Fall 2017 Issue
For decades, the Request for Proposal (RFP) has been the enemy of value, life-cycle cost, quality, innovation, and cost certainty when buying complex, custom, and costly services or goods.
While appropriate for purchasing commodity services or goods that are only differentiated by price, the RFP doesn’t work for more sophisticated and complex services or goods. In fact, in 1972 the U.S. federal government under The Brooks Act made it illegal to use a price-based RFP when selecting architecture and engineering firms for federally-funded projects. Since then, 46 states have passed similar laws for state-funded projects.
The reasoning behind The Brooks Act is that government infrastructure is too important to be designed by the lowest bidder, discouraged from all considerations of innovation, life-cycle costs, and quality. And despite what pro-RFP advocates may say, it is incredibly difficult to win any RFP without being the lowest bidder.
Having said all that, sometimes participating in an RFP is unavoidable and perhaps even to your advantage. But this is only possible if you have already invested time and money positioning your firm for sales success outside of the RFP process.
In a perfect world, your firm would be well-positioned to deliver custom, complex, and costly services or goods to clients who recognize, and are willing to pay a fair price for, the value you bring to their organization. They understand that while the price-based RFP process delivers low initial cost, the cost is usually not the realistic long-term cost, and the winner of the price-based RFP process usually does not deliver the best quality or value for the money.
But unfortunately, we do not live in a perfect world.
The reality is that if you want to win a typical RFP you must be a very low, if not the lowest, bidder in the competition. You must enter a combative stance with your potential client because, in order to win, you usually must propose a solution that is either not optimal, or possibly even just wrong. Your proposal must focus on winning the RFP, which means getting your price as low as possible without consideration or opportunity to present better solutions, innovative opportunities, and possibly without the opportunity to even ask meaningful questions.
One RFP-weary colleague commented recently to me “as I’m writing the proposal, I am already preparing for the arguments I know I am going to have if we win this thing". That's hardly a process that sets up a collaborative client-vendor relationship.
So, what do you do?
Should you sacrifice your business to wage a holy war against the RFP process just because it is the right thing to do?
While that might get you the moral high ground, and the applause of your peers, it may also get you the financial low ground. As much as it feels great to rage against the machine, that rage rarely helps you make payroll.
Does that mean then that you simply roll over, fire up the proposal-writing machine, and hope for a few wins here and there to sustain your firm until it figures out how to sell around the RFP, sell to those that don’t use the RFP, or find some magic that makes winning a certainty on every Request for Proposal?
That’s probably not a good idea either. But as negative as I am on the RFP, there is plenty to be hopeful about.
An RFP, is Not an RFP, is Not an RFP.
Some RFPs should be avoided at all cost, and conversely some price-based RFPs aren’t too bad.
Even if an RFP has a pricing requirement (which I believe none should ever have, but if they do, the budget should be disclosed by the buyer), if the evaluation criteria are clear and appropriate, with binary and objective scoring scales, and there is no requirement to provide solutions before being hired, then the RFP is moving closer to what is called Qualifications Based Selection (QBS), which denotes progress for both the buyer side and the vendor side.
Although this type of RFP is not wholly ideal to deliver optimal solutions to the buyer in a fair and respectful manner to the vendor, it’s better than its hillbilly cousins that have no clear evaluation criteria, unclear and subjective scoring scales, and a requirement to provide 'spec solutions'. It's a move in the right direction.
To Extend that Thought: Canada is Moving in the Right Direction on RFPs.
Professional associations across the country representing architects, engineers, graphic designers, management consultants, and dozens more are now speaking out against poor RFP practices and advocating on behalf of QBS. For the first time, we see a critical mass of multi-disciplinary groups banding together to advocate for better procurement. Some organizations are hosting events to discuss alternatives to the price-based RFP (such as QBS).
More and More Organizations and Governments are Interested in Exploring and Testing QBS
At least once a month I get an e-mail like this:
"I was at the annual conference of the BC Supply Chain Management Association (SCMA) where you presented on QBS and provided a copy of your book ‘Buying Professional Services’.
I have used QBS a couple times since then and am encouraged to use it more.
I have recently changed employers and we have a very enthusiastic user base here that wants to use QBS over traditional price based selections…"
So, Should you Respond to RFPs?
I believe the RFP in the near future will be much improved, but the optimal way to drive sales in your organization is to have a reputation that attracts customers without a competition, and without the need for you to pursue them. Your primary goal should be to pursue this as a long-term sales strategy.
Not surprisingly, pursuing a strategy of being the most sought-after, in-demand vendor in your market space will also help your RFP efforts. Then if you do pursue the RFP path, the key to success is being methodical and selective about your participation.
Understanding how to evaluate an RFP in order to make better decisions about participating is the number one way to keep your sales costs down, plus your win percentage, and new revenue and profit, up.
Cal Harrison inspires change in buyers and sellers of professional services. He is the author of The Consultant with Pink Hair as well as Buying Professional Services: Replacing the Price-Based Request for Proposal with Qualifications Based Selection.
Cal is the President at Beyond Referrals - anti-RFP sales advice for the consulting professions. He is a Certified Management Consultant (CMC) and a graduate of The University of Manitoba (MBA, BA). For more info, visit: http://beyondreferrals.com/