Vintage Post: This post originally published October 13, 2009
When selecting professional services, many businesses and nonprofits use a Request for Proposal (RFP) process to make a decision about the best firm or individual for the project. Seems like a wise way to approach buying services. Is it?
According to Cal Harrison of Beyond Referrals, the RFP process, which varies wildly in format and content, needs a major overhaul before coming even close to being effective, objective and cost efficient. He’s on a quest, of sorts, to bring buyers and sellers of professional services together to come up with best practices to improve the RFP—perhaps get rid of the process entirely.
I attended an event Cal recently facilitated that aimed to define these best practices for procuring professional services. In a room of 50 or so buyers and sellers of services, it was clear that although everyone seemed to agree the RFP process has problems, it was a challenge to get consensus on a set of best practices. There was some progress but it’s clear it will take some time. I’d be interested in what ideas/thoughts readers of this blog have on the subject.
Generally, none of those who attended the forum embrace the prospect of either responding to an RFP or evaluating that response. The process is often expensive, time consuming and sometimes downright confusing. Ironically, the RFP process is supposedly set up to ensure an objective and transparent method of evaluating professional services. However, upon scrutiny, the very process appears to be fraught with evaluation problems and can be manipulated for unfair advantage.
Because of these realities, some of the larger, more successful consulting practices have stopped investing time and money into responding to RFPs. If this trend increases, it will mean that buyers using RFPs will be disadvantaged by not having some of the best professionals qualified to meet their needs at the table. Clearly, some best practices are needed.
Cal’s written a thought provoking white paper about the costs of the RFP process for buyers and sellers so I won’t rehash all of his points here but I do want to highlight a few of them.
Who bears the financial costs?
It is rare for a professional services company to be compensated for participating in an RFP. The firm is expected to “throw their hat into the ring” solely for the possibility that it will win the business.
I’ve been involved in pulling together RFPs for both my own business as well as for others. I was involved in one RFP for a consulting company that was worth millions of dollars. The firm spent many thousands of dollars crafting its response. Countless staff hours were dedicated to the process and they hired me on contract to copy edit the responses. It was a complex, very time-consuming process involving many late nights because of the tight deadline. In the end, the firm did not win the business. Who do you think paid for the RFP response?
You may think that the consulting firm/vendor paid. In reality, the costs are passed along to all the customers of the professional services company. That’s because they build the cost of responding to RFPs into their fee structure. They have to in order to make up for all of the resources they’ve put into their unsuccessful RFPs.
This wouldn’t be so bad if the firms procuring service were getting good value from the RFP process. However, Cal argues convincingly that they are often not getting the best professional and the process is grossly cost inefficient.
Cal argues that when selecting a professional service provider, you should consider only two equally weighted evaluation criteria. These are: sector expertise and functional expertise. Sector expertise pertains to how well the professional understands your industry and functional expertise is his/her understanding of your unique challenges.
Many RFPs ask for and evaluate factors that are irrelevant to choosing the best professional. These include items such as methodology or work plan (most are generally the same), hourly rate or proposed project budget as well as timelines.
What, not ask for a budget or fees?
The most inefficient RFPs don’t list a project budget and request the vendor to submit an hourly rate or project budget. Both are irrelevant in terms of evaluation criteria. That’s because professional services differ from labour-based services (e.g. plumbing, electrical) in that there are likely several different approaches to the same need or problem. Purchasers should always provide a project budget so that vendors can tailor their response accordingly. This actually gives the purchaser more objective information. They can then evaluate the scope and scale of what each firm offers for the same amount. Otherwise, how do they ensure they are comparing the same level and scope of service for the money?
Careful what you measure
Many questions outlined in RFPs do not lend themselves to objective evaluation. They are vague or worded poorly. Questions must be as explicit as possible for any kind of reasonable evaluation. So, a question/qualification such as, “the candidate must have strong experience in delivering services of this type” should be replaced with, “does the candidate have five or more years experience delivering this type of service?” One can immediately see that the second approach is stronger in terms of objective evaluation.
Checking references can also be a vague and unhelpful measurement. Often buyers don’t have rigorous evaluation criteria for the information they obtain from references and it because a largely subjective exercise. Many at Cal’s forum agreed that references should only be used to verify the information in the written RFP process and shouldn’t be part of any scored evaluation. There was also some agreement that little useful information is obtained from references. They are almost always overwhelmingly positive.
Work plans and proposed solutions
I’ve participated in a number of RFPs that briefly outline the company or nonprofit’s need and then ask for a “work plan and approach to the solution.” This always stumps me. As Cal points out, unless the organization has some unique problem or set of circumstances, most professional consultants follow the same methodology for arriving at a solution. It would make more sense to ask for this after selecting the consultant.
Asking for proposed solutions is also problematic. Without going through the above methodology, providing a proposed solution is premature. It can also put up red flags for consultants who have seen ideas they proposed in an RFP executed by another firm who won the RFP. Not ethical, but it happens.
What’s the alternative?
If we got rid of the RFP, how would we ensure there is a fair and transparent process? This is often the sticking point among buyers—particularly in the public sector where tax dollars are involved. The reality is, having an RFP process does not ensure it is a fair one. As Cal points out in his paper, we can look to the Gomery Commission Inquiry into allegations of inappropriate hiring of ad agencies for proof of that.
So, we go back to evaluating candidates based on sector and functional expertise. How do you evaluate that? By examining level of experience and professional reputation. Defining best practices in this area, I suspect will be the greatest challenge.
This post could go on for several more pages about the pros and cons of evaluating professional consulting services. I’ve really only scratched the surface but I’d like to hear about others’ experience.
What do you find most challenging as a consultant or buyer of professional services with respect to RFPs? What are your suggestions for some best practice statements? Please leave a comment.