Request for Proposals (RFPs) come in all shapes and sizes. Some are no more than a few pages, while others are thick binders that include everything (including the washroom sink). Regardless of the volume of information you choose to share, one thing is certain that you are sourcing experience, from solution to vendor selection, to contract negotiations and through transition, are directly related to the quality of your RFP.
Some of the benefits of creating a solid RFP include,
1. Receiving quality responses from service providers
2. Reducing the time it takes to negotiate the contract
3. No surprises further down the line
4. Documenting in-scope requirements early helps build internal consensus and organizational alignment
Listed below are tools and techniques to help solid RFPs for selecting the best service provider for your organization.
- Build an SOW first, and then build the RFP around it
- During a traditional sourcing lifecycle, organizations usually publish an RFP first, then select a sourcing partner second, and develop a Statement of Work (SOW) third. The problem with this sequence of events is that the real organizational requirements are revealed too late in the process. By then, you have already selected your partner and have lost your leverage.
- Instead, put your initial time and effort into building a solid and comprehensive SOW. Direct your team to document requirements, capture volume data, and identify service levels. In other words, build an SOW that you plan to use to negotiate the contract. Then build an RFP around this SOW.
- As a result, you gain a deeper understanding of your sourcing needs and are in a better position to pick the right sourcing partner. By publishing a highly customized RFP, you exponentially increase your chances of receiving a customized solution instead of the generic RFP responses. Most importantly, you avoid unpleasant surprises down the road and you know exactly what you are getting.
- Prioritize your service requirement as “must have” or “nice to have”
- Internally document your sourcing requirements as either “must have” or “nice to have”. This simple exercise alone will focus your team on what is absolutely important, reveal internal objections early in the process, and ultimately build alignment within the organization. In addition, knowing the difference between “must have” and “nice to have” allows you to quickly add / remove services when you are in the contract negotiations.
If done early in the competitive RFP process, you just might be pleasantly surprised at how eager service providers are to throw in “extra” services in order to win your business.
Pricing
Include a pricing template in your RFP, comparing service provider bids and pricing can be a challenge for anyone, especially if the bids come in different shapes, sizes, formats, and inconsistent definitions. Give to avoid this problem, include a blank pricing template along with the RFP. The template should include pricing line items, resource units, volume information, definitions, etc. The more direction you can provide the service provider, the better the response. The goal is to give specific guidance on how you would like to receive the pricing and to ensure consistency and uniformity in how the pricing is delivered. As a result, you get to control the level of detail in the pricing model. Since everyone is using the same template, the same line items, and the same definitions; comparing rival bids is a snap.
Document each party’s financial responsibilities,
In addition to adding the pricing template, I recommend that my clients add a Financial Responsibility Matrix (FRM) document to the RFP as well. As the name suggests, it is a document that outlines each party’s financial responsibilities. For example, if you are considering outsourcing your call centers, use the FRM to determine who is financially responsible for the services, the equipment, the scripts, and the T1 connection to the call center. In my opinion, it is always better to have an agreement on financial responsibilities early on. It gives you a good handle on your true costs and it prevents nasty surprises during contract negotiations.
Be upfront with your most important Terms & Conditions (T&Cs)
Now is the perfect time to include major Terms & Conditions (T&Cs) for the Master Services Agreement. Don’t be shy. Negotiating a Master Services Agreement is a time consuming activity. Including a list of your major T&Cs will help reduce this cycle time (as well as points of contention during negotiations).
Share with the service provider your preferred payment terms, intellectualproperty (IP) position, termination clause, at risk amount, etc. Document the most important terms and allow the service providers to respond. In a competitive bidding environment, you will be amazed at how open the providers are to your positions. Just by adding your term sheet you will not only pocket some big wins without a fight, but will also cut down the contract negotiations time.
Involve regional stakeholders early on
For scope of services that are global in nature, involve the regional stakeholders early on in the sourcing process. Getting regional executives to agree after the service provider has been selected or the contract has been negotiated is a political disaster waiting to happen. And, on a personal note, this is a sure fire way for you to get the short end of the stick. Bringing regional stakeholders on board early helps build consensus and buy in.
Inevitably, you will run into issues where services and SLAs will differ across regions. In such cases, it is best to create a global services baseline (SOW + SLAs), document the extra regional service requirements, and ask the service provider to price these requirements as uplifts (i.e. additional charge over the base fee). Then let the regions decide for themselves whether they would like to pay for the extra services. You will find that many regions, for both economical and political reasons, choose the global baseline.
Manage the people side of the sourcing equation
These days, mentioning the word outsourcing makes people nervous. If you are contemplating sourcing, don’t go talking about it to everyone. As a matter of fact, keep things under wraps during the early stages. Keep the sourcing team small and only involve the subject matter experts that need to be in the know.
When you are absolutely sure that sourcing is right for you, and then announce it to the general population. This needs to be done gently, carefully and with compassion. If some of your employees are going to be rebadged to the new service provider, share this with your organization. If you plan to redeploy your resources, share that as well. But not saying anything, especially when the cat is out of the bag, is what gets people nervous. It is always your best resources (the ones you would have liked to stay on and help you with the massive transition) that will leave first.
Keep the core team consistent
The team that has created the RFP, selected the vendor, and negotiated the contract, should be the same team that is responsible for transition and managing the day to day contract. In sourcing, continuity can work wonders. Information is not lost, minimal knowledge transfer is required, finger pointing is avoided, and the classic “it’s not my problem after tomorrow” syndrome is minimized.
Furthermore, since the team will ultimately be responsible for the daily management of the contract, they have a vested interest in structuring an optimal deal for themselves and the organization.
Adjust the business case
If you have not already built a preliminary business case, now is the time. If you have already built one, update it to reflect the specifics of the RFP. The goal is to keep adding granularity to the business case as you get further into the sourcing lifecycle. The business case should never be treated as a static document, but rather as a work in progress where information is continuously updated as new data is uncovered.
Eventually you can use your business case to track the actual benefits received. A word to the wise: try to build the business case model so that the pricing model (that you receive from the service providers) will integrate easily into the overall model. This saves you time, minimizes aggravation, and reduces chances of errors.
Pick a process and stick with it
My old boss used to say “Any process, even a bad one, is better than no process at all”. For RFP development, several processes are available in the market place. Some good, some not so good However, the key to a successful sourcing experience is not in what process you pick but rather that you pick one and then stick to it. I have seen organizations agonize over what process or approach to use and then midway into the project, change the rules of the games completely. This confuses your sourcing team, wastes time, and ultimately produces an inadequate RFP.
My advice: pick a process, customize it to your situation, and then stick to it. If minor changes need to be made, then by all means, do so. But keep the central theme the same and keep your team focused on developing a world class RFP.
Following these simple rules will greatly improve the quality of your next RFP. The more time you spend creating a solid RFP, the greater your chances of finding the right solution, with the right partners, and at the right price point.
