Imagine this argument between a procurement agent and a real buyer he represents, as they try to hire a freelance graphic artist to revamp the company’s visual identity.
Procurement agent: Well, based on her qualifications, she’s clearly not qualified for the job.
Real buyer: Why not? Based on her education and portfolio, she is better than any other applicant. This is exactly what we need. She’s a real “pencil and paper” graphic artist who also knows how to use a computer. Considering that all other applicants are nothing more than skilled Photoshop users without the “artist” part, she’s clearly the winner.
Procurement agent: But she has no Photoshop experience.
Buyer: No, because she uses Gimp, the open source equivalent of Photoshop. It’s expertise that counts.
Procurement agent: But she doesn’t fit my job description in the RFP.
Buyer: The job description is to be an experienced graphic artist.
Procurement agent: No, my job description clearly states the applicant must be an experienced Photoshop user.
Buyer: Look, we need someone who really understands graphics as art and can help us.
Procurement agent: No! We need someone who fits my job description to the letter.
And the argument could go on and on, but I think you see what the problem is with RFPs.
Yes, RFP indeed means request for proposals from buyers’ standpoints, but it also means request for problems form the bidders’ standpoints.
Michael W. McLaughlin, the author of Guerrilla Marketing for Consultants and a former partner at Deloitte, calls it “real fools participate”.
Different people have different opinions about RFPs, but in general companies respond to them when the other option is long-term starvation or when they are not interested in doing proper marketing in their companies.
In this article, we examine only eight ways responding to RFPs can hurt companies, but I’m sure there are many more.
So, let’s get started with…
1. Clear Objectives Are Replaced With Arbitrary And Ill-Defined Tasks
In the non-RFP world, when it comes to projects, we discuss…
- Goals: The type and magnitude of business improvement: E.g. increase online sales by 25% within one year.
- Objectives: The documented work to be done during the project. (i.e. build a fully optimized and e-commerce website with lead generation/conversion ability and online payment systems.)
- Scope of work: The list of tasks to be done to fulfill the objectives.
- Value: The long-term value to client expect to garner from the successful completion of the project.
- Investment: What the buyer pays to achieve the required objectives and to get on the path of achieving the desired business goal.
In RFPs, buyers have already listed the desired tasks, and they’re looking for someone to do the manual labour work. Using medical lingo, the patient has diagnosed himself and is now looking for a doctor to carry out the patient’s instructions.
If the RFP fails to communicate what the buyer wants to achieve through this project, then think twice before responding.
2. Decision-Making Is Abdicated To Disinterested And Non-Expert Bureaucrats
Imagine Johnny wants to date and court Jenny with the intention of marrying her.
But Johnny can’t see Jenny until they are married.
No way! He must “date” Jenny older brother, Fred, who acts as Jenny’s romantic procurement agent.
But he doesn’t care about Johnny’s character and other things that would be important for Jenny.
And even the wedding will be done in Jenny’s absence by Johnny and Fred, in the presence of Jenny’s lawyer, signing the appropriate legal documents.
Fred only cares about how much money Johnny brings to the marriage, and how easily he can confiscate Johnny’s wealth and give it to his sister if Johnny dies or the couple divorces.
The situation is similar in real RFPs.
- The decision-maker is a slightly higher than rank-and-file employee.
- Procurement agents have no profit/loss responsibility.
- The decision-maker is not a boardroom dweller.
- A non-executive makes executive level decisions with executive level consequences.
- The decision-maker has neither business- nor subject matter expertise. I.e.: A procurement agent with a history degree decides who replaces the old IT infrastructure.
RFP proposals get evaluated by the wrong people based on the wrong criteria, which leads to the incorrect selections.
3. Short-Term Engagements
Companies issue RFPs either because the government regulates them to do so or they believe they can get better work out of their contractors by constantly holding their feet to the fire and reminding them how fragile their positions are… unless they dance as the client whistles.
It means whichever contractor gets the renewed contract, it’s a short-term deal and it soon turns into an ordeal when it’s time to renew it, and hundreds of RFP responders are banging on the gates for entry.
Incumbents know that no matter how great work they do and how satisfied the clients are, they soon get replaced by someone… usually cheaper.
It also means that most companies don’t give their best people to RFP work. Regardless of whether the work is done on site or at the back office, RFP projects are usually staffed by non-A-players, freeing up A-players to work on lucrative non-RFP projects.
This is also a great win for the sellers because they can train junior people on their clients’ dimes.
4. RFPs Are Very Expensive To Win
On average, it takes seven people about 185 person hours to digest and RFP and craft and submit a proposal for it.
Then from the issuance of the RFP, it can take as long as 45 days to get invited to the first bidder meeting that all bidders attend.
At those meetings, procurement people usually amend their RFPs a bit. They usually shave the time line and the price a bit and bloat the project’s scope a bit.
But look at the costs first. Just calculate the cost of those seven people. And that 185 hours exclude the support staff who do support work like photocopying, printing or checking little details to make sure that every T is crossed and I is dotted.
And what may happen after submission?
In unlucky cases, you get notified of the bad news.
In lucky cases, you get notified to rework some sections in the RFP where you haven’t properly adhered to the format.
And now the timer keeps ticking beyond the original 185 hours.
So, by the time, you submit the proposal in the proper format, you’ve spent the king’s ransom.
