I’ve been blogging about a pet peeve of mine for years, it’s time for this year’s installment:
I’ve made the argument time and time again that procurement groups rely too heavily on a rigid standardized and templated strategic sourcing process; and because of it, receive mediocre results and responses from their suppliers. Using software tools to “automate” the process (looking at you Ariba!) often make the problem ten times worse. (To be clear, this isn’t Ariba’s fault, but the users of it and tools like it often do not have proper strategic sourcing processes and training in place). Time and time again we are exposed to poor sourcing practices within companies as consultants looking in; or we ourselves are invited to bid our services utilizing mandated sub-par sourcing practices and tools. Having a rigid, structured RFP process (especially when combined with e-sourcing software) will ultimately cost you more money for the goods or services you are looking to buy. Period.
I will not rehash all the reasons why, I’ve don’t plenty of that in the past:
- Stop RFP Spamming!!!
- What Not To Do With an RFP – Rant
- Yet Another Example of Poor Government Procurement Practices
- A 3 Bid Process is often just another form of RFP Spam
- Don’t Let Your Suppliers Write Your RFP!
- RFP – A Tactical Solution (by Joe Payne)
- “What Not To Do” – An Entire Chapter Dedicated to It in the Book “Managing Indirect Spend”
BUT, let’s nitpick the very beginning of the process that MANY of you are guilty of. That is, creating an RFP and then inviting suppliers to respond to it without ever speaking to suppliers. Even worse are those of you that forbid communications from the supplier during the RFP event itself, or cap conversation to basic written questions.
Here’s 3 good reasons why you should have an open dialog with prospective suppliers throughout the RFP process:
- You can actually shorten the RFP process by having conversations and dialog with suppliers. Suppliers are more likely to be engaged and treat your RFP as a serious opportunity. This means, at a minimum:
- They are more likely to respond with a scope of services/products that meet your needs in the first pass: shortening the RFP life cycle
- They are more likely to be aggressive with pricing and will not just be throwing you “rack rates”: shortening the negotiation cycle
- They will likely put more detail, thought, and care into their response: answering questions you didn’t even know you had: shortening the scorecarding process.
Let’s look at this example - which I’ve seen twice in the last two weeks - A company is looking for a consulting firm (like Source One) that can help source and benchmark a variety of categories. They write an incredibly robust RFP document that focuses on primarily generic questions (financials, demographics, geography) and doesn’t really ask questions that would help qualify the quality of the consulting services. They then ask for the providers to bid a daily rate pricing for consultants and attach resumes of each consultant. In one of these RFPs, they limited questions to a simple open-forum Q&A, in the other they restricted all communications from the stakeholders and purchasing groups. What’s the problem? A rate card consultant on a daily plan is probably the most expensive way you could handle this engagement; you are restricted to their time, their individual experience, and you will be paying for them even during the down-time portions of your project lifecycle. There are plenty of better, ways to provide consulting support and resource that would not only be more cost effective, but would provide a better experience with stakeholders (like a managed services provider model).
So, we have a solution for you, that is better than what you were looking for, and it costs less; but I don’t have a way of communicating it to you and your template is too rigid to allow deviation. Worse for you, since we don’t feel that this is a real opportunity, and we haven’t been allowed to ask questions and explore your team’s thinking; we think you are simply looking for pricing to leverage your incumbent. That means we aren’t going to even respond to your RFP.
I can’t think of any categories of situations that the sourcing process should exclude conversations with potential suppliers. If you can think of one, please post it in the comments.
Please help, only you can prevent RFP Spam!