RFPs – How to Get Full Vendor Participation and the Best Price/Value
If you have been in procurement for any length of time you realize that full vendor participation is required to obtain the best combination of price/value.
The RFP process can be frustrating to execute for the procurement team. Too often procurement professionals deal with requests from stakeholders that are incomplete. Late requests can be even more problematic since they may not allow sufficient time to produce a quality RFP.
Based on my experience it can be even more frustrating from the vendor side.
Vendors will provide their best bid only if they are 100% confident of what they are expected to deliver.
If there is any doubt, they will build in a cushion to protect for the inevitable changes after their bid has been accepted. Their level of confidence will dictate how much cushion to build in. If there have been issues in the past with your company, you can be sure they will build in a healthy cushion since all companies are in business to make money.
Imagine if your spouse asked you to make pasta for dinner and didn’t provide any other details. How could you possibly get it right given the vast number of sauce recipes and the variety of pasta shapes? The obvious answer is you can’t.
Clearly even an RFP that is poorly prepared will have more information than the pasta example I provided. But the specifications that are provided as part of the RFP will be used by each vendor to prepare their bid. The quality of those specifications will have the biggest impact on their bid price.
Here are some fundamental steps that will help create the most competitive bids:
- Procurement and internal stakeholders need to work together to create the specifications that allow vendors to provide their most competitive bid.
- Technical research on the product specifications should be completed by the most experienced members of the collaborative team. Too often this falls to the business unit but if procurement has sourced similar events for other business units they may be a better choice to draft them.
- Total cost of ownership should be developed using all available company resources and this should include the financial team at the company. Some aspects of the cost of ownership can be a challenge to calculate so utilizing financial talent with access to company-wide data should be helpful.
- Procurement should be able to provide templates of similar events to speed up the RFI and RFQ part of the RFP. Even if your company has boiler plate items that are in every event that won’t cover all the information required in each individual event.
- If you are using eSourcing tools, then the company that supports the tools can be a tremendous resource in creating events. It is very likely that the support team has done many similar events and can lend expert advice to make your event better.
The takeaway today should be that if you make your events easy for suppliers to bid then you will put your company in position to get the most competitive price/value combination. If it is a struggle, expect less than desirable bids and vendors who decline to participate.
Action Step: What should be your next step?
If your vendors are constantly bombarding you with questions that seek to clarify the specifications or many are declining to bid, these are strong indicators that you aren’t making it easy for them to give you the best price/value.
EC Sourcing Group is one of the companies I represent because they help procurement teams deliver dedicated support by experienced procurement professionals. This translates into quantifiable cost and time savings. If you want to know how, I invite you to request a demo or 30 minute discovery conversation so you can experience the platform, process, people, and tools. You can reach me at 973-936-9672.
Next week I will continue on this same theme so your organization can improve your bottom line.
If you would like to know more ways to reduce costs without changing the way you do business simply give me a call or send me an email with your contact information and the best time to reach you.
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Until Next Time, I Wish You Great Success in Your Business and in Your Life