5. RFPs Ignore Lon-Term Consequences
Since it’s procurement agents, not executives, who handle RFPs, long-term consequences are almost always ignored.
Executives select suppliers based on…
- Factors that are beneficial to the company’s long-term success.
- Quality of relationships – Ease and effectiveness of working together.
- Long-term value to the client company.
- Seller’s ability to work effectively without supervision or micromanagement.
But procurement agents select suppliers based on…
- Factors that are personally beneficial to them (promotion, pay increase, extra perks, etc.) while working at the company.
- Price – Saving budget.
- Long-term job security for themselves.
- Seller’s ability to work as a supplicant micromanaged by procurement.
Unlike procurement agents, executives, since they know they have to live with the long-term consequences of mishandled projects, make their selection based on criteria that allow real A-players to win contracts.
Executives know that their projects are in good hands with A-players regardless of the prices they charge.
6. Most RFP-Driven Projects Are Over-Scoped, Under-Timed And Underpaid
From the perspective of project management, there are three factors that define projects at the initial, pre-negotiation stage.
- Time frame: How much time has the buyer set?
- Cost: The amount of money the buyer set aside for the project.
- Scope: Amount of work that I planned to get done.
There some problems here.
The time frame confuses effort and duration. E.g. A Canadian passport takes 17 minutes of effort (actual work) and one month of duration (sitting in piles) to renew. RFPs tend to ignore duration and focus on effort, that is, demanding to receive a renewed passport in 17 minutes.
Cost is usually a wild guess E.g.: The dentist charges $200 for plaque removal from teeth, so a cardiologist should charge about the same for plaque removal from arteries.
Scope is a gallimaufry of tasks very often assembled by laypeople in certain influential positions. E.g. an IT infrastructure overhaul project gets scoped by some manager with an Ivy League MBA but zero IT expertise. Hence, many of those projects end up suffering from massive bloating of scope (Scope creep), while adhering to the original time frame and price.
7. RFPs Are Based On Self-Diagnosis
According to a widely accepted medical maxim, prescription without diagnosis is malpractice.
But it applies not only to medical professionals, but any professional in any industry.
The problem is that self-diagnoses don’t go “deep” enough and solutions are developed based on experienced symptoms, not root causes. The other side of the same coin is that solutions get developed by laypeople not experts.
Many moons ago, McKinsey & Co. did a study to see how effectively consulting engagements deliver value to clients. It turned out that…
- Some 75% of consulting engagements don’t return a profit to consulting firms.
- Some 50% of consulting engagements don’t deliver the expected value for clients.
Yes, and one of the main culprits is lack of expert diagnosis.
So, sellers are disallowed to diagnose buyers’ problems, but blindly follow buyers home-cooked – usually wrong – solutions.
And when the solution fails to solve the real problem, of course, very often clients blame and even sue sellers.
Mainly in the US, lots of fat people are suing their personal trainers, their doctors and fast food companies for “turning” them fat.
8. RFPs Ignore Your Uniqueness
One of the greatest things in the free market is that you can win great projects with your uniqueness.
- Many companies engineer optical lenses, but there is only one Carl Zeiss AG.
- Many companies make kitchen knives, but there is only one Cutco.
- Many architects design meat processing plants, but there is only one Temple Grandin.
The problem is that when you respond to RFPs, you are requested to respond in a plain vanilla fashion. You must rigidly follow the RFPs template, and can’t write about what makes you unique in your market and industry, because that would be stacking the deck in your favor and that’s unfair to the other bidders.
But the fact that you’re an accomplished specialist in the very area that the RFPs is all about is irrelevant and a generalist can easily win the project based on either lower price or some superficial factors.
Back in the day, when I was a technical buyer, having advised senior executives on technical purchases, I experienced how little procurement agents cared about real factors that actually could have contributed to the overall success of projects.
While procurement agents call it competitive bidding, the Actors’ Equity Association’s name, which is really actors’ union, appropriately calls it cattle call.
Unions are all about equality and seniority regardless of talent, performance and other practical factors.
So back in the days, lots of roles were given to talented actors and second-rate union actors were ignored.
Then the Actors’ Equity Association (AEA) started lobbying for equal treatment regardless of talent.
The selection process required directors to compare lots of actors and actresses for each role, and hand out roles based on seniority and other obscure criteria, not talent.
RFPs are the same. In comparison to inbound marketing initiatives, responding to RFPs is one of the most ineffective ways of landing new clients.
Bidders are expected to show up and give their best, so the selection committee can select one bidder based on price and some other mysterious factors.
Knowing how expensive the process is to bidders, they’d better learn how to market their products and services properly and avoid cattle calls once and for all.
Hubspot’s 2015 State of Inbound Report clearly shows that good inbound marketing can deliver triple the ROI outbound marketing, including responding to RFPs can.
The only exception is when you jointly write the RFP with the buyer and you know beyond the shadow of a doubt that your business is the only one that can fulfil the RFP’s criteria. It means you have objective evidence (licence, etc.) that can’t be overruled with subjective reasons.
If the RFP calls for a Cisco CCIE certification and only you have that (objective evidence), the procurement agent can’t reject you based on subjective factors like incorrect hairstyle or the wrong shape of your nose.
But this is really the only case, and it doesn’t come up too often.
Considering the cost of responding to an RFP and the chances of winning it, it’s not a cost-effective game and you’re better off focusing on improving your marketing and getting higher quality business.