Second, based on the questions asked by the vendors, the team may find holes in the RFP process. In this case, the team should decide whether any of the previous work should be revisited or refined and what corrective action, if any, to take. Unless the fault is particularly egregious, there should not be any disappointment in a few mistakes. Vendors are highly experienced in scouring and picking apart RFPs.
Within a few days of the conference, the full transcript of questions answered during the session, as well as follow-up questions, should be e-mailed to all vendor representatives. As incremental questions are asked by vendors, they should be documented and the questions and answers should be sent to all vendors.
During the RFP analysis process and the following vendor due diligence, the team should resist the urge to hold information too closely. While some information should not be revealed (e.g., targeted pricing), most information should be shared as widely as possible. A common misconception is that keeping information concealed or responses ambiguous and nonspecific somehow improves the team’s negotiating position or negatively impacts the selection process. Quite the opposite is true—most vendors want to put their best foot forward and win a deal by having the superior product or service
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for the client’s needs. Sharing as much information as possible with the vendors facilitates the process and ensures a quality selection. Often, a selection team’s hesitance to share information with the vendor is indicative of a lack of confidence on the part of the team.
REQUEST FOR PROPOSAL RESPONSE ASSESSMENT.
The process should
allow between one and four weeks for the vendors to formulate a response, depending on the complexity of product or service, the level of investment in question, and depth of the RFP questions. Vendors should provide the requested hard copies and electronic versions of their responses by the date and time established in the RFP.
Vendors should also be asked to refrain from additional contact with the evaluation team during the evaluation period, with disqualification as a possible penalty. Without this threat, the most resourceful (or aggressive) vendors will pester the team (and anyone else in the company that may have inf luence) endlessly with follow-up questions, status checks, and offers to
“provide additional information.” By communicating clearly the evaluation process and setting hard deadlines for the decision, the team can satisfy the vendors’ need for understanding the timing of the next steps.
In some cases, the team may have determined additional questions or data points to gather during the RFP response period or after reading the responses. In these cases, supplemental questions should be aggregated and distributed to all participating vendors via e-mail with a reasonable, but rapid, time frame for response.
The actual evaluation process should have the team reading each RFP in no particular order and scoring the vendor response based on the requirements and weighting determined before the RFP distribution. If possible, the team members should conduct individual reviews of the RFP responses to avoid biasing one another. Team members can debate the merits of each RFP after all the individual scoring is complete.
After the RFP reviews are complete, the scores should be summarized, with a final score by vendor created from the mean of the team scores.
SELECT FINALISTS.
After the vendors have been scored by the selection
team, it is a straightforward exercise to force-rank the vendor options by total score.
The team should conduct a final round of debates to ensure that the outcome passes a “sanity check” and that everyone agrees with the results of the analysis. After any alterations to the score have been made and a final force-rank vendor list is complete, the team should decide which vendors to carry through to the due-diligence process. The team should make the cut at the first point in the force-ranking where there is a significant drop-off in score.
This point should usually be between two and three vendors, although a
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thorough due diligence on more than two vendors can be a challenging effort and can consume more value than it creates.
After the results have been finalized, the team should inform each of the vendor participants of the outcome in writing. The notification should thank them for their participation and provide a contact if the vendor would like follow-up information. It is not necessary to inform the losing vendors of the scoring or disclose which vendors will be carried forward through due diligence. A courteous, professional notification ensures the future participation of the vendors and provides a backup set of vendors if the due-diligence process produces unsatisfactory results. If time permits, the team should provide feedback to the losing parties. Most good sales professionals are interested in understanding how they can compete successfully in the future; they appreciate the feedback and will incorporate it into their next sales pursuit.
Vendor Due Diligence
The focus of this piece of the work is to prove to the satisfaction of the team the assertions made by the vendors in their RFP responses. The particular focus is on understanding the details of how the product or service will fit the firm’s requirements. The team should also begin conversations with the vendors’ customers to understand how well the vendors have served them, as well as beginning to build relationships with them for future information exchange. The team accomplishes this primarily by working with the vendor sales teams and taking the actual product through its paces.
As the team proceeds through the due-diligence exercise, it should focus the majority of its attention on points of differentiation among the vendors because it is on those points that the ultimate vendor decision is made. For example, if vendor locations are a consideration and both vendors have the same geographic coverage, the team should not spend time attempting to differentiate the vendors based on this criterion. Because vendors are often at competitive parity on many aspects, this approach dramatically cuts down the breadth of analysis required for due diligence, as well as ensures that the ultimate selection is based on the factors that provide real differentiation among the competing alternatives.
In vendor selections where investment is low, the product or service well understood, or a single vendor is the clear winner, the team may elect to deemphasize certain portions of the due diligence. In these cases, minimum research by the team should include a set of good reference checks.
CONDUCT PRODUCT OR SERVICE DUE DILIGENCE.
Because the prod-
uct or service provided is likely to vary widely by vendor type, we do not attempt to address the specifics that should be covered for all possible vendors. The previous business scoping and vendor scoring effort should
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provide a more-than-adequate baseline of requirements for ensuring that the competing products or services can be evaluated against one another.
CONDUCT COMPANY DUE DILIGENCE.
The focus of the company due
diligence is the verification of the RFP data provided by the vendor. Because most of this information is factual, this portion of the due diligence should be a fairly rapid “check the box” exercise. Information verifying the vendor ’s locations, revenue history, and relevant product or service lines should be readily available from a variety of sources on the Internet or from business research services such as Hoovers.
CHECK VENDOR REFERENCES.
Vendor reference checking provides two
important benefits. First, it provides independent verification and validation of a vendor ’s claims. Although the odds of discovering adverse information about the vendor are low, the effort expended is moderate, and the value of any adverse information is very high. The search, therefore, must focus on uncovering adverse or disconfirming evidence—any good management scientist knows that “the value of information is inversely proportional to its probability.” The evaluation team would appear foolish and shortsighted indeed if a few phone calls would have turned up such critical information.
Our consulting practice was helping a client salvage a particularly poor vendor relationship, where a few reference checks might have changed the outcome of the vendor selection. The client CEO remarked to the evaluation team: “So, this was important enough to spend two million of my dollars on, but not important enough to call a couple of people on the phone?”
Second, calling vendor references establishes a relationship with other customers, which can later facilitate best practices sharing, vendor information sharing, and other mutually beneficial exchanges. Over the long haul, having a relationship with other customers increases the company’s ability to inf luence the vendor as well as provides additional information for negotiations.
There are usually two sources of customer references for a given vendor.
First, as part of the RFP process, the vendor should have provided a list of clients according to similarity. The client references should be ranked according to similarity to the company, size, geographic footprint, or other relevant factors. The evaluation team should call on the references that have the most similarities to their situation.