Requests for Proposals (RFPs) are a key tool that businesses and organizations of all sizes can use to ensure that they choose the best partners for any tasks and projects that are not handled in-house.
The upside of a correctly structured RFP is that it reduces risk during the buying process and creates a clear platform to evaluate the different choices available. From a seller's perspective, it gives a straightforward understanding of the buyer's needs and objectives and ensures that the typically time-consuming and frustrating back-and-forth negotiations are minimized.
At Mäd, we have responded to hundreds of RFPs sent to us by everyone from government organizations, NGOs, and large multinational conglomerates to startups and smaller local firms. Alongside this, we've also helped clients navigate complex, mission-critical buying decisions with millions of dollars at stake.
This guide is based on these experiences, with the aim to:
The core idea behind having a structured buying process with an RFP vs. a more casual buying process is to make better-quality decisions.
The reason why RFPs lead to better decision-making when choosing between various services and products is that it forces the buying organization to think through their goals and needs and gives them an objective way to compare multiple alternatives.
Having several vendors working with precisely the same information allows the buyer to make an "apples to apples" comparison — unlike an unstructured process where each vendor simply proposes their solution or product based on a loose understanding of the requirements.
A well-structured RFP will do the following:
Our recommended structure for buying professional services and achieving the above objectives is as follows:
This section should state the precise format and composition you expect to receive in the proposal from the vendors.
Ideally, it should be whoever will be managing the relationship with the chosen vendor or partner. RFPs are best when written by one individual: while the other team members can review and comment on various versions of the document, it's important that one person takes full accountability and responsibility for the quality and accuracy of the RFP. If the team does not have experience, it's a very technical project, or the consensus is that an objective third party would be more suitable, then you can contract specialist consultants like Mäd to guide the buying process.
Again, this depends on the industry you're in and the complexity of the proposed project. Generally speaking, you should set a final response timeline of 2 to 4 weeks from the day the proposal is sent.
Allowing vendors to send draft proposals that will be returned with comments ensures that the final proposals are of a significantly higher quality. However, depending on the number of vendors pitching, this can significantly increase the workload of the buying team. If they don't have the time available to fully review draft proposals and give meaningful feedback, then it's not worth adding this step to the process.
This is also linked to the previous point about the buying team workload. The more vendors you ask to reply to the RFP, the more work you'll have answering questions, having calls and meetings with them, and evaluating the final proposals. Also, smart vendors will often ask how many other vendors are bidding and will often decline to bid if the number is too high, as the risk-reward ratio of the time spent on the proposal vs. the chances of winning does not make sense. Typically, 3 to 5 vendors is an appropriate number, but in larger organizations, you may want to check with the procurement department for any specific rules, as they may have a specific minimum number of bidders required for compliance purposes.
This is a divisive topic, with several good arguments on either side. Including an indicative budget range or maximum budget is positive because it will instantly allow vendors to self-select in regards to deciding to bid or not, and it can also save you and your team time as you won't be evaluating vendors whose final proposed pricing is significantly above your maximum budget. However, if this is a complex purchase (i.e. custom software development) or a type of project that is best suited to a time and materials engagement model vs. a fixed price one, then it may not be a good idea to include any specific budget. This is also the case if
This depends on what you value most from an ideal vendor. If the project is in a rush, then give more weight to the timelines and the availability for the vendor to start immediately. If it's a more long-term strategic project, then you should value prior experience, team CVs, and case studies more strongly. You can see two examples below that have different criteria and weights:
Everyone who was involved in the buying process from the start and had conversations and meetings with the vendors. Senior stakeholders who were not involved deeply in the process can also be invited to evaluate the proposal and score it, or they may just wish to review the final scoring to help them make the final decision. Additionally, both external and internal subject matter experts can be recruited to help with the scoring. For instance, the MarComms team may ask a member of the IT department to help in evaluating CRM software choices.
For each evaluation criterion, you should give a score ranging from 0 to the maximum allowed for that particular criterion. Each individual that is involved in the buying process should evaluate each vendor privately, without sharing their scoring with any other team members. Then, the buying team should share their scoring simultaneously and take an average of the total score to give each vendor a final grand score based on all the evaluation criteria. You can then rank the vendors by scoring.
We hope that this guide has been useful in understanding the importance of a well-structured RFP in aiding key buying decisions. In the modern business world, it is rare for any organization to work in isolation, so being able to consistently pick highly effective, specialist partners is more crucial now than ever before.
If you'd like to request our help in your buying decision for a project or creating and implementing a specific buying process within your organization, don’t hesitate to reach out to us at email@example.com.