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For many of us working in projects daily, life without request for proposals (RFPs) can be practically unfathomable. Although it would certainly be simpler, it would also remove what appears to be a crucial process in evaluating suppliers for projects.
As Adweek highlights, a study of brand executives found that 42 percent of respondents found the current agency search process to be time consuming, and 28 percent saying “you’re told so many things that you’re not sure what to believe.”
Let’s start with the reason why the RFP still exists – its main benefits and strengths.
The project process can be scary. It starts off with a vision, but the overwhelming possibilities and unseen obstacles cast fog on which solutions are most appropriate for you. This is where suppliers come in.
As you have to search for companies to bid on your project, you’ll naturally conduct much more research and set up criteria to evaluate each bid with. You’ll start to look into how each of them stack up against the others, and you will select according to the one that fits in best with your priorities and constraints. The information you acquire helps you decrease the risk a little bit.
RFPs practically force you to take such a detailed approach to evaluating potential collaborators. It helps you transform the previously murky and vague endeavor (set up a website) into a much more detailed set of objectives, needs, and deliverables.
Ideally, the meritocracy that RFPs appear to facilitate also leads to a more objective and transparent selection of suppliers. The development of criteria appears much more fair to participants.
Proposals also come with a perk: free information. Whether it’s potential feature sets and solutions, or just pricing information, suppliers share information with you that may have required external consultation or more company time. But exactly how accurate is this information?
CASE AGAINST RFPs
Years ago, Google took its data from tens of thousands of job interviews to determine if interview scores correlated with job performance.
Google’s SVP of People Operations summarizes in an interview with The New York Times:
“It’s a complete random mess, except for one guy who was highly predictive because he only interviewed people for a very specialized area, where he happened to be the world’s leading expert.”
Most RFPs, as with most interviews, are hardly precise indicators for supplier performance. In fact, the time project teams spent on RFPs could have been spent actually getting to know potential suppliers more intimately. Digiday highlights some of the inefficiencies in RFPs in the media market.
One of the RFPs strengths also become its greatest weakness: the goal of RFPs is to put every firm on an even level and compare them along the same metrics. They help you compare apples to apples.
But because RFPs benchmark each supplier next to the other, they commoditize the process. They overlook the creative solutions or potential innovation value that firms could have, which may be the fruit the project team had really wanted to sink their teeth into.
Because of the RFPs defensibility, it also acts as a layer that shrouds the true sticking point. While this project may be botched, if a company could figure out what went wrong then they could learn and remove that sticking point next time.
Unfortunately, the complexity the RFP introduces – while great for individual teams and project leads – also means that each party could shift responsibility to the others, such as procurement teams or subcontractors.
You don’t have to look farther than the relaunch of the Affordable Care Act website to understand the downfalls of the RFP. Not only did it disqualify smaller teams (including Obama’s very own – successful – technology team that helped him win the election), it also introduced a process so complex that the project went wrong at multiple points.
The President of Development Seed, the subcontractors who worked on the product, said in an interview with Slate: “The problem here is nobody knows what happened, and that’s not acceptable.”
The RFP process restricts your selection of suppliers to only those large enough that can hire proposal writers. That means a smaller, innovative shop would automatically be disqualified, despite its potential fit for your project.
The costs that are written into an RFP are not necessarily precise (to say the least). As you can imagine, many companies are spread thin – and likely are dedicating more resources to their current clients than to potential ones. As the information in the RFP is not earning them any money, they’re not going to dedicate too many resources to it.
That means the information provided isn’t necessarily of value and is based on guesswork and an extremely brief analysis into your industry, challenges, and company. The questionable validity of this information also jeopardizes the valuable objectivity that RFPs bring to the table.
Within the RFP, there are also politics and an informally acknowledged inside track (when certain suppliers are more likely to get the job than others through prior connections). As you can imagine, this also removes from the objectivity that is supposed to be an RFPs major strength.
THE PROBLEM PERPETUATED
The inertia of the RFP process naturally allows it to stay significant and relevant longer than it should have.
For example, the RFP has forced companies to invest resources into positions such as “Search consultants” (headhunters for vendors) and procurement departments (costcutters that often fail to consider project value). While the people in these roles certainly provide some value, their existence and the sales and marketing resources dedicated to spreading these messages exaggerate the need for the RFPs.
BETTER ALTERNATIVES TO RFPs
Instead of looking for free information through a proposal, offer these suppliers a brief paid engagement to do an in-depth exploration of the project. Much like how it’s not wise to rush the doctor’s diagnose and hurry on with the prescription, it’s also important to dedicate resources and time for experts to evaluate your challenges and your project.
While slightly more costly, these “discovery” engagements allow suppliers to really hone in on your problem and provide you with a detailed analysis. More importantly, you can slowly see whether the company’s communication, reliability, and expertise live up to your expectations or not.
You can gain more valid information on your end. While this is a bit of an investment up front, it will save you tens of thousands in the future.
DISCOVERIES: MEASURE TWICE, CUT ONCE
The main advantage of the discovery is in its effectiveness: by taking a little more time to get a better idea of the target, the end result is achieved more effectively and efficiently.
Typically, any one hour invested in discovery saves around two on the rollout or end of project. Similar to how a pair programming process saves overall time by producing 15 percent fewer bugs, discoveries appear to cost more time initially but allow the supplier to save time on fixing mistakes in the long-run. According to IAG Consulting’s Business Analysis Benchmark Study, a discovery process reduces time overruns by 87 percent and budget overruns by almost 75 percent.
There are various methods to approaching the discovery process. Ours is based on the world-class MoSCoW rating system, where suppliers elicit your Key Performance Indicators (KPIs) and scope a suggestion accordingly. Together, we prioritize goals and objectives according to this framework:
M is for Must Have
- Mission critical
- Necessary to be included in project delivery and scope
S is for Should Have
- While not critical, these requirements are very important
- Likely included wherever constraints allow
C is for Could Have
- Less critical
- Nice to haves
- Lowest return on investment
W is for Won’t Have
- Least critical
- Not planned for current project but might be considered for a later phase
This method has proven to be 85 percent to 90 percent effective in controlling projects.
Think twice before using RFPs for your next project. You can free yourself from the RFP’s lack of correlation with supplier performance, the bureaucracy and inefficiency introduced, and the disqualification of innovative, smaller suppliers that don’t have the resources to respond to RFPs.
Instead, try a discovery engagement on a smaller project with certain suppliers – just to see how it goes. You may find yourself pleasantly surprised.
*Originally Published as a Climax Media Blue Paper