Many businesses rely solely on an RFP document to manage their vendor selection, but in reality, the RFP should only form part of the process and for some, it may not be relevant at all.
An RFP is seen by most procurement-led businesses as the gold standard for selecting vendor for products or services. It promotes transparency, objectivity, reduces risk and establishes clear requirements. In practise, the dice is loaded from the outset.
For many businesses, the act of running an RFP process is a check box exercise, satisfying a management team in “being open, impartial and transparent”. And whilst the process may satisfy some stakeholders, for others, and for vendors, the process can be equally as frustrating.
What’s wrong with the RFP?
“…what should you do in active opportunities that come to you as an RFP? The simple answer – don’t waste your time on them unless you wrote them. If you did not define or contribute to all or part of an RFP’s buying requirements, your chances of winning are much less than 10 percent – most customers tell me less than 2 percent”
The new solution selling by Keith M Eades
Services not solutions
The RFP process is largely geared towards products or services, not solving problems. By focussing on solutions that are provided by vendors through their products or services the process greatly removes co-creation opportunities and stifles creativity and innovation from the vendors involved. Additionally, when the RFP demands information about tooling or a specification based on current solutions, and there is limited scope for challenging that decision, the client misses out on whole of market opportunities and innovation.
Team fit
Often the process removes the human element, it dehumanises by only providing limited access to the business project owner or team or by insisting that questions can only answered via a single channel or timeframe. You’re forced into a situation where there is huge guesswork in creating ideas and strategy for the response. And, worse asked to give away this IP entirely for free.
Vendor selection bias
A new vendor, or incumbent, bias may already exist, making the process inherently flawed. For incumbents, they may have already been given additional notice, giving them more time to prepare. Depending on how successful the incumbent has been in their role, they may already have forged a good working relationship, or at least will know the team and the business a lot better than a new vendor - any insider knowledge, nuances, preferences, likes or gripes aren’t ever captured in the RFP itself.
The cost of RFPs to vendors
Consider this. In a line-up of 5 RFP respondents, 80% of the total vendor time would have been wasted during the traditional RFP process. All of the ‘losing’ businesses will pay for that in the end. The double hit for the vendor who operates in a services-based industry like agencies or consultancies, is that the time invested also results in a loss of billable hours.
Let’s put this into perspective. The average time it takes to complete an RFP is 60 hours. Based on Eades’ 2 per cent win rate, it would therefore take you, on average, 50 RFPs to win one. That means you’d need to recoup 3,000 hours of effort per won RFP. On an hourly rate of £125 that’s £375,0000 of costs to be recovered for every “won” deal.
Costly business.
So what’s the alternative?
The RFP is not completely dead, it’s just the process that should be adapted. An agile approach will help encourage collaboration and creation, and result in a better vendor selection. An RFP is not the complete solution - make the RFP a part of your current procurement architecture:
- Create a sourcing strategy with clear steps, roles and responsibilities, and a realistic timeline. Don’t expect vendors to be able to turn around a hundred-page RFP in two weeks and get their best response.
- Execute by co-creating your RFP with subject matter experts, don’t leave it to your internal team alone. Too often RFPs are written by an internal or procurement team that have little experience or no understanding of the solution you are looking for. The RFP then contains a basic list of requirements but doesn’t lean into uncovering the real or genuine underlying business problem or problem.
- Market analysis. Scan for vendors using simple criteria such as market presence, track record, suitability and engage in an initial RFI that engages with the vendors team as well as understands the initial criteria for selection.
- Vendor Selection. RFPs are often scored by procurement, black and white loaded scoring based on information provided by the vendor that may not have a true, good, fit or experience of the project. This method can mask the true value of the potential vendor. Instead opt for “trust and verify” process. This could be through workshops, meetings, proof of concept, but engagement and investment of time from both client and vendor is critical.
RFPs should never be used to force competition between the incumbent or selected vendor and other respondents. It’s a waste of everyone’s time and resources. It’s better to “trust and verify” – it adds the human back into the process that cannot be achieved through a paper exercise alone. It can also distinguish between a legitimate offering and showmanship.
Build “trust” by offering a budgeted proof-of-concept project though a vendor demonstration process. This will quickly enable the assessment of the human side of the vendor selection process – collaboration and culture fit for both teams as well as technical and creative capability. “Verify” through the vendor demonstration session designed towards assessing agility, collaboration and creative/technical skills.
Add these scoring metrics to your traditional weighted RFP vendor selection process and a fairer, more balanced view can be discovered overall. And if your stakeholders insist on following an RFP process to validate market costs - ensure due diligence is done and offer other respondents a paid benchmarking exercise.
Summary
There is value in an RFP, but only really if it’s part of an overall vendor selection process that is genuinely open and transparent. An RFP should never become a race to the bottom for pricing and should be fair to vendors involved.
Etch will always respectfully challenge an RFP process that holds us back from being able to offer the best value that a partner can offer. We’ll push all the teams involved hard to get the best out of the project or programme budget, to produce better outcomes and ensure the delivery is successful.
For more information about how we challenge the RFP process to arrive at better business outcomes for us and our partners, get in touch.