You probably issue RFPs because you think it’s the only way to get the best price on your major purchases. It's a common procurement strategy misconception, but it’s just not true.
I worked at an RFP software company for three years. During that time, I talked to countless purchasing teams issuing RFPs, as well as their responding vendors. The funny thing was, everyone, regardless of their part in the process, utterly HATED RFPs.
I heard horror stories about RFPs that took years to complete, that included 500+ questions, and required 30 different versions. It was a nightmare for everyone. Worst of all, it usually wasn't an efficient selection method.
This blog covers why issuing RFPs won’t get you the best price, and what to do instead.
Why RFPs Don’t Work
In some industries issuing RFPs is a non-negotiable requirement. Fair enough. But for everyone else, it’s far more optional. Before you release your next Request for Proposal, consider the following downsides.
1. Time and Energy RequiredThe dirty secret of the RFP is that they typically take six months plus to complete. Not to mention countless hours to create and evaluate. Which is a problem because, for any procurement professional, time is your scarcest resource. You need savings solutions today that you can implement with minimal effort.
It takes weeks to write the request and get it approved. Then add on time for suppliers to review and respond. Plus, factor in a delay for asking additional follow up questions and hammering out contract negotiation. By the time you've selected a winner, you've spent weeks on the RFP, and you're just now getting to implementation.
If you’re looking for fast savings solutions or better commodity pricing, an RFP doesn’t make sense. It won’t get you the best price because it’s too lengthy and intensive for what you need.
2. Ineffective Apples to Apples ComparisonLet’s say you’re still not convinced. You think an RFP is necessary, and you’re willing to put in the time and effort. That's well and good. But if your goal in doing an RFP is to get a real side-by-side vendor comparison, you'll probably be disappointed.
For example, let’s say you have five contending suppliers. If you ask each of them 50 questions, assuming they all engage, you’ll have 250 responses for each stakeholder to evaluate.
The typical result is lots of scattered Excel sheets and confusing scorecards. You’ll be left with a murky mess and won’t truly understand how the suppliers stack up. The RFP won’t get you the best price, because it won’t help you make a more informed decision or understand the overall value of each provider.
3. Good Suppliers Won’t RespondAnother factor most buyers don’t consider is just how much vendors hate responding to RFPs. The result is that the best suppliers are not likely to respond to your request.
Why the Top Vendors Won’t Respond to Your RFP
- Responding requires dozens to hundreds of hours of free labor to write the proposal
- They have a minimal chance of winning unless they have a relationship with the purchaser
- It’s challenging to get the right answers from the right people, requires chasing down Subject Matter Experts (SMEs)
- Often the RFP is rigged, there is a clear incumbent, and the suppliers know you are just checking the box of going out to bid
- RFP expectations are often vague or unrealistic
- Questions are rigid and can paint suppliers into a corner
They might also be able to tell you’re looking for free advice, as this consulting group put it:
“I once had a client at a family foundation solicit consultants using an RFP, and he specifically told me that his plan was to identify the best ideas from all the proposals and then have the chosen consultant (likely the cheapest) implement them…
I’d rather give an hour of free advice for a project I know I won’t get than spend hours working on an RFP response for a project I might get.”
For suppliers, RFPs demand a massive amount of work, but only offer a slim chance of winning the project. And since the top suppliers have their pick of customers, they will likely choose someone else who is demanding less of them. Those who do have time to respond may not be someone you want for a partner.
Procurement Strategy: RFP AlternativesThe pitfalls of the RFP process are pretty clear, it’s incredibly difficult, and it doesn’t guarantee you’ll get the right supplier or reduce your spend. But if not RFPs, then what? If you dare to look outside the box, you’ll find that you can get the savings you need for far less trouble.
Request a Quick Cost Analysis
If your goal is to get the best price on key commodities, working with a Group Purchasing Organization (GPO) is ideal.
The beauty of partnering with a GPO is that by joining a group of buyers, you get access to “bulk” pricing without having to increase your volume. Working with a GPO like UNA is particularly ideal for commodity purchases because it’s free and the supplier contracts are already written and pre-negotiated.
Since UNA has over $100 billion in network buying power, we can get you better discounts than you could access on your own. You'll get below industry average pricing, without having to do an RFP or negotiate with suppliers.
You’ll also get unparalleled price stability. Plus, when you partner with us, you’ll work with our category executives and specialists. They’ll monitor your contracts, and make sure your suppliers remain compliant.
You could spend the next six-plus months issuing and evaluating an RFP, and get average savings. Or you can contact us and request a quick UNA cost analysis.
Within two weeks of receiving your accounts purchasing file, we’ll be able to show you exactly how much you can save. On average we help clients reduce their procurement spend by 10-20%. Learn more here.
Hire an Expert
If you’re making a highly complex purchase like new healthcare software, we still recommend skipping the RFP. At the very least, wait until you’ve done lots of research, interviews, demos, and narrowed down your list to the top 3-5 candidates.
Also, if you’re not an expert on the related category, you’ll want to hire a consultant to walk you through your options. While it’s an additional expense, it will significantly speed up the process, and save you from your inexperience.
Bottom line, before you issue your next RFP think twice. It won’t get you the best supplier or best price. Skip the RFP, skip the BS.