Important Elements of a Comprehensive RFP, continued:
- Pricing – Typically detailed pricing grids in an Excel spreadsheet requesting pricing for the various goods/services and ancillary costs under procurement. The pricing grid should reflect the needs of the category, which may require one or a number of different types of pricing, such as Market Basket Pricing, volume pricing tiers, percent discount off of a list price, etc.
- Response Deadline – Deadline for response submittal. It is advisable to clearly state the consequences of a delayed response and to reinforce the deadline with the appropriate client contact for suppliers that anticipate delays. One often encounters scenarios in which reputed, competitive suppliers refuse to bid because the timeline is too challenging. In order to avoid having a challenging deadline eliminate prominent suppliers, there needs to be a contact person who works with these suppliers to agree on a feasible submission date for their proposals.
- RFP Terms and Conditions – Set of terms and conditions that govern procurement (for example, stipulating that any costs incurred in submitting bids are solely the supplier’s responsibility; proposal prices to be valid for 90 days; etc.)
- Contract Terms and Conditions – Sample contract that the buyer intends to execute with the winning supplier(s). Typically, suppliers are asked to review and indicate any clauses they disagree with. This saves time by conducting contract negotiations in parallel with the overall process. The caveat here is that suppliers will often “agree” to the terms and conditions during the RFP without carefully reviewing the contents and, later on, will want to have extensive changes (especially if a lawyer gets involved). Performance metrics with supporting liquidated damages and rewards must also be included.
- Evaluation Criteria and Process – RFPs need to outline the evaluation criteria, which will be used to score the suppliers. Relative weighting also needs to be provided.
Evaluating the RFP
Determining and documenting the methodology for evaluating the qualitative and pricing elements of the RFP prior to its distribution is critical for proving internally that the methodology neither favors a particular supplier, nor is done in an "arbitrary and capricious" manner. The evaluation criteria and weighting should be developed by the buyer in collaboration with the end user. Following these two best practices will help speed up the oft drawn-out supplier selection process.
When you are developing the evaluation criteria and weightings (i.e., a weighted scorecard), organize criteria into various assessment categories such as supplier credibility/overview, technical support, price, etc. Each assessment category should be given an overall percentage weighting, with each criterion within the assessment category having its own percentage weighting. This method helps make sure one criterion is not given too much weight, and it allows for an easy, systematic comparison of supplier scores. Criteria weightings typically add to 100%, but a point scale can be used instead. Since each RFP is different, there is typically no one right way to evaluate suppliers. The key is to allow for some flexibility while helping to drive the greatest savings opportunities and maintaining an equitable process.
In conclusion, any time a company bids out a key category, the goal should be maximizing the value received from the supplier. Therefore, buyers need to receive a well-structured and comprehensive bid from suppliers that will allow the buyers to select the best overall supplier. In making this effort to select the best possible supplier, efficiency is crucial. Buyers must develop an RFP and evaluate the responses in a timely manner in order to keep pace with their other purchases and responsibilities. If buyers decide to ignore this advice and select their suppliers primarily based on price, their suppliers’ performance will continue to vary just like Eli Manning’s QB rating.