Avoiding a Big “Gotcha” in the RFP Process

Here’s a blatant truth: Any company looking to procure outsourced services can get into a similar situation as the government faced with its healthcare.gov website before it switched the work to Accenture to fix the debacle. That’s because the RFP process is a breeding ground for “gotchas” that eventually can evaporate a deal’s ROI or, at best, result in a deal that yields just so-so outcomes. I’ve studied the RFP process in my 30 years in this business and observed insanity — that is, companies doing the same thing again and again but expecting different results. I think it’s time to resequence the RFP process.

The foundational error in the RFP process 

Typically in a services procurement process the buyer first defines its objectives and then goes to the market to understand which providers are well positioned to meet those objectives. After some consultation, the buyer codifies those requirements into a request for proposal and works the RFP scope through a series of design workshops to truly understand the providers’ responses and help them better shape their proposals to address the buyer’s needs. The result is a number of very similar offers, competing on little more than price as well as terms and conditions.

So it’s no surprise that this RFP process sequence means the provider-selection decision is actually based on price. Despite best intentions, and even documents that say price isn’t the buyer’s biggest driver and it’s positioned at #4 or #5 on the selection-criteria list, the RFP process makes price the most powerful determinant.

A proposal for resequencing the RFP process

Perhaps what we need to do is to change the process to first define the problem and allow providers to build different, not the same, solutions around their strengths. This switches the process from an apples-to-apples perspective to an apples-to-oranges view with evaluation based on total cost and total effectiveness rather than price.

At this point the buyer would thoroughly examine and weigh the capability of the best-and-final two providers to deliver the offered service. This is different from getting client references, which often are manipulated.

Industry angst

Will the industry seize the chance to operate from this new level of thinking in the RFP process, or will it display angst? I perceive substantial pushback from both the procurement community as well as the provider/vendor community. The procurement community is happy to compete on price, and the provider/vendor community doesn’t want to unnecessarily spend scarce resources on bidding and legal fees before assurance of a high probability of a win.

Notwithstanding initial angst and pushback to my proposal, I certainly believe the RFP process needs to change.

Photo credit: Ahmillar