This guest post, exploring RFP alternatives, was written by Cindy Rittel, a Senior Sourcing Advisor at Una.
It can be tempting to stick with what you know.
Every profession has a ‘default’ course of action that people tend to take in response to a challenge. Unfortunately, doing so often has little regard for the challenge’s unique context, goals and desired outcomes. It also lacks imagination and creativity.
Generally, for many the default response to a sourcing challenge is to issue a request for proposal (RFP). But in doing so, procurement professionals fail to acknowledge other viable courses of action.
In this article we’ll explore the pros and cons of RFPs. In addition, we’ll cover three RFP alternatives available and the benefits of each. Finally we’ll discuss the future of traditional RFPs and their alternatives.
The pros and cons of RFPs
The RFP approach to procurement is over 120 years old. Over the years the RFP process has remained mostly the same. While the in-depth, formal question-and-answer format is time-tested, it wasn’t designed to meet the needs of every procurement project. Consequently, many procurement teams are finding new ways to adapt the traditional process and embracing RFP alternatives. With a combination of old and new strategies, the procurement team can be agile, efficient and effective.
Let’s examine some of the pros and cons of the RFP approach.
- Procurement teams and suppliers are familiar with the formalized structure of RFPs.
- RFPs provide a data-driven approach to finding a supplier.
- They are ideal for strategic sourcing and complex projects that require in-depth analysis.
- RFPs give procurement the opportunity to ask very specific questions about supplier capabilities, certifications, pricing plans, and more.
- RFPs encourage suppliers to suggest solutions to the problem procurement wishes to solve.
- The structure of an RFP allows for weighted scoring based on differing business priorities (not just lowest cost).
- RFPs enable a clear, fact-based comparison of suppliers’ capabilities.
- RFPs are time-consuming (sometimes taking over a year). They’re expensive for the procurement team to write and more so for the supplier to respond to. Unfortunately, this disadvantages small businesses (on both sides) who don’t have the time or dedicated resources to commit to lengthy RFPs.
- Small and medium-sized businesses (SMEs) may hesitate to respond to an RFP if they believe there is little chance of winning your business. This narrows the pool of potential suppliers.
- The formal process and structure of RFPs does not tend to nurture creativity.
- Some (unethical) procurement teams use the RFP process to collect free advice or ideas.
- RFPs do not encourage adaptive planning. As project scope and specifications are likely to change, providing a lot of up-front detail in RFPs can be a waste of time for procurement teams and suppliers who respond.
Three RFP alternatives: Non-traditional processes to try
1. Use a Group Purchasing Organization (GPO)
The best-known benefit of joining a GPO is to save money by leveraging the collective buying power of thousands of businesses, but members also save themselves a headache.
A GPO works on your behalf. They handle the time-consuming activities involved in managing a category, such as:
- Gathering market intelligence
- Identifying suppliers
- Writing RFPs
- Negotiating contracts
Outsourcing the RFP process frees up procurement professionals to spend their time on value-adding activities such as strategic planning, risk mitigation, social and sustainability initiatives.
Ultimately, GPOs do the heavy lifting to save money, time, and effort is otherwise swallowed up by the RFP process.
2. Consider other RFX options
The strategic and intensive nature of RFPs mean they are the most time-consuming of the RFX options. Carefully consider the end-goal of your request to determine which RFX will best deliver the answers you are looking for.
This handy RFx selection guide infographic explains the differences as follows:
- An RFI (request for information) educates. It is best for doing research, getting an overview of available vendors, or exploring the market. An RFI is usually followed by an RFP.
- An RFQ (request for quotation) quantifies. Issues a targeted request for suppliers to competitively cost a specific solution.
- An RFP (request for proposal) compares. Used for evaluating the bigger picture, and to determine which suppliers will be most capable of meeting organizational needs.
In other words, assuming you’ve explored the market with an RFI, then it’s time to decide whether you’ll need an RFQ or RFP.
- If you know exactly what you want (a specific product or service), use an RFQ to quickly pick the vendor with the best price and terms.
- If you don’t know the solution, use an RFP to describe the problem or desired outcome, and invite suppliers to come up with creative and compelling solutions.
3. Run an informal process or “RFP Lite”
In the end, the disadvantages of the RFP approach all come down to one factor: speed.
While the pace of business grows incrementally faster in other functions, procurement teams still find themselves hobbled by time-consuming sourcing processes. Unsurprisingly, the RFP approach often faces criticism from stakeholders for being bureaucratic and unwieldy.
When undertaking a new sourcing project, consider if your organization really needs to invest the time and effort into launching a full-scale, formal RFP. Deciding factors may include compliance requirements, or different rules depending on spend thresholds. An informal RFP process may simply involve a short email or call to a select group of suppliers to ask them how they’d solve a problem (and what they’d charge to do so). While this approach has its flaws, suppliers will appreciate not having to spend months filling in a 200-page RFP.
Any attempt to create an “RFP Lite” (by cutting down the questions asked) should keep in mind that all of the important questions must still be addressed. If they’re not, any time saved using the informal process is lost issuing additional RFP rounds. In addition, it can be useful to introduce a “no fluff” rule to ensure your suppliers keep their answers succinct.
The future of the RFP and its alternatives
Like any manual, dated process, RFPs are ripe for disruption. New procurement methodologies and technologies are emerging where months-long RFP processes are compressed into two or three days. For example, in Europe, a methodology known as Lean-Agile Procurement is gaining popularity as a way to dramatically reduce sourcing times by swapping the RFP process for one-day workshops and a one-page limit on documentation. In addition, RFP management software transforms traditional RFPs by digitizing, centralizing and automating the process from beginning to end making it far more efficient.
Going forward, think strategically about your goals and needs. Don’t be tempted to respond to every sourcing project with the same RFP-based approach. Save the RFP process for situations where its detail and considered approach are a benefit instead of a burden. The most adept procurement professionals can demonstrate a versatile and agile approach to different projects, which means they’ll add the most value in the most efficient way possible.