends to pick its favoured supplier anyway.
A second problem is that the investment of time in the RFP process is expected to be made solely by the supplier. If the prospective supplier has questions, the contracting company often won’t answer or meet with the supplier.
Sometimes what is being asked in the RFP document is unclear and questions need to be asked. Usually the overall scope is unclear. Ms. Abbott recalls one contract for facilitation services with a not-for-profit group. A fixed price was requested, but the RFP didn’t specify the number of meetings the group had in mind. The organization was a couple of blocks from her office, but she couldn’t just wander over for a cup of coffee and a chat to clarify specifics.
She notes that companies use an RFP based on “a belief that this process is fairer, just having everyone respond equally.” On her blog, she argues: “While fairness is admirable when it is reducing corruption and patronage, it also suppresses merit. It favours the formulaic.”
Nor is she persuaded that an RFP is the best way for companies to solve their managerial challenges. “The problems executives have are squishy and amorphous. A large part of the consulting process is helping them to define the problem. But with the RFP, that’s already been done,” she said in the interview.
The best consultant relationships, in her experience, are when a company sits down with a consultant because it has a problem but isn’t quite sure what is happening or how best to approach it. Bringing an expert consultant in early may show the company that the problem (and hence the solution) is actually different than was originally thought.
Here are some of the changes she recommends for the RFP process:
Start with the price
Currently, when companies make specifications for an RFP they often hide what they expect to pay for the service, or decline to give a range of value. Instead, Ms. Abbott said, companies should start by indicating what they are prepared to pay for a solution and invite suppliers to advise what they can offer within that budget or less.
A company knows whether it is prepared to pay $10,000 or $100,000, and should spell that out, she said. “It gives the consultant some notion of what kind of solution they want – how much quality they want. Is it two focus groups or 10 focus groups and an online community?”
Share more with the supplier so the proposal can be more informed, in return for him or her signing a non-disclosure agreement. “If you’re going to work with me, you’ll have to trust me anyway,” she noted. An example of the secrecy she has encountered: In one recent RFP for a global, multiproduct company, she could not find out the name of the brand she was expected to give advice about.
Focus on capability and fit
Most of us don’t buy the cheapest shoes or choose our employees because they can be paid less than anyone else. Similarly, the focus of the RFP shouldn’t be on lowest price but on the capabilities the prospective supplier offers and its fit with the contracting company.
Besides, the reality is that the price will usually be the same for the same service. “The differences are going to be small, usually. If my price is much higher or [much less] than someone else, we weren’t talking about the same thing,” Ms. Abbott said.
In knowledge-based services, as with cars, restaurants and many other products, there are tiers of value. You can buy cheap, medium, or high-value.
So sit down with your prospective suppliers, she advises, discuss the challenge, and collaborate to find the right solution and right price level to satisfy you. It may be a Really Fabulous Process.
Special to The Globe and Mail
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter