Are RFPs Good or Bad?

Many, many years ago as a Chief Technology Officer, I remember gloriously putting together multiple RFPs (request for proposal) on a variety of topics.  Each one was well intentioned and I worked hard thinking that I was creating a strong evaluation process designed to eliminate my biases.  First, I would describe the goals of the project, then the decision time frame and the criteria, and then I would solve the problem and ask for vendors to submit their best bids.  The reality is that with one exception, the vendor who helped uncover the problem that their technology would solve, almost always won.   Ultimately, I don’t regret the vast majority of the decisions.  I do however greatly regret the process as I don’t think the Credit Union got the most innovative, creative or valuable solution.

For the past 7 years I have lived on the vendor side.  I have been the recipient of multiple RFPs and spent thousands of hours trying to fit our solution into the clients’ process and perspective.  My conclusion is that there are 5 major things wrong with RFPs that do not end up accomplishing the goal.  These include:

• Solutions instead of Problems – In general, RFP’s dictate solutions to your vendors instead of engaging them to solve the problem.
• Eliminating Vendors Expertise – An RFP generally ask vendors to fit their solution into a box.  This tends to eliminate the vendors expertise around their product and probably doesn’t lead to better prices.
• RFPs are Biased – RFP’s are often written to favor one particular vendor – making them somewhat biased and not leading to transparency in the decision making process.
• Partnership – RFP’s tend to eliminate the ability for a client and vendor to actually partner and communicate about an opportunity or problem.
• Eliminates Innovation – the process tends to eliminate creativity and best practices from the discussion

In fact, in most cases we have stopped participating in RFP’s because of two major reasons.  First, the RFP generally eliminates our ability to sit down and engage in a conversation with the client.  Often times there are multiple decision makers and a variety of business objectives associated with an RFP.  The inability to discuss the clients’ higher level business objectives makes it very difficult for any vendor to really understand the goals of the project in the broadest of terms in order to make sure there is a good fit.  One example was a Credit Union that submitted an RFP for a one year Disaster Recovery solution.  At first, we jumped at the opportunity as it was a large credit union and the deal seemed to be a good one.  As we thought about it though we felt that there was information missing…sure enough after we had passed on the project – the client merged with another large credit union.  The result would have been bad for both the client and us.

The second major reason is that we believe it is every bit as important for us to determine if a fit exists for us.  Our solutions are not for everyone.  An RFP often eliminates our ability to see if we like the people on the other side of the table and to make sure that we think the client would be a good client for us.  I call this the Honda – Ferrari process.  If a client comes into my Ferrari dealership and requests a Honda – I have several options.  I can try and convince the client that my Ferrari is in fact a Honda.  Fortunately – the Internet seems to have ruined this approach.  I can ask a bunch of questions like – do you like going fast, do you want to look cool, are you in hurry…to determine if there is a need for my product.   If there is not a need and you will never go over the speed limit and you primarily driving role is to drive your kids to school every day – a Ferrari may not be for you.  No matter how much I try and make my Ferrari look like the Honda you have requested it just won’t work.

Instead of the traditional RFP process, I suggest that credit unions do the following.  First, determine several credit unions that they admire most.  Second, go visit those credit unions and see how they work and what they are using to solve problems.  Get references and back ground on the vendor in advance. Pick two or three vendors from your credit union brethren and sit down to lunch with them.  Explain the business objectives (higher ROA, lower Expense Ratio, better service) etc. and ask them to show you how their product and service demonstrably align with those objectives.  Make a selection.   I suspect you will save countless hours in the evaluation process, save some trees, and probably get a better partner.