Top Ten Tips for Drafting an RFP

Kit Burden

Just as every building needs firm foundations, so every major sourcing initiative needs to have a firm basis on which to proceed. Whether you call it a Request for Proposal (RFP) or Invitation to Tender (ITT), the document and process that initiates the process of selecting the eventual vendor is quite possibly the single most important document that the customer and its advisors will produce. All too often, however, the RFP turns out to be poorly constructed, and/or provides a process that is not best suited to meet the customer's needs.

Given the inevitable pressures that will be placed on customers and the procurement process by the economic downturn in 2009, what then are the top ten tips for getting the RFP right?

  1. Don't issue the RFP to too many suppliersIt becomes unwieldy and too much of a drain upon internal resources. Before issuing the RFP, you should first produce a "short" list of suppliers most likely to be able to provide the desired services. This ensures the responses are relevant and, therefore, worthwhile for review.
  2. Ask questions that enable the suppliers to genuinely differentiate themselves from their competitors, rather than ones that confirm what you already know or could otherwise guess. Open questions about how "good" the suppliers perceive themselves to be will be of limited use, whereas getting concrete details, for example, of past projects where the supplier has faced similar requirements to those now in issue will be a far better guide of how the supplier will perform in the future.
  3. Ensure that you get case studies and references from a number of directly comparable projects. In this regard, it would be preferable to have some examples of your own rather than relying simply upon the supplier to offer up reference sites (as the supplier will inevitably have picked out its best projects to act as references and these may not be entirely representative!).
  4. Be clear on your own objectives from the outsourcing, e.g. cost reduction, service improvement, service/resource flexibility etc.. Although the requirements of each of these objectives will often be mutually exclusive, many negotiations begin with the desire to receive everything, whilst the realisation that this comes at a cost may only dawn gradually. This can lead to delays and additional cost in the negotiation process.
  5. Ensure the RFP sets out the ground rules for the overall procurement process, such as the submission and subsequent use of information, timescales, points of contact, etc. For example, you may wish to specifically preclude the supplier from approaching and "canvassing" past contacts of theirs within the business who may then place pressure upon the negotiating team to give some kind of favourable treatment to that particular supplier.
  6. Include either a draft contract or set of key contract principles, and require each supplier to provide a detailed response. This is particularly important, as ultimately the deal that is to be struck will be encapsulated in the contract documents, and understandings as to what has been agreed at a commercial and business level can quickly unravel when one gets into the detail of the contract drafting if you are not careful. Responses to the effect that something is "agreed in principle" or that a provision "will need to be discussed in due course" should be guarded against, as they are stock phrases to hide the fact that there is either a significant caveat to come, or else an outright rejection of the position that the customer is putting forward.
  7. Identify your own core team (legal, commercial, financial, HR, etc.) who will be involved in the process going forward and make sure they have sufficient time to devote to it. For larger deals in particular, it needs to be recognised that this is not the kind of thing that can be balanced with the ongoing requirements of a "day job".
  8. Be clear on how you intend to "score" the RFP responses (e.g. desire for capability as opposed to pricing, resource pools as opposed to contractual compliance, etc.) and communicate this to the shortlisted suppliers. There is little benefit in keeping this secret from them, as sharing this information will mean they will likely work harder to come up with a proposal that focuses on the issues of paramount concern.
  9. Identify all key internal stakeholders and make sure they are adequately involved in the RFP process. They need to be kept abreast of how the negotiations are going and why particular points arising in them are perceived to be of importance - these should be communicated in business terms as opposed to "legalese".
  10. Anticipate the questions/information the suppliers will want to ask or receive, and gather the information in advance. Due diligence is an essential process, and any supplier worth their salt will want to have a clear understanding of what they are being asked to take on. If the information provided is deficient, one can expect suppliers to argue for the inclusion of contractual assumptions/dependencies regarding the areas of uncertainty. This will likely give them the opportunity to vary their prices and gain relief from contractual liability, post contract signature (and at a time when - with the contract duly signed - the customer's bargaining leverage with the supplier will have significantly eroded).

The RFP process is a crucial part of the sourcing process and it is necessary to invest the utmost care and attention to it. Ultimately, every hour or pound spent in developing the RFP and the background materials for it will likely be repaid many times over during the remainder of the procurement/negotiation process, and thereafter in the undertaking of the actual services to which the RFP relates.