White Collar Worker sitting in an office having just finished reading the following:
“…and as a result, the Executive Management Team along with the Board of Directors has decided that prior to executing a contract renewal with Vendor X, we undergo a thorough examination of alternative service providers. Please begin the planning process as soon as possible.”
White Collar Worker puts their head in their hands. Lights down.
Here it is, the familiar opening scene in Act One of the RFP process. If you work in an organization that has a Procurement Department, it’s just another work day. But if you’re one of hundreds of team members that has a full-time (plus some) day job, the RFP process can be daunting to say the least.
Daunting, but necessary and might I add, well worth the effort if done right. Based on being on both sides of the RFP process for the past few decades, I’d like to share with my readers some of the best practices I’ve learned over the years. But before I do that, let’s look at the value of issuing a formal RFP.
First, if you’ve been using essentially the same vendor for more than five years, it’s time to see what the market has to offer. Second, you likely use about 1/3 of the feature functionality your existing vendor can provide and the process can uncover features you’ve forgotten about or missed along the way. Third, establishing a benchmark for your costs alone may be worth the effort.
A formal RFP process doesn’t have to be tied to a contract renewal either. For example, if you plan on launching a significant new product or service, it might make sense to ensure that the platform or other support technology you’ll run this on is the optimal one, not just the most convenient.
Now that the justification is out of the way, let’s get to best practices. Here’s my 5 secrets to issuing a great RFP:
1. Define and Refine the Objectives
This is not stating that the organization wants to “examine new debit processing platforms” or “potentially change card brands” or “launch a personal financial management tool”. The objectives should be specific as to what market and/or organizational need or needs are addressed by the RFP and further, exactly how the RFP process is going to address them. I can’t emphasize enough that being painfully specific at this stage will result in a far better RFP experience. It’s similar to how important the Business Requirements are to the coding process as in “garbage in, garbage out”.
The best RFP’s I’ve worked on are those that have an Executive Summary which articulates the market and/or internal dynamics (that can be reasonably shared) driving the RFP along with a detailed description of what its objectives. From this starting point, vendors gain a sound understanding of how best to highlight their solution and which components of it have the most value to their client or potential client. This is especially important when you’re dealing with vendors that have large, distributed enterprises with complex solution sets. What you don’t want to happen is to waste your staff’s time sifting through responses and demos of products that are not highly relevant to your needs.
2. Organize and Categorize
As you gather questions from your various stakeholders, categorize them into logical, functional groups. This will your team to efficiently contrast and compare responses. In addition, this system supports separate internal groups evaluating responses. Here’s the categories I recommend (where applicable):
- Company Overview and Experience
- Ownership and Key Executives
- Representative Clients
- Feature Functionality
- Core features vs. Premium features
- Risk Management including security, backup, etc.
- Account Management and Operational Support
- Disaster Recovery
- Compliance and Certifications
- Implementation including integration and scheduling considerations
Once again, be specific and craft your questions in such as a way as to improve the likelihood that you’ll get more than just a yes/no or a cut and paste from some marketing collateral. For example, rather than ask “Does your system support XXX feature?” Ask, “Provide a description of how a current client is using your solution to support XXX feature.”
3. The Pricing Challenge
Without a doubt, it’s generally the pricing component of an RFP that causes the most headaches. You can ask for pricing in a specific manner, even provide an Excel template, but not all vendors will comply. As you know, different vendors have different pricing models. Especially when you’re evaluating complex solutions, the pricing section can be mind-numbing. In my experience, the solution to this problem is to create a pricing comparison workbook that normalizes all of the pricing information provided by various respondents into a common framework of your choosing. For example, you may wish to understand the total cost by account, by transaction, by month or by year and this methodology puts your cost efficiency and analysis priorities front and center.
This will result in more work for the evaluation team or finance department, but it is well worth the effort. Once done, it can be a powerful tool that will illuminate total cost of ownership on your terms, separate core and premium pricing components and put your organization in a much stronger negotiating position.
4. Think Contrast and Compare
Unless you’re using an RFP tool to aid in evaluation, I suggest creating an Access database or Excel spreadsheet with the questions in the first column and the respondents across the following columns. This will allow you to quickly browse specific responses and highlight those of particular interest or confusion.
Where responses are more complex, note the highlights in the workbook and reference back to the more complete answer. For table stakes feature functionality where there is little or no differentiation, simply list these out as being addressed in the RFP and note any unique responses or exceptions. Conversely, if there are specific features that are most important to your organization, they can be easily highlighted and notated.
Once again, the purpose of the RFP is to evaluate competitors and thus, you need a line of sight into contrasting and comparing their responses. This workbook or database design allows you to to do that with greater efficiency.
5. Cull the List
Especially if it’s been some time since you’ve issued an RFP, the temptation will be to issue it to the entire universe of potential solution providers. In my experience, the only outcome of a “welcome all comers” RFP is to bog down the process. My suggestion is to select the top three vendors in whatever solution set is applicable along with one or two lesser known or new providers as a balancing factor. Be kind, but brutal.
With tighter scrutiny than ever before on third party service providers and the heightened pressure to improve products and services through innovation, vendor selection is an even more important activity for any organization. I encourage those of my readers that are considering launching an RFP process to consider these 5 key best practices:
- Specific Objectives
- Feature Functionality Organization
- Pricing Analysis Methodology
- Highlighting Contrasting Solution
- Narrowing Potential Respondents
If you’d like to have a no obligation call to discuss your RFP process, gain additional insight and recommendations or learn how cost-effective my independent services can be in support of your next RFP, please contact me to setup an appointment.