How to issue an effective RFP for consulting services
Francis Wade, Sunday Business COLUMNIST
There's something broken in the process of issuing request for proposals (RFPs) in the Caribbean.
My evidence? The majority of RFP processes I have participated in were stalemates, and were never awarded at all.
It's not that the organisation issuing the RFP ran out of money, although this does happen. There was neither spite nor malicious intent. It's just that an RFP is only useful in certain situations, but so much of a hindrance in others that no decision can be made. How can the process be improved so that everyone benefits?
The best way to understand this point is to make it personal. Buying a bar of ordinary soap, for example, is a matter of finding the cheapest store that supplies the item. An RFP issued for this product makes sense, because the item being sought is almost exactly the same from one supplier to the next. Also, the points of differentiation between bids would be easy to comprehend.
However, imagine if you woke up and your stomach was hurting and you decided to issue an RFP to several doctors for their professional services. Why would that be a poor approach?
1. DIFFERENT SOLUTIONS
Presumably, you're an amateur with no medical skills and only have the symptoms as your guide to solving the problem. Unlike the routine purchase of soap, treating stomach pains is probably something new to you. As a result, your RFP is likely to be broad, eliciting a range of solutions, depending on the speciality of the doctors who respond.
As an amateur in the field, you'd be hard-pressed to decide: you'd read the responses ... and be stymied into doing nothing at all.
This is precisely what happens when organisations issue RFPs without understanding the source of the problem: a fact that is only realised when the proposals are read.
The wide variety of approaches only generates confusion within the decision team, which struggles to make valid comparisons. Eventually, the contract isn't awarded because the team can't decide.
2. ARTIFICIAL CRITERIA
In an attempt to make the decision process transparent, and hopefully easy, a few organisations try to use a point system. Multiple criteria are set up and the 'winner' is the one who gets the most points.
Unfortunately, sharp consultants know how to game the system by including associates with PhDs, bidding at low rates, and adding in new deliverables. They understand that, if they win, they can always negotiate their profit margins back into the equation at the final step.
Simplistic criteria are useful for buying soap, but professional services aren't commodities that are dropped off on a loading dock. Instead, the relationship between the client and the company is critical, much in the same way that you'd do your best to employ a surgeon who you know and trust to save your life.
Treating a service like a simple commodity transaction makes things difficult for all involved.
Ask consultants, accountants, or lawyers what they think about RFPs and they might tell you the truth - they dislike everything about them, and only spend time bidding on them when they must - either because business is slow or it's a legal requirement.
In other words, the best and busiest professionals try to avoid the guessing game/beauty pageant of RFP processes whenever they can, preferring to work with clients who are willing to build relationships. They know the odds of winning are always very low.
Many professionals know that a client who self-diagnoses their issues is prone to make egregious mistakes. It's like assuming that the stomach ache must be an ulcer, then writing an RFP for that treatment.
Experienced consultants compensate for this fact with higher bids that account for the energy, time, and cost required to divine the correct solution.
Fortunately, there are better approaches. The best companies cultivate a solid network of relationships with experts who stand ready to meet specific problems or opportunities. In these cases, if the consultant meets a required threshold, they are hired.
Sometimes, companies may invite in a handful of firms for deeper discussions in which the objective is not only to gain insight into the problem, but also to establish trust. Once a firm clears the threshold, the conversations are over - they are simply hired.
The point of these approaches is that they progress on two fronts at the same time, making for great projects. According to Peter Black, author of Flawless Consulting, they build long-term relationships while solving the problem at hand.
These kinds of projects produce the best results, satisfying clients in ways that meet the needs of all parties.
The RFP process, as we know it, often fails to do this.
Francis Wade is a management consultant and author. To receive a document with a summary of links to past columns, or give feedback, email: email@example.com.