Podcast: Play in new window | Download
RFPs or “Request For Proposals” are project announcements put out by companies outlining the “what” and “how” of a project they are looking to bring outside help on, with the expectation that firms looking to take up the project will “bid” on it, effectively making it a competition for who can get the job done for the lowest possible price.
In this week’s episode, we talk about the good, bad and ugly of the RFP process, share our experienced with this approach and whether or not it’s a fit for buying expertise.
For material goods, RFPs can make sense; “We need X number of trucks, capable of hauling Y pounds of cargo, and get over Z mpg,” If the product is exactly the same no matter where it is purchased, an RFP can work.
For services, particularly those involving consulting and expertise, RFPs create a lose-lose situation.
On the side of the creator of the RFP, the reasoning is that the RFP “levels the playing field” so that they can compare one company’s offering with others. On the surface that might make sense for the buyer – but it is the LAST thing any good sales person wants. If anything, when you are selling you want the playing field tilted far in your favor. So far that your offering can’t be compared to others.
RFP’s make the assumption that all consultancies are identical in all aspects – ignoring differences in skill and experience. Even worse, if everything the client wants is specified and standardized – what is left to discuss?
Price. And only price.
Also, built into the RFP is what you need done, and how you want it done, why bother hiring a consultancy? It would be cheaper, by far, to hire someone directly to follow your instructions, than to hire a consulting firm.
On the side of the prospective “bidders” on an RFP, many buyers ask for speculative “solutions” while giving very little information upon which to make recommendations. This is bad for everyone involved because the chances your recommendations will be on target are slim and the chances that the client will latch onto a bad idea are great. Even worse, you might win and have to implement this bad idea that has likely been “stolen” from other firms.
There’s no guarantee that you’ll be hired, leaving that work unpaid, and no guarantee that they won’t take your advice, implement it themselves, or pay someone else to implement it at a lower cost.
In our experience, successful firms don’t respond to RFPs because it’s poor practice and they simply don’t have to do so. They are busy, and spending a week giving away random ideas isn’t a sound business decision. It’s a waste of resources because bidders seldom win these contracts. Most often, there is a firm behind the scenes who wrote the RFP and is the predetermined “winner”.
What do you think? Do you respond to RFPs? Why or why not? Leave your thoughts in the comments.