Buying Professional Services – a Re-Think

It may sound like heresy, but when it comes to purchasing professional services, forget about RFP’s and the RFQ’s: they do more harm than good.

The Problem

RFP’s (and RFQ’s) can actually increase project costs and decrease the likelihood of finding the best suppliers for professional service engagements. Here’s why.

Unlike sourcing goods or equipment, when purchasing professional services, your goal should be to narrow down your evaluation to a few, well-qualified firms.

The RFP process is designed to produce the opposite. It broadly invites many firms to bid, in the name of competition, fairness, and transparency. The intended result is to ensure a job well done at the lowest possible price. Unfortunately, this is usually not achieved when tendering professional services...

By their nature, RFPs tend to inflate costs. Vendors do not bill for their proposal work, but clearly, the preparation cost has to be built into billable rates, or their firms would not remain viable. It’s not uncommon for consultants to build 25% (or more) into their hourly rates to cover proposal work.

RFP’s start the whole process off on the wrong foot. They are essentially draft contracts written by a purchaser who may not understand how the required service is best delivered, or how to describe a firm that is capable of delivering it effectively.

RFPs cut off communication. The process is arms-length, competitive, and secretive, leaving little opportunity for the parties to explore alternative approaches, discuss the current situation, gain meaningful clarification, let alone establish cost expectations.

It is easy to see how this can lead to misaligned expectations, inefficiencies, and disappointment on both sides. Not surprisingly, more and more capable consultants are refusing to participate in RFP/RFQ processes.

Simply put, the RFP approach is unlikely to attract or identify the best service suppliers, let alone ensure you receive good value for money.

The Solution

The best professional services solutions occur when buyer/seller interaction happens before the contract is created.

The approach described below is designed to make good use of your (and your vendors’) valuable time, help you quickly hone-in on the most qualified vendors, and avoid most of the problems and pitfalls (including legal) associated with tendering for professional services.

First, use a Request for Expressions of Interest. In it ask suppliers to clearly describe why they believe they are qualified to meet your specific challenges and requirements. Limit them to one page.

Next, review their responses and invite up to 3 firms to meet with your team to present how their company’s capabilities can address your very specific problem. To help them prepare, make sure they know your budget, the details of the challenge that needs to be overcome, and what your desired outcome is. Treat them all the same, and limit their presentations to 1 hour.

At the meeting, provide them the opportunity to ask detailed questions – and receive detailed answers. Do discuss timelines, elaborate on expected outcomes, and determine how you would work together. Don’t ask for solutions to your problems and never reveal one vendor’s question to another.

Next, evaluate and rank the competitors by honing in on tangibles like experience, performance on similar projects (in similar industries), education & certifications, third-party recognition, and client endorsements.

Finally, invite the firm that best demonstrated its overall expertise with your challenge to submit a brief proposal. This is basically a written version of what was discussed in the meeting, and will form the basis of your contract.

The Payoff

The payoff is higher success rates for professional service engagements because of:

• Better use of your time: No need to prepare long and involved bid documentation, or to review and evaluate a pile of responses.
• Better results: obstacles and risks are surfaced at the beginning of the process; methodology and expectations are clear and understood by both parties.
• Better Price: costs are reduced by making the bidding process more efficient. Savings should be available without affecting your vendor’s margins.