double benefit of encouraging vendors to participate if they perceive a fair selection process and of forcing the internal evaluation team to consider each vendor equally, mitigating any potential biases.
• Multiple analyses of the requirements and information in the RFP by highly skilled vendor sales and delivery staff may point out shortcomings or inconsistencies in the previous analysis by the internal team and vendor manager.
Not every vendor selection is a good candidate for a full RFP. The team may elect to not conduct a full RFP for a variety of reasons. In these cases, the team may proceed straight to the vendor investigation and due-diligence process. Some examples include:
• The number of vendors identified during the previous screening is small enough to justify proceeding directly to due diligence.
• In a seller ’s market, the RFP may be considered too onerous by target vendors and discourage participation; they will opt to go after easier-to-win business.
• The preliminary vendor selection conducted in the previous step unearths enough information to satisfy the selection team.
• The final decision needs to be made rapidly, and not enough additional time is available for a full RFP-response-analysis cycle.
• The vendor(s) being selected is minor, or the level of investment is minor enough and does not justify the effort of a full RFP.
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• There is a large separation between first- and second-place vendor, so first-place vendor takes the decision by default.
Creation of a high-quality RFP requires the team to have a clear command of the business scope of services or product requirements. If creating a good RFP is difficult for the team, it is likely that these elements were not clearly defined in the previous task. A good RFP not only reduces the effort for the team but also ensures enthusiastic and full participation by target vendors.
Exhibit 16.8 provides an overview of the RFP process. The steps are described in the following subsections.
CREATE REQUEST FOR PROPOSAL. A well-constructed RFP contains two
primary sections: an overview of the company, which gives the responding vendor information on the company and required service or product to help in its response, and a section for vendors to provide a detailed response to specific questions on company, capabilities, functionality, and other relevant considerations. The first section may include the following company information:
• History of company
• Size of business: three- to five-year revenue history, number of
employees
• Geographies covered: headquarters, branch offices, plant locations
• Service line overview
• Key points that differentiate the company business operations
• Single point-of-contact e-mail address for all questions and responses Conduct
Evaluate
Select
Decide
Distribute
bidders
Answering
Generate
RFP and
finalists
selection
RFP
conference
questions
RFP
follow up
for due
framework
to vendors
if
(ongoing)
questions
diligence
appropriate
• Based on
Vendor
scope
conference
Method of
contact
Build
vendor
Period should
information
be 2–8 weeks
document
Exhibit 16.8
RFP Process Overview
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The section should also include RFP process information such as:
• RFP distribution method
• Response required (number of copies, format)
• Names of decision makers on the evaluation team
• Vendors invited to participate
• Time line for response and review of RFP
• Criteria for selection and relative weighting
The focus of the document should be on providing information helpful to the vendors, as well as answering the qualifying questions that most smart vendors ask before pursuing a lead:
• Is the scope under consideration a good match with my product or
service?
• Is the playing field level?
• Is there a budget approved?
• Who will make the decision?
• How long will the evaluation take?
• Which of my competitors will take part?
• Does the client have a clear understanding of what they are doing and a good process for getting there?
Although the buyer of products or services is in the driver’s seat during an evaluation, going to the trouble of providing the right kind of information to the candidate vendors in this section ensures that the opportunity is attractive to successful, smart vendors—the exact kind that will be ideal partners.
Because the vendor orientation section of the RFP often contains company proprietary information, the team may want to consider having the vendor recipients sign nondisclosure agreements (NDAs). The firm’s legal team or retained counsel can put together a simple NDA to be completed by all participants.
The second major section of the RFP should be focused on gathering the detailed data from the vendors; this helps determine which vendors should be carried forward through vendor due diligence. This information is similar to the data gathered for the preliminary vendor screening but goes into additional depth. Achieving this level of detail is possible because the individual vendors alone have the expertise to fully answer the questions and because the work is distributed across multiple vendors instead of the selection team.
The typical categories of information to be gathered in this section include:
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• Vendor: Information concerning the vendor company—size, stability, and resources.
• Contact information for this RFP: Account manager, delivery sales representative, senior manager in charge.
• Financials: Three- to five-year revenue and profitability history for vendor.
• Financials: Three- to five-year revenue and profitability history for the product or service in question.
• Company size: Total company employees or other reasonable proxy for understanding overall company resources.
• Service or product definition: Details about the service or product under consideration.
• Overview of vendor product or service lines: Include revenue distribution among product lines.
• Customer qualifications: Positive references from existing customers with similar requirements.
• Customer input method: How it works and frequency.
• Service levels: How does the vendor measure its delivery or product or services—measures might be quality, user satisfaction, support calls, or other; how does the information get reported internally, and how often; how does information get reported to the customer?
• Economics: Vendor list pricing schedules; drivers for pricing.
To facilitate later comparison and analysis, the RFP should provide a clear format and organization for responding to questions. The RFP should also specify the number of hard copies that the vendor must provide, as well as desired electronic formats. The responses should be standardized as much as possible; reading through a large number of responses inconsistent in format and organization adds considerable work to an already labor-intensive process.
REQUEST FOR PROPOSAL ISSUE.
After the RFP has been created, it
should be distributed to the target vendors. The best way to manage the issuance process is to send paper and electronic copies to the sales professionals who have been identified at each vendor. A team member should be designated to make a follow-up call to each vendor to ensure that the package has been received.
To gauge interest in the RFP and provide an equal-footing forum for vendor questions and answers, the evaluation team should consider conducting a bidders’ preconference one to two weeks after the RFP is issued. This timing ensures that the vendors have had enough time to review the information and show up with good questions. The invitation should limit the number of attendees per vendor to three or fewer. Otherwise, vendors sometimes send
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a small army of salespeople, particularly for large proposals. More than one bidders’ conference we have attended has been so oversubscribed that it had to be postponed or moved to a new location. The conference is also an ideal time to distribute additional information to interested vendors in electronic or paper form.
The agenda for the conference should be simple. The vendor manager
should introduce the selection team members and give a brief overview of the material in the vendor orientation portion of the RFP, with a particular focus on expected business benefits and evaluation process. A brief explanation of how the vendor invite list was created may be appropriate here as well. The bulk of the conference should be an open-end question-and-answer session for the vendor representatives. A scribe should document the questions asked (and answers given). If vendors ask questions for which the team does not have a ready answer, the question should be documented and a response sent later. In some cases, the team may simply choose not to answer the question. The entire process should take between 60 and 90 minutes, depending on the RFP complexity and the number of vendors in attendance.
After the conference, the team will have some new information to process. First, the vendor attendance should indicate the level of overall interest that the RFP has generated. If a number of vendors do not attend, there may be several reasons, including a mismatch between the RFP scope and vendors’ capabilities, a misread of the RFP by the vendor, or even a simple mistake. In any case, the team should contact the vendors who have opted out to solicit their feedback and possibly revise the scope, RFP, or process based on the information.