Reducing RFP Cost for Increased Results

              Whether you are seeking to source a new project or drive down costs in an existing category, the Request for Proposal (RFP) is often the go-to way for engaging suppliers and identifying a solution to your organizational goal.  It may seem that suppliers should be jumping at the chance to complete your request, especially if you are a company with few budgetary restrictions and high overall spend, however this may no longer be the case.  Taking up both significant time and resources, suppliers today are more hesitant to participate in a lengthy RFP process, especially if the chances of being awarded the new business look slim.  If you want to maximize your response quality and increase competition, take into consideration what the true cost of an RFP is to your suppliers (and your organization), and follow these guidelines for each phase of the process to drive down cost and increase value.

Phase 1: Supplier Selection

Do your research.
Understand your needs and learn as much about your potential supply base as possible.  Use information discovered at this stage to structure your expectations for the initiative and select suppliers that appear to align with those expectations.

Share insight on organizational culture.
As you begin to contact potential suppliers take the time to understand their organizational culture and align it with your own.  Give them confidence that there is common ground to reduce the risk of unresponsiveness in later stages.

Be Upfront about Fit.
Deciding on fit should be a collaborative effort.  Do not be vague about the nature of the initiative, disclose as much information as possible, and discuss whether or not it would make sense to include the supplier.  Falsely engaging a supplier for the entire process when they do not have the capabilities will not benefit either party, and will waste valuable resources.

Phase 2: Preparing the Questionnaire

Be as transparent as possible.
Give direct timelines for release dates, due dates, and question responses.  Giving ample notice of when to expect deliverables prevents wasted time requesting updates on both ends. If you are sourcing a pilot initiative, be candid about budgetary constraints and price point expectations.  If no budget is established, let the supplier know ahead of time that you are testing feasibility.  If a supplier is not confident that their proposal will fall within an acceptable price range, the opportunity cost to complete a thorough proposal becomes greater.  If you are sourcing an existing initiative, be as specific possible about areas that are lacking and your goals for improvement.

Ask for differentiators, not descriptions.

At this stage in the process you should already be confident in each participating supplier’s capabilities.  Allow them to tell you why they are a top player, not a long-winded description of how they function.

Present your end goal, not how you think you should get there.
Allowing a supplier to construct a plan based on their own capabilities takes the time and resources out of merging their offering with your initial idea, and allows opportunity for greater efficiency in the solution.

Keep it closed-ended where possible.
If you know the response you are looking for, utilize drop-down menus and character limits for responses.  If a supplier has a large space for a response, they may feel pressured to compete by filling the space.  Save their time and your time by imposing limitations.  Allow a section for final comments at the end. Instead of, “What certifications do you possess?” ask, “Are you certified in X, Y, and Z?”

Be mindful of your respondents.
Consider the types of questions you are asking and the role required to answer each.  Differentiate questionnaire sections based on the person with the knowledge to respond to allow your supplier to allocate resources responsibly.  An engineer cannot answer financial questions, and the sales representative should not have to filter through technical questions to find ones relevant to account details. If you are expecting certain suppliers to bid on partial business, have relevant information organized by location, product category, or any other differentiating factor.

Step 3: Supplementing the RFP

Present supplemental information in a simple, organized fashion.
Do not force suppliers to open large quantities of individual files to locate specifications that could be presented in one simple spreadsheet.  Often specification information can only be reviewed by highly skilled engineers and executives. Examining a large number of documents is time consuming and expensive for the company.

Present a reasonable timeline.
The time allotted for an RFP response is critical to the success of the project.  If a timeline is too aggressive, suppliers may become weary that you are simply searching for pricing and have no real interest in transitioning business.  If a timeline is too relaxed, suppliers may lose interest in the process and communication may suffer as a result.  The key is to find a common ground which gives suppliers enough time to present a successful proposal, without losing engagement.  An open dialogue during the early stages of the RFP, along with evaluation of past experience, can be the best way to determine a timeline.

Use supplier questions as a resource.
Collect supplier questions and distribute responses anonymously to all participating suppliers to ensure an even playing field and prevent time loss answering repetitive questions.

Be accessible for communication.
An RFP is a stressful process for both your company and the involved suppliers. Keeping communication channels as open as possible will reduce the risk of unexpected road blocks and suppliers dropping out of the running mid-way through, creating a loss on both sides.

Issue constructive rejection notices.
If a supplier does not win the business, they are more likely to be open to the RFP process in the future if they received feedback to enhance their business processes.  Have an open conversation rather than issuing a standardized notice in writing.

By being upfront with suppliers about your goals and available resources, you provide them with the incentive and motivation to present a robust proposal.  It is vital that the platform for a long term, mutually beneficial relationship is established at the beginning.  By taking into consideration the time and resources that are used to deliver lengthy responses and taking action to reduce these costs, you are presenting your organization as transparent, organized, and invested in every step of your procurement process.

For over twenty years, Source One Management Services has been supporting Fortune 1000 realize billions in saving through our Strategic Sourcing Process. From developing the RFP to conducting best-in-class negotiations, our experts can help you identify and onboard the best-fit supplier that meets your organization’s needs.