Do you consider reputation damage in the Request for Proposal (RFP) process for your organization? Most companies have a process for managing the RFP but fail to realize an RFP could ruin your personal and company’s reputation and increase cost in the long term. Here are three mistakes I’ve seen over the years.
Conflicts of Interest
Many suppliers spend 40 – 80 hours building a proposal. They align their business capability to the customer’s business requirement, usually involve the entire organization in the process, and determine the cost and acceptable margin for meeting the specification. One aspect of the supplier’s decision is to decide if there is innovation or features that will offer the buying firm completive advantage.
As a supplier, you expect that the buying company has issued the bid in good faith and will treat the information as confidential. Working with clients, I have seen several RFPs where individuals involved in the bidding event had a conflict of interest with the some of the bidders. It is safe to say that much of the information from the supplier’s bid was shared with competitors. Conflicts of interest must always be declared! Had the clients known about the conflicts, they would have chosen not to bid.
Asking a supplier to participate in the RFP Process, when there is no real intent to do business with them.
Suppliers may be aggressive when they get a new opportunity to participate in an RFP, however, if they are unsuccessful, they may not want to participate again once they realize that they were exploited. One client had a contract with a supplier allowing them to bid at the end of the second year of a three-year contract with the provision that the client handover the lowest bid for the right of first refusal. The total sales on the contract were $6,000,000 and one of the bidders worked hard to submit an innovative proposal with a savings of $1,000,000. The client company complied with the incumbent contract and handed the competitor’s bid to the incumbent supplier who then met the challenge and reduced the cost by $1,000,000. When the industry consolidated a few years later to those two suppliers, the supplier who worked so hard and lost the bid refused to bid again. This left only one supplier bidding on a high-volume strategic component. This situation lasted 17 years until the VP of Sales for the once exploited supplier retired.
Never ask a supplier to bid when there is no chance they can win the business! Of course, it’s never ethical to divulge another supplier’s pricing.
Failure to communicate and meet commitments
I always create a process and timeline when I create RFPs. As a rule, I communicate to all of the bidders the details relating to the bidding process and timeline. I like to have conference calls or meetings to include all of the bidders. I typically include all of the bidders, advise them of the pending process, timelines, and address any questions.
It is essential to make sure that the process is fair, the timeline is detailed, and the objectives are clear. To be effective, you must manage the RFP as a project by meeting the milestones and timeline. Many procurement professionals lose credibility when they fail to deliver the RFP and results on time. If there are any necessary changes, it should be reported to the suppliers as soon as you know. Finally, the worst thing that you can do is award the contract and fail to brief the unsuccessful bidders. There are several reasons that this is poor practice; suppliers have spent much time preparing these bids and deserve to know where they fell short on the proposal. I don’t recommend providing precise detail, but some direction. It will set them up for success should they bid again in the future.
The Request for Proposal is one of the essential tools in the buyer’s toolbox. If the request for proposal is done correctly, it can enhance relationships, lower cost, bring innovation, and create a strong supply chain. If done incorrectly, it can leave suppliers feeling exploited, damage your and your business’s reputation, damage relationships and cost your firm considerably. These three mistakes to avoid can make a difference in your career.
Is reputation a consideration in your RFP process?