You've probably all seen or used a clause similar to this in an RFP or RFQ before:

"XYZ Company is not responsible for costs incurred in the preparation of proposals".

     Basically, you are laying the ground work upfront with your potential suppliers that you are not willing to pay for their time, materials or expenses in order for those suppliers to submit a proposal to win your business.

Expecting a sales team to eat its own expenses is a relatively standard and accepted practice in just about every industry for almost every single spend category. As long as your requirements are not unreasonable, such as demanding multiple in-person visits for redundant presentations, it's perfectly acceptable to expect a supplier to incorporate their sales/marketing costs back into the cost of doing business.

Surprisingly though, many companies are paying to receive proposals, and they are often paying a very highly hourly rate to do so. Here's how: If you already have a consulting firm or team of FTE individuals embedded in your firm and their firm is trying to sell you additional services or products, you are probably paying for your incumbent team to sell to you. Now, those costs can be either direct or indirect and can be difficult to track, but they are likely happening. Below I'll outline three different scenarios that could be costing you money when you go out for bid.

For simplicity sake, in each scenarios, let's assume the same criteria: You have a large multinational company that is embedded on a long term project within your organization. Those consultants are working on a system integration and software development project that has been signed off at the highest levels within your organization. Now, as an outcome of their efforts, they have identified a specific need, let's say it’s a software database complete with the hardware to power it, and have submitted it to the procurement department for acquisition. Unsurprisingly, they've also conveniently put you in touch with a coworker of theirs' in a completely different division that can supply the hardware and software, but you need to go through your due diligence anyhow. So how could you possibly be getting charged for this?

Scenario 1: The long-term consultant that has been working at your location is spending time providing the specifications to his company's sales representative directly. Not only should they should not be having any communication whatsoever without the prior approval of your project manager (and possibly the procurement team), they are probably responsible for helping spin the specifications to favor their company. It's highly unlikely that they are doing this outside of normal working hours, which means that your team is paying that individual's hourly rate to have him tip off his internal sales team on how to win the business. - Unfortunately, this is difficult to track time against and difficult to uncover at all.

Scenario 2: One of the consultants working at your location sits in on each sales call and presentation that their company performs. While this is not uncommon when they actually contribute something to the conversation (such as technical answers that the vendor may have), if they are simply sitting on the calls or in the room to see what's going on, then you should not be paying them. . - Fortunately, although this is the most direct form of you paying the costs of a proposal, but is also the easiest scenario to track and ask for recoveries for. Unless you have specifically invited the consultant into the meetings and discussions, you should be looking at their timecards/invoices and asking for credits on any time billed that should have been a sales cost.

Scenario 3: Again, one of the long-term consultants is aware of a deal in which their company is attempting to sell additional products or services to you. And although they were not directly involved in the sales process, they stop by your office on a weekly basis to remind you that the proposal’s pricing expires soon, or the more sneaky tactic of lending some “free advice” that a price increase is happening across the board, and he/she wants to give you some insider advice to pull the trigger now. Again, this is difficult to track, but has a tangible dollar amount associated to it. It is time that they are billing your organization for to pressure you into buying their product/service.

So, I already see certain bloggers and high-priced consultants getting fired up on this.   I’m nitpicking, right? Surely, the amount of dollars associated with managing this are not worth the time to manage it, right? Well, maybe yes, maybe no. It’s not just the minutes (which translate to real money pretty quick with consultants making $150 to $375), it’s also your time being distracted from tasks at hand…. That consultant who is doing the friendly pop-in a couple times per week…, It’s not usually just a straight forward conversation, is it? No, they want to talk about the weather or what the Giants vs. the Eagles matchup is going to look like this season. Or they’re going to talk about the new Spiderman movie, ask about your kids, or anything else they can think of to break the ice. So now, they just wasted 5 to 10 minutes of your time + their 5 to 10 minutes x their billable rate. Now consider that something they said, like a warning of price escalation, causes you to get nervous. Now you have to drop what you are doing to look at contracts and proposals to make sure your safe. How much did that time and money did that visit really cost you?

Now, I’m not going to go into the ethics of allowing your in-house consultants to be involved in the sourcing process of something that their company happens to be able to supply, that’s a whole thesis paper within itself (even if they are off-the-books and not billing you for it). But I did want procurement agents to start thinking about if that consultant is really just being helpful, or are they racking up an hourly or daily rate in order to sell you more stuff.
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William Dorn

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