I am wondering what recent brilliant instructor/article/reporter/analyst gave purchasing managers this crazy idea that has been popping frequently...

In the last couple weeks, we have received multiple 'RFP Notifications' from unrelated companies that were looking to bid out their projects. The twist? They require the supplier (in this case, us) to pay for access to the RFP. This access has ranged from several hundred dollars to several thousand dollars, just for the right to view and respond to the RFP. And, we are not talking about government jobs, or projects that a third party or a subscription services gets a cut of (think mfg.com), we are talking plain old RFPs, direct with the buying group.

Scenario 1: We receive a 'RFP Notification' that only provides this bit of information: "XXXX company is accepting sealed bids/proposals from qualified firms to furnish the goods and/or services in the specification document. The Procurement Managed Services specifications documents can be downloaded electronically for a fee of $500. ALL PROSPECTIVE BIDDERS/RESPONDENTS ARE HEREBY CAUTIONED NOT TO CONTACT ANY MEMBER OF THE xxxx COMPANY OTHER THAN THE SPECIFIED CONTACT PERSON" (who can be only identified after purchasing the document). Now, as tempting as this is, no serious consulting firm or supplier would ever even remotely entertain the idea of throwing away hundreds of dollars to gain access to an RFP that may not even be related to their business, when they cannot even speak with or email a contact person to learn summary information of the RFP.

Scenario 2: A company that has been a prospect for a long while reaches out to us out of the blue. They are seriously considering engaging with us, but they developed what they think is a good method on how they will rank us with other providers in our industry.... They identified a specific product that they are looking to make a one time purchase of, in this case the product already has a pretty narrow list of recognized qualified suppliers (less than 5). They are going to go out to bid to the suppliers on their own and will negotiate with them in order to get the best final offers. After this is complete, they will send us the specifications (along with several other consulting firms) and want us to go back (along with everyone else) to the same suppliers and try to negotiate a better deal. They will not provide us with their pricing/efforts/information until after we submit our bids/results to them. If we come back with the best bid, compared to other consulting firms and their own efforts, then they have the option of hiring us based on their own internal qualifications, and there is no guarantee that we will be paid at all, if they feel our commission structure brings the price too close to the price they negotiated. Oh, and one more thing, they require us to pay $2,000 to make sure we have "skin in the game". So, first off, when any company assigns resource to work on an RFP, be it a consulting firm like ours that is going to assign human and electronic resources to a sourcing event, or a supplier that needs to fill out a multi-page RFP document to win business, they already HAVE "skin in the game". Secondly, the idea of sending multiple organizations out to beat up the same supplier list on the same exact items is going to produce ZERO results. In fact, it will do nothing but damage any relationship that organization has with those suppliers.

Collaboration is an extremely important component of Strategic Sourcing and your Supply Chain. This tactic of making suppliers pay for an opportunity to look at your business does nothing to help your position to develop good relationships that go beyond unit cost with your suppliers. You can have the best of both worlds, unit price reduction and improved service levels, but it will not happen by opening up communications with your supply chain with "give me money".

If you are in procurement or sourcing for your organization, please think twice before deploying these "Pay for an RFP" tactics within your organization, because they best organizations are going to respond like we did, "No Thanks". Also, if you missed it before, take a moment to read this previous post "Stop RFP Spamming!!!" I can guarantee you will not achieve the results you are looking for with either strategy.
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William Dorn

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  1. The other piece the purchasing team in "Scenario 2" is missing is that having a consistent message with the supplier base is absolutely crucial in an supplier negotiation. You can not have two or more teams working in parallel on the same category at the same time. Besides abusing their potential consulting partners, this company is going to anger their supply base to the level where many suppliers will likely drop out rather than provide proposals for the same business to 4 or 5 different teams.