The RFP Effect and How to Fix It
To RFP(1) or not? This question creates anxiety for purchasers and fear for bidders. It’s amazing how three otherwise innocuous letters can instill such angst when arranged in this order! Purchasers get bogged down with the writing of them; collecting specs, understanding service requirements, sifting through Appendix D (that’s from the Legal Department), dotting i’s and crossing t’s.
Bidders have their own private nightmare to endure: finding product(s) with the exact specs, negotiating a better price from the manufacturer (it says price won’t be the final factor, but we all know what that means), struggling with bid software to upload the final document, did I remember to in include freight?, you get the idea. In an age when “collaboration” is the buzz word of the new workplace it’s hard to believe we still endure the RFP.
In a recent article on Forbes.com entitled, Why the RFP is a Waste of Time, Marketing Consultant Avi Dan had the following to offer: The RFP as we know it is an inferior tool for evaluating agencies. It’s obsolete. It might give a rough idea of an agency’s past accomplishments, and these can inform somewhat of what’s ahead. However, you’re not hiring an agency’s past, you’re hiring its future.(2)
Yet the RFP is a reality for many organizations. In both the public and private sectors RFPs are entrenched as the way to “do” procurement. Tenders are often seen as the “fair” way to do business or the way to get the best price. They appear to be a methodical, well-planned and transparent approach to procuring products and services. But is this really the case?
The Mask Comes Off
I met an electrical contractor years ago who told me, “Every time I win a tender, I lose sleep for 3 or 4 nights in a row. Usually the winner is the one who made the biggest mistake!”(3) He might be on to something. Here are some common challenges:
– Tender due dates rarely give enough time to proceed methodically and carefully. They have an uncanny way of falling during your busy season and you might even find there are 2 or 3 due at once.
– Specifications can often be tricky. Sometimes they are unclear. Occasionally they arbitrarily call for brands that are hard, or even impossible, for a given vendor to secure.
– Procurement is frequently removed from the day-to-day operational challenges that the current program is creating. This can lead to RFP requirements that might not provide a solution.
– Details are hard to keep track of. Freight considerations are on page 14, taxes are covered on page 68, the specs are in Appendix A, insurance details are in Appendix D (you remember, the Legal stuff), etc.
– Formatting sometimes takes nearly as much time as gathering the data (has anyone ever successfully uploaded into the bid software on the first try?).
The RFP Effect Defined
There is an elephant in the room, and I’d like to introduce him to you. I call him the RFP Effect and his impact on the supply and delivery of products and services is enormous. The RFP Effect is a state of mind. By its very nature it creates relationships that are adversarial not collaborative. You typically don’t have to read more than a couple of paragraphs into the bid document to understand this. Battle lines are drawn as liabilities and obligations are spelled out evoking a series of negative emotions that hinder both creativity and collaboration.
Here are some of the emotions:
– fear of making a mistake,
– anxiety over the details,
– doubt (regarding pricing, product choices, delivery times, etc.),
– contempt for how the bid document was written,
– disdain for the stress caused by the bid process.
In short, the RFP Effect chokes creative thinking and problem solving and reduces the pursuit of effective alternatives to a grind of checking and rechecking to avoid errors.
What’s the Point?
In order to talk about solutions, we need to understand the goal of an RFP. Going out to tender is primarily intended, by the buyer, to find the best product, with the best service at the lowest price. That is over simplified, but at its core, these are the goals. It is about risk reduction, solution generation, and budgetary constraints. These are the primary aims of the process.
But what if we approach these ideals in a different way? What if we were to come to the table as business partners instead of adversaries? Could we still accomplish all of the buyer’s goals? Could we, in fact, improve the chances of success?
A New World Order
I had the privilege once of working on a construction project that was much more collaborative.(4) They called it a tender, but in fact it was more of a negotiation and a partnership. The purchasing company hired a broker who was given a budget for each phase of the project. My phase was the lighting supply, and our original quote came in at $680,000. The broker came back and told us the budget for lighting was only $500,000. My heart sank. To my great surprize, however, he said, “Here are the contact details for the designer in New York. Give her a call and see what the two of you can do to hit the budget.” I was speechless. They hadn’t even started construction and the lighting guy (usually the last one they talk to) was already involved.
The designer turned out to be Rachel Eichorn, Associate Designer at Kugler Ning Lighting Design.(5) Over the next several months Rachel and I went back and forth looking for alternative products that delivered on the intended design and quality while staying within the dollar target. It wasn’t easy work to be sure, but by collaborating and dialoguing we were able to tweak the specs so that her inspiration was not compromised: and neither was the budget. We achieved the look, feel and quality of the original design concept while under cutting the budget by $16,000. It was some of the hardest work I’ve ever done, but it was also some of the most rewarding.
A Lesson Learned
According to Bob Mudge, President of Wireline Network Operations at Verizon Communications Inc.,
Collaboration is no longer just a strategy: it is the key to long-term business success and competitiveness. Businesses that realize this sooner rather than later will be the ones who win the game and succeed in the new global economy.(6)
Upon reflection at the end of the project it occurred to me that everyone involved got what they wanted: each party won.
The buyer got:
– an outstanding lighting design (I’m still amazed when I walk through the space),
– high quality products,
– at the price they wanted.
The designer got:
– the look she was aiming for,
– the actual products she had specified (the supplier didn’t use knock-offs).
– The supplier (that’s me) got:
a project where all my time and efforts went into a real project, not a tender I didn’t get.
I sometimes call this approach the Negotiated Bid. All parties come to the table with a common goal and a common interest. There is no intimidation, no panic, no second guessing. There is open dialogue, creativity, collaboration and teamwork – a true partnership.
Whether you call it a Negotiated Bid, or a Request For Partnership, or a Reason For Positivity, the end result is the same. Each party realizes their goals in ways that just don’t happen under the RFP Effect.
1. The terms RFP (Request for Proposal), RFQ (Request for Quote), Tender and Bid will all be used interchangeably in this article.
2. Forbes.com, February 19th, 2014, http://www.forbes.com/sites/avidan/2014/02/19/why-the-rfp-is-a-waste-of-time/#79a618e72535
3. The contractor welcomed the use of his words here, however, for obvious reasons, requested to remain anonymous.
4. This is now a popular restaurant in downtown Toronto.
5. At the time of the project Ms. Eichorn was the Project Manager/Lead Design at KNLD. She has since opened her own firm, Shimstone Design Studio, in North Bergen, NJ.
6. Fastcompany.com, January 2nd, 2014 http://www.fastcompany.com/3024246/leadership-now/why-collaboration-is-crucial-to-success. At the time he wrote the article, Mr. Mudge was President of Consumer and Mass Business at Verizon.
Mark Burden is a Certified Behavioural Analyst and career sales leader currently working as Sales Manager, Canada Direct Sales at UniFirst Canada Ltd. in Oakville, ON. Mark has a diverse background working in business consulting, advertising sales, lighting and uniform supply.