The information technology (IT) department within my company uses Requests for Proposals (RFP) when obtaining products or services from vendors outside of the organization. A RFP is a “type of procurement document used to request proposals from prospective sellers of products or services” (Project Management Institute, 2004, p. 371). Although the IT department uses RFPs as part of its standard procurement approach, my company can improve its approach by incorporating RFP best practices into its standard process.
RFP Best Practices
The best practices for managing the RFP process generally fall into six categories of activates: planning, creating, issuing, evaluating, and awarding. Each area will vary depending on the products or services that are procured. However, the following best practices provide a solid baseline to work from.
Planning the RFP
RFP planning is the “process of documenting project purchasing decisions, specifying the approach, and identifying potential sellers” (Project Management Institute, 2004, p. 316). The first step in the planning process is to determine which products and services the organization will develop internally, or procure from an external source. Know as a make or buy analysis, the results of this process can vary widely depending on the project and its procurement needs. In addition, for each team, the team needs to determine the type of contract that they will use to management the procurement. General categories for contract types include fixed-price, cost-reimbursable and time and materials contract. Contracts are often used to help manage the risk associated with procuring products and services from external vendors.
Once the products and services are identified and the contract type is determine, the team can focus on determining the resources needed to develop the contents for the RFP. Resources might come from within the organization, externally or a combination of the two. As part of the process, the project team should develop a responsibilities matrix in order to provide clarity about the roles of each person involved with developing the RFP.
In addition, the project team will develop an initial list of potential vendors that will be able to respond to the RFP. Organizations might use vendors from previously established relationships. However, if the procurement is for a unique product or service, the project team will need to find vendors that are qualified to response to the RFP. Using internet groups like LinkedIn or advertising in public papers are a couple of ways to find potential suppliers.
Once the planning is complete, the project team should document the procurement plan and all related decisions in a procurement statement of work.
Creating the RFP
Once the planning is complete, the project team shifts its focus to creating the RFP document. The organization should have clearly defined corporate policies and procedures and use standard templates for its RFP and procurement documents. In addition, the RFP should include “standard terms and conditional and any other items that the buyer specifies to establish what the seller is to perform or provide (Project Management Institute, 2004, p. 315). Other items include product or service technical specifications with the level of detail tailored to the needs of the project.
Once the initial RFP draft is complete, the organizations legal department should review the contents before the document is issued to prospective bidders. The legal department will ensure that “the language describes the products, services, or results that will satisfy the identified project need” (Project Management Institute, 2004, p. 315).
Finally, the project team will create the criteria using a weighting system that they will use to evaluate vendor responses. The team should create the evaluate criteria before review vendor responses to ensure its evaluate is as objective as possible.
Issuing the RFP
Once the project team has created the RFP, they send it out to the previously identified bidders. The team might send out a scaled back version of the RFP, a Request for Information (RFI), to the initial list in order to narrow down the prospective bidders. The RFI can also serve as a tool to help identify areas within the RFP that need further information or clarification.
In addition, the project team might elect to hold a bidders conference. In a bidder’s conference, the prospective bidders are brought together and the project team reviews the details of the RFP. The bidder’s conference allows the vendors to ask questions and to seek clarify about the desired products and services. This process also benefits the buyer because they are able to update the RFP with the additional information needed for the vendors to respond accurately to the request.
Evaluating the RFP Responses
After a predetermine amount of time has passed, the project team will open and review initial proposals from each of the bidders. The initial review is an opportunity for the project team to determine if the proposals obtain sufficient information to perform the evaluation. The project team will answer open questions and clarify details as necessary. The answers and clarifying detail is sent to each of the bidders to ensure each is working from the same base information.
Once the project team has reviewed the proposals they will evaluate each response against the evaluation criteria. Through the initial evaluation the team should reduce the number of vendors to two or three, known as the short list, in order to simplify the contract negotiating process. However, the team should continue to negotiate with at least two vendors in order to maintain price leverage. The team will continue to negotiate the pricing, terms and conditions of the contract with each of the short list vendors