The RFP process explained | 8-steps to RFP

The Request for Proposal (RFP) is alive and well, despite the increasing criticism and murmuring in the market. RFPs are under scrutiny because it is seen as a time-consuming effort that ties organizational resources and kills differentiation. 

We'll outline an 8-step process to get you started on RFP!

They are...

1. Identify sourcing potential with spend analysis
2. Scope and specification 
3. RFP preparation 
4. Await the RFP responses 
5. Evaluation and supplier selection
6. Negotiation and contracting  
7. Implementation and handover 
8. Lessons learned

What makes a good RFP?

RFPs are still the method of choice when tendering a product or service. RFP may not be the best-fit approach for evaluating specialized competence and sophisticated solutions– at least without a proof of concept (POC).

The RFP process, when properly managed, is transparent, objective, and fair.

A poorly drafted document causes the candidate stress and uncertainty, resulting in many clarification questions, multiple iterations, and sub-standard submissions.

A well-crafted RFP document defines the quality of the submissions, essential business requirements, and the time it takes to conclude a contract. It aims to improve customer satisfaction, service quality, and business value.

How long do RFPs take?

The end-to-end RFP process usually takes from six weeks to...well, forever. There may be no strategic alignment within the organization on the desired outcomes. Business requirements and priorities may be misunderstood.

The main problems hindering an agile RFP process are often administrative. Many companies are still stuck in the 20th century, using manual drafting processes and email-based RFPs despite the wide availability of sourcing software solutions.

Sending documentation back and forth via email requires patience and precision. The elapsed time depends on the complexity of the project, size (and relevance) of the team, number of potential suppliers, number of RFP rounds, amount of information required, and need for contract negotiation.

Sourcing a new commodity or service for the first time takes longer than a repeat purchase from approved or preferred suppliers because the definition of requirements (together with business stakeholders) takes time.

The RFP process explained in 8 steps

The following steps serve as a checklist and practical guide to completing RFP in about 4-weeks.

As a disclaimer, the purpose of this blog is only to give ideas on how to streamline your RFP process - not to rush you into making a major decision carelessly.

Graph: The 4-week RFP - how to complete an RFP process in 20 business days

1. Identify sourcing potential with spend analysis

Spend analysis can reveal sourcing potential and opportunities for consolidation. A business owner may have requested you to conduct an RFP, or you have identified an opportunity and have buy-in from business stakeholders for the project.

Either way, before kicking off the RFP, you must have identified a potential return on this resource and time investment.

An experienced category manager gets to know their market domain and does their market research in advance. Ensure market availability for the product/service you had in mind.

One way to scope is to have an intro call with potential suppliers. Your understanding of the offering will increase, and you might find elements you did not consider before. In intro calls, you can give a hint of possible tender coming up so the market can reply to demand as needed.

2. Scope and specification 

Spending time defining the scope before creating an RFP is vital. Organize a kick-off meeting with your internal stakeholders to ensure maximum commitment and alignment. Harness the know-how of your organization in drafting specifications and key business requirements.

Stakeholders, subject matter experts (SMEs), and end-users need to be fully aligned on the desired outcome. Your stakeholders most likely hold valuable market intelligence and information on potential suppliers to involve.

Poor strategic alignment derails many sourcing initiatives. If you are having difficulty defining the scope, go back to the stakeholders and get clarity.

Ensure the availability of your RFP team upfront. Book meeting slots in advance with SMEs and senior management for reviewing the scope, processing the responses, supplier presentations, evaluation, and potential negotiations. The stage can be referred to as front-end-loading.

3. RFP preparation 

The RFP should explain who you are in a cover letter, and why this product or service is important to you. Tell the candidates everything they need to know about your current state and desired outcome. Translate the specifications, key requirements, and user needs into RFP questions and templates.

We have 3 different guides and templates available to get you started on prepping your RFPs! Enjoy.

• RFP questions to ask software vendor | free template and cover letter

• RFP template for procurement savings management solution

• How to Write an RFP for Procurement Analytics Software

4. Await the RFP responses 

It is possible to complete the publish-to-receive stage within two weeks. If you are tendering a simple product or service that can be catalog prized, the time given for submitting responses may be shorter. Professional bidders often handle responses to large and high-value RFPs.

The answer will likely be a NO-BID if you give them a too-tight deadline. Level of familiarity with RFP candidates impacts on time required: if your RFP candidates are contracted suppliers or familiar with your company, processes, and requirements, it may be more straightforward for them to submit a response.

Awaiting the responses should not be time wasted. Use this time to plan and prepare for the following steps. Provide one week for candidates to ask clarifying questions and ensure their questions are replied to shortly.

5. Evaluation and supplier selection 

For fairness and transparency, evaluation criteria must be agreed upon before sending out the RFP. Forms and tables, fully and correctly completed by candidates, make it easy to compile, apply the agreed weightings, and evaluate. With the help of analysis tools, this step can be completed in minutes.

Securing internal alignment and buy-in, on the other hand, may not come easy. Open-ended questions often require human attention. Sourcing software can help you by providing ready-made scoring and recommendations, but the human effort is needed to qualify responses and decide.

This phase can include more detailed supplier qualifications, such as reserving one day for site visits, presentations, financial audits, or product testing. You may want to consider setting up a POC project. Planning and preparing a POC that delivers good results would likely be outside the 4-week window.

6. Negotiation and contracting 

Before negotiations, short-listed candidates may be asked to provide more information on clarification questions. Best and final offer (BAFO) negotiation with several shortlisted candidates may occur.

Consider setting up an e-auction for transparent bidding of prices. E-auction is not viable if you seek multiple proposals for a specific challenge, but it works for products and services that can be compared directly.

Contract negotiation happens with the preferred candidate. It’s fair to say that complex negotiations can take weeks if there is unclarity in specifications, service requirements, and responsibilities between the parties. Negotiations can cause significant delays if they are not pre-scheduled and the target of the talks is unclear.

Preparation is vital; align with your internal team on what is considered a minimum-viable contract before engaging with the supplier. Ensure both parties have their legal and subject matter expert resourcing reserved for the scheduled negotiation time.

To speed up the process, ensure everyone has access to the same data and latest documents, and define each person's role on the negotiating team. Good planning, engaging supplier(s) in the iterative definition of the requirements, and familiarizing yourself with the supplier’s standard SLA for common ground reduce the effort required in the negotiation phase.

7. Implementation and handover 

Communicate the award first to internal stakeholders, then to the winning candidate, and then to other suppliers. Explain the scope, contract terms, SLA, and KPIs to relevant stakeholders and end-users.

Ensure you have nominated a contract owner and a relationship lead that will monitor the KPIs and collaborate with the supplier. Ensure the supplier is activated in relevant systems. Agree on future procurement involvement and governance arrangements. Agree on practices related to validating prices along the contract period.

Learn the best practices for a successful contract handover.

8. Lessons learned

Analyze lessons learned in each RFP process and collect feedback from internal stakeholders and candidates. Continuous improvement of the RFP process and alignment of interests will ensure that your stakeholders are eager to support sourcing projects in the future.

It is good practice to provide feedback to unselected candidates on why they were unsuccessful and how they could potentially improve in the future.

This concludes our step-by-step guide on the fast RFP process. RFPs are heavily criticized when they are used just to test the market or to ratify a purchasing decision already taken. Be authentic to your potential future business partners and transparent about your desired outcomes for the RFP.

RFP time-saving tips!

Here are some final RFP time savers:

• Keep the number of candidates limited to focus your efforts. Involve only such candidates that have a fair chance of winning. Consider your time investment in reviewing responses, questions, and comments – the number of candidates is the multiplier.
• Provide a cover letter. With a good briefing, you avoid multiple questions from candidates later on.
• Use pre-drafted RFP questions to assess functionality. Focus on the essentials.
• Provide pre-defined forms to complete and tables for pricing. This makes the evaluation of responses easier for you later on.
• If you wish to mitigate unwanted surprises, introduce your mandatory requirements, compliance forms, terms for non-disclosure, information security requirements, and code of conduct upfront.
• Request potential suppliers to submit their SLA for review. Depending on the service and established industry practice, the suppliers may prefer to use their SLA for all their clients (as in the case of SaaS). Reviewing different SLAs allows you to compare suppliers' service coverage.
• Never assume that suppliers are familiar with all your internal jargon. Introduce internal concepts and acronyms.
• Provide contact details for requesting additional information and a preferred date and time for doing so.
• Provide an RFP timeline for potential next steps, such as presentation or negotiation dates. Communicate the intended start date for the service.
• Give clear instructions on how to submit the RFP response. Explain what documents you need from the candidates. 
• Use electronic sourcing and e-signature tools. E-sourcing enables the smooth distribution of RFP materials, audit trail, and storing of responses. E-signing helps you mitigate delays in signing and secures document version control.

Header picture by: Joe Hu (Unsplash)