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How to Work With Consultants: RFPs

By crooky | November 17, 2008

Many organizations and companies take comfort in the formalized structure of a Request for Proposals (RFP). There’s nothing inherently wrong with the RFP process, if it’s done right and it’s done for the right reasons. In my opinion, RFPs are a waste of time and energy when the project in question is less than $30,000 or you have a vendor in mind that you want to use. I’m qualified to speak on this topic because as a consultant, I’ve responded to dozens of RFPs over the last few years and have also been a project manager responsible for millions of dollars worth of consulting work done by vendors.

Note: This is the first posting in a two-part series about RFPs, consulting and the people who use RFPs to hire consultants.

Let’s start with the basics:

To Issue an RFP or Not to Issue an RFP

I mentioned above that I am of the opinion that contracts under $30,000 or situations where you have a vendor pre-selected should preclude the need for a formal RFP. Here’s why:

1. You have to factor in the value of your time. If it takes you a week to manage an RFP process for $10,000 worth of work, the contract is now worth closer to $15,000. In my experience, it’s never as easy as it looks to manage RFPs and the cost in wages incurred by you and your team must be considered. $5,000 in PM costs on a $30,000 project is a 16% administration cost. It’s 50% of a $10,000 project. The bigger the value of the project, the more sense it makes to issue an RFP.

2. You might not legally have to issue an RFP. Find out what the sole source limit is for your business. Government agencies, large corporations and the like usually have a signing authority limit for project managers. $20,000 - $30,000 is the limit for senior managers at most major organizations. If you don’t have to go through a formal RFP process – don’t. There’s the cost that I mentioned above and there’s also the legal exposure that comes from a formalized RFP process.

There are other things to consider when looking into issuing an RFP or not:

• There are consultants that respond to RFPs and there are those that do not. I’m a recovering RFP responder myself. I used to respond to every RFP that I was qualified to bid on. I won one and I only got it because I contacted the client to let them know there was a problem with their budget. In my experience, the kind of consultants that respond to massive amounts of RFPs are the ones that haven’t got many connections in the industry and maybe haven’t been in the business long. Experienced consultants will learn the hard way that the majority of RFPs are a waste of a consultants’ time (more on that below). Large firms will often bid on RFPs to maintain dealflow but they can afford the shotgun approach. Many good consultants get their clients and projects through word of mouth and don’t look for RFPs.

• It’s rare that you, as the client, have a 100% clear vision of how the project will play out. If you knew exactly what to do, you could do it yourself much cheaper. Part of the value of a consultant is their experience with similar projects that they bring to the table. Good projects tend to involve a consultant at the concept stage to brainstorm the best approach. An RFP forces you to set the project scope and scale in stone before you know how it is going to play out. No one wins in these situations. The scope and scale is rarely exactly what you think it is going to be and when you see those initial results roll in, you’re going to want to change the scope and scale. Unfortunately, most RFPs leave little room to change the nature of the project once a vendor is selected – potentially leaving both client and consultant dissatisfied.

If you choose not to issue an RFP, my recommendation is to reach out to your network to find vendors that have done similar work in the past and have a good reputation with colleagues that you trust. You can also find consultants online or through Craigslist fairly easily but you should check their references if they haven’t worked for anyone you know personally.

If you absolutely must engage in an RFP process, there are ways to make the process less painful for you and for the vendors you select – enabling a successful project. Here’s what I recommend:

1. Clearly identify the problem that you are trying to solve.

Consultants and other vendors aren’t mind readers. The more upfront you can be about the nature of the problem that you want solved, the better the proposals you will receive will be. There’s no advantage to obfuscating the issue at hand. By laying out the problem clearly, potential vendors can think creatively about your problem and put some very innovative or focussed solutions into their proposal. It can be kind of a test as well – if the potential vendor doesn’t really understand your problem, it will be clear in the kind of response they give to your RFP.

2. Give some indication of scope and scale.

If you need a project done with a national scope – say so. If you really need 500 respondents to a survey to meet your needs – communicate that clearly in your RFP. You don’t need to give a budget number because if you communicate the scope and scale clearly, a good consultant should be able to estimate the work required to complete the project. This is kind of a test as well – if the bid comes back with some ridiculous low-ball estimate of how long the work is going to take or a really high estimate – it probably means that the consultant doesn’t really grasp the scope and scale or they’re going to try and overprice the job by inflating the numbers in their estimate.

3. Don’t make unreasonable demands

Intentionally or not, I’ve seen some potential clients make absolutely ridiculous demands. Professional liability insurance is one of them. For a sole proprietor like myself who is not a licensed professional anything – I can get professional liability insurance for thousands of dollars per year but what is the point? There is no professional body that can certify me. Most of the time, the work that I do is market research-related and comes with no guarantees. I provide advice – buyer beware.

For example, if I do a market assessment for a technology company and I tell them that my research shows there’s strong market interest in your theoretical product that you haven’t actually produced yet – that’s not a guarantee from me. The market is not a rational force – external factors (regulatory, economic and demographic shifts) can throw off even best practice market intelligence. Even your implementation of my advice increases or decreases its value. In a nutshell – you asking me for professional liability insurance to the tune of $5 million tells me that you have no idea what you’re buying when you hire me.

Other unreasonable demands:

• “Please courier us X hard copies of your proposal.” It’s 2008! An electronic copy of an RFP should suffice. I’m sure these kinds of requests are driven by a desire to avoid wasting paper but if I print off six copies of a 25-page document, “we” are still wasting paper. Learn to read bids electronically – they’re easier to send to colleagues for second opinions this way too.

• “Subcontracting is forbidden.” This is idiotic. Most big consulting firms (including KPMG and PWC) use sub-contractors when a subject matter expert is needed or when not using sub-contractors would have a $1500/day consultant doing data entry. What I think most clients are trying to avoid is situations where jobs are awarded to someone competent and then executed by someone significantly less competent without their knowledge. What I suggest instead is that you insist that bidders name any sub-contractors and specify what work they will be doing. I do this with every proposal I send out whether it is asked for or not.

4. Treat potential vendors with respect

I have been in many situations in the past where potential clients were rude, condescending or unnecessarily difficult in other ways. Yes, you are offering money for a service. Remember that you’re offering money for a service that you are unable/unwilling to do yourself. Successful client-consultant relationships should be more like partnerships. If you want someone to bully, get a co-op student.

Now, more than ever, having a good reputation as a client is important. Demographic shifts and a highly competitive job market means that it’s a consultant’s market. For experienced consultants like me, if I don’t get a contract from you, there is a lineup of people around the block waiting for some of my time. I turn down around $200,000 worth of business a year because I can only do so much. If you dick me around, I can well afford to walk away from you.

Case in point – I recently had the displeasure of dealing with a procurement manager at a public institution who was such an insufferable prick during the RFP process and its subsequent withdrawal that I would hesitate to waste one more second bidding on jobs for this organization. The consulting community also isn’t that big and I get asked for references on potential clients all the time. If you treat consultants like crap, it will impact your ability to secure quality vendors in future.

There are some very easy things you can do to maintain good relationships with the consulting community:

• If you withdraw or re-issue an RFP, it’s common courtesy to e-mail the previous bidders to give them another chance to bid. It takes five minutes to do this and the goodwill it generates is priceless.

• Drop a quick note to unsuccessful bidders letting them know that they were not selected and why. This kind of feedback will give consultants an opportunity to submit better bids in future.

• Give consultants the opportunity to ask questions well in advance of the closing date and respond to them in a timely manner – if they’re asking, it probably means you didn’t communicate something clearly enough in your RFP.

• Allow at least three weeks between issuing the RFP and the closing date. Less than that is not reasonable.

Finally, I’m not denying that there are some terrible bids that come in sometimes. No matter how clearly you write the RFP, there will be some vendors that will not read it in any depth and subsequently miss the mark with their bid. There’s nothing you can do about this.

That’s it, in a nutshell. Make sure issuing an RFP is the best option given the circumstances, communicate your needs very clearly, be reasonable and don’t treat potential vendors like sub-humans. If you can do all of these things, the RFP process will be a much better experience for you and for the vendors that you eventually select.

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Topics: Business of Consulting |

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