RFP Best Practices
By: Roman Civín (Moravia) - RWS Moravia
03 June 2009
The world of business has changed and our current global economic downturn often serves as a plausible explanation for new trends and developments. Are there visible new approaches companies adopt in the management of business relationships with suppliers? If so, how is the request for proposal (RFP) process affected?
This article focuses on several perceptions of the RFP process in our translation and localization industry. How are RFPs changing (if at all)? What are the good and bad practices in the RFP process? What are some examples of good and bad RFPs? For additional into the RFP process, please refer to the results of the Q2 2009 GALA Member Pulse Survey covered in this issue of GALAxy.
What is an (ideal) RFP?
A definition by a supply management tools provider gives a good description of what an RFP is: A request for proposal (RFP) is an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. A bidding process is one of the best methods for leveraging a company's negotiating ability and purchasing power with suppliers. The RFP process brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront.
For this article and our industry, let us focus on RFPs that are relatively complex requests for services, requiring more than two days and up to two weeks to respond to (according to most respondents in the GALA survey, it can take up to two working days to respond to a request). We are focusing on projects requiring a closely fitting response in the form of a document, probably with appendices, as well as reference materials, pricing, information about compliance and answers to RFP questions. Frequently RFPs today use online technologies to manage responses and bidding.
Arguably, each RFP response covering localization services is unique and has to meet specific customer requirements, although some information is repeated in every RFP response or proposal. So a nimble reply to an anonymous request for pricing with a catalog attachment should not count as an RFP response. From the buyer perspective, “effective RFPs [should] typically reflect the strategy and short/long-term business objectives, providing detailed insight upon which suppliers will be able to offer a matching perspective.”
With that objective of transparency in mind, an ideal RFP should be a concise, well structured and documented request with sufficient space for comments, attachments and questions. Planning the RFP as a project and allowing sufficient time for respondents (i.e. the selling organizations) to prepare and respond helps suppliers deliver solid responses and build solutions that add value. In addition, an ideal RFP should contain clear and complete expectations from the prospective customer, the objectives of individual decision makers on the customer side, and clear and weighted vendor selection criteria. Having roadmap information for the work described in the RFP and sample deliverables is another key point, not to mention clear instructions and contact information.
RFP Management and Technology
Large businesses frequently use SRM (supplier relationship management) systems to control the process. Ariba, Emptoris, Oracle and SAP are just a few resonant names in this area. As one of the leading SRM software producers aptly describes, "many businesses are seeking to increase bottom-line cost savings delivered by sourcing and procurement functions. By focusing on procurement operations as profit centers, forward-looking companies are strengthening supplier relationships and making procurement a more strategic partner in the organization." While strong partner relationships management is indeed key for success in localization industry, a lot of the RFPs generated and managed though an SRM system can degrade the process to price bargaining and exploitation of value.
Figure 1: Online RFP bidding
Asked to name the three most visible trends with RFPs today, it is no accident that three quarters of the GALA Member Pulse Survey respondents indicate that RFPs seem to be increasingly focusing on price only (the most-cited trend). An RFP process where procurement takes full ownership (as opposed to a balanced strategic role) is usually limiting and can be detached from the ultimate users of the service in the customer company. A procurement-only approach to RFPs could signal something is not working; RFPs should include an opportunity to talk to decision makers and discuss questions.
Focus on Solution May Not Suffice
In the current GALA survey results, you will find a lot of examples of good and bad RFP practices. Hopefully LSP (localization service provider) feedback can contribute to enhancing the RFP as a tool and bring benefits both to buyers and suppliers. In summary, RFPs today suffer from the same problems as maybe they always have: lack of planning, clarity, information and, not least, the missing element of communication/relationship. Take the following examples.
You have received an extensive, “demanding” and well-structured RFP from a blue-chip company who could be your ideal customer, if you won. You jump at the opportunity and focus your entire workforce on the project. You submit the RFP response on time, sail through a deadly e-auction and wait with bated breath to hear the results of the process. But your company loses to a competitor you know you’re better than, and despite the fact your RFP response was perfect, covered all requirements appropriately and was probably the best proposal the customer could receive. The lucky competitor has won because there was a relationship established between the customer and them.
RFPs are strong customer tools, but they are not everything. Ideally, an RFP is combined with successful relationship building and access to key people. Focusing on delivering all tasks, providing high-tech and competitive solutions and meeting the deadlines, you as a supplier may lose sight of the bigger picture, the customer, goals of individuals and the importance of building rapport.
As another example, you have taken part in an extensive 60-page RFP with a global buyer of complex services. The RFP project was carefully planned and you were pre-selected. The eight pre-selected partners were individually invited for personal meetings and presentations with customer stakeholders. This step alone demonstrates a fairer approach and equal opportunities to build a relationship in addition to evaluating the proposal. Yet, this is more of an exception rather than the rule. Perhaps it is no surprise that the second of the top three visible trends in the RFP process from the GALA survey is an anonymous approach in the RFP process, with over 40% of survey respondents highlighting this development.
From the perspective of an LSP covering over 50 full-size RFPs a year, there is a continuing tendency towards consolidation of vendor base by larger businesses that were not doing that in the recent past. Companies increasingly issue RFPs just to compare options and see what kind of pricing they can get from LSPs (“kicking the tires”), not necessarily having made the internal organizational decision to actually change suppliers. These RFPs usually grant limited access to key people in the buying organization and are focused on price.
Today, companies seemingly globalize their vendor base while reducing their office locations worldwide. For example, a Japanese software publisher that closes down its EMEA hub in Europe with the intention to produce all localization from China. On the other hand, a regional model as something between global and local indicates an effort to get attractive “local” pricing while maintaining an MLV (multi-language vendor) model. Grouping languages into regional wholes helps create a more competitive environment where global LSP players have to cope with the challenge of capable regional providers.
As RFP costs are not negligible, buyers are likely to make more careful decisions and conduct more effective RFPs less frequently. Hopefully there will be more clarity in the customer business objectives and evaluation criteria.
Roman Civín is Moravia Worldwide's Solutions Architect, working primarily with the company's Europe-based customers to design and optimize their localization processes. During his 12 years at Moravia, Roman has held a number of production and managerial positions in the area of localization, testing and engineering.
iii SAP SRM (http://www.sap.com/solutions/business-suite/srm/index.epx)