Sorry it has been a while since our last post, we are all a bit backlogged because of the recent holiday.

While catching up on the news on various blog sites, I noticed that Spend Matters is now promoting free RFP templates for procurement solutions in their sponsored links sections. Out of curiosity I reviewed the “Strategic Sourcing Management System RFP”. Basically what I found is a document that is the perfect example of one of the mistakes that procurements departments often make, letting the supplier write the RFP for you.

While I will not nit-pick this particular document (as it is a great form of marketing for those companies that sponsor it) I will draw attention to a few common things that relate to the previous post by Joe Payne.

From a “company information” standpoint, one thing we often see is that suppliers that play in the Fortune 500 space make a huge deal out of it. Therefore it is not uncommon for them to promote it and use that fact as a disqualifier for competitors that are not as heavily engaged in that space. For instance, this particular document has a section asking about how many Fortune 500 companies your bidding vendors have as customers. Though this may be meaningful to you if you are a Fortune 500, chances are you are not. Would it not be more important to find a supplier that does more business with companies more similar to your size and your culture? According to many supplier generated RFPs, the answer is no, because they expect that smaller companies will feel more important that they have solutions that bigger companies have.

Now let’s jump into the real heart of the problem, when you let suppliers actually write the specifications for the products or services that you are buying. For this example I will stay with the RFP for Strategic Sourcing Management, as it is easy for any of you to download, but we see these issues in almost every type of product or service that a company is purchasing.

The most common thing we see when a procurement person lets a supplier write the RFP for them, (which is the same as downloading one from a supplier’s “free” content) the supplier does a fantastic job of taking every single little feature, item, concept or technology of their product and formatting it so that it is a requirement for the buyer that they cannot live without. In the Strategic Sourcing RFP example, the functionality and technology sections of the document are nothing more than a feature list of Ariba’s software, crafted as statements that make buyers think they need (and will use) every last feature of the solution.
In this document there are tons of examples, such as:

· “Does the solution support HTML formatting” - HTML formatting is great, however 99+% of people have no clue how to do it, so should it really be part of your requirements list? – It also creates a whole new set of questions surrounding security, scripting, remote hosting, etc. So should it really be in this first pass RFP?

· “Does the solution allow Large Line Item events (minimum of 1,000 lots for line items) with at least 25 price or non-price attributes per line item?” -This is a good question if you are doing large line item events of over 1,000 lots with multiple price attributes. Problem is, you are probably not ever going to do that, so why does it need to be in your RFP.

· “Do you offer a hosted On Demand Environment? “ - This one is self explanatory, but the question procurement people need to ask themselves is if they want an on-demand environment or local hosting and “licensed software” don’t let the supplier tell you what is best, do your own research.

· “Classroom Training Available?” – If the answer is no, should they really have points knocked off from their evaluation? It is reasonable to assume that there are much more cost effective ways of delivering training nowadays. RFPs should be structured more to open dialog with the supplier, not to respond with yes/no answers.

I could keep listing examples here, but I think you get the point. But I also want to point out some other examples (non-tech product related) that we have seen in the past when suppliers generate RFPs for their customers:

· “Is the company ISO 9001 certified”­-Although this may apply to many buyer’s internal QC policies, it might be time to re-evaluate it as a requirement. Many companies have superior internal quality control systems and simply choose not to pay for auditing by ISO, so they should not necessarily be disqualified if they answered no to the question.

· “Type 316 SS Flange” – (or insert any other material/product here) We often encounter companies that have been purchasing a particular product from a particular vendor for many years. However, they only reason that they buy that product is because that is what the supplier originally specified for them years ago. So, buyers (and engineers) need to take the time to understand why they are buying a certain product. Maybe a different, lower cost material such as 303 or 304 would work? You will never know if your supplier is building all of your specifications for you.

· “Does your website support integration with your ERP system?” ­­- Though integration and punchouts with supplier sites can be great, does your company even use it? Will it ever? Does it add cost to the products you are buying?

I realize this post is getting a bit lengthy, and I could literally go on with 100 examples, but I need to wrap things up. The point is two fold:

· If you are a buyer looking for a new technology, product or supplier, be careful of the “free templates” that are readily available on the web, in most cases they are just a feature dump of “requirements” that whichever company created the document has in their product line. These templates do give you a great starting point so that you do not have to start a RFP from scratch, but go through each criteria very carefully and make sure it actually applies to your business, and make sure that your own requirements get in there, not just your own.

· If you are already buying from a particular supplier and do not have the specifications handy to look for alternates, look to build the specification in-house, or with outsourced assistance. Although you can and should reach out to your incumbent supplier for information, try to understand what it is you are buying, and why exactly you are buying it that way. If you let the supplier simply build the entire specification for you, you can severely limit the opportunities for cost savings from other supplies or from alternate products.

In both cases, one recommendation I have is to move away from the typical yes/no questions that you see in RFPs and move to more of an open dialog with your potential suppliers. Rather than asking dozens of questions, present a business problem or opportunity that you have and encourage the supplier to describe how they would resolve it. Building a massive structured RFP will stop suppliers from being able to come up with creative solutions to resolve your problems.
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William Dorn

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2 comments so far,Add yours

  1. Hi William. I enjoyed reading the post. A while ago I wrote a post about sales vs procurement, picking up on some tactics sales organisations are using to combat the rise of procurement departments.

    Follow the link to the Factor R website - their material makes interesting reading for buyers. To cut to the chase, they recommend to sales people that if you find out your customer is going out to market:
    1. Try to head them off
    2. If they must go out to market, write the RFP for them.

    The fact that it is in the interests of sales people to write RFPs should ring warning bells to buyers.

    Relying on a vendor-written RFP is a sure-fire way of narrowing down your field of potential suppliers to, errr, one.

  2. Alan, thanks for the links. Your article was much aligned with the topic at hand (though you covered it months ago!)
    That was a great link over to the Factor R website, it actually makes me wonder how many suppliers I have dealt with potentially had engaged their services.
    Of particular interest was their section on "bid avoidance", though Factor R's process is a little more complex than what we typically deal with some notable suppliers, which is "Don't call them back and they will drop this project". That tactic hurts suppliers more often than not, and the only successful part for suppliers is that it may protect their revenues in the short term (3-6 months) as our clients switch to a new supplier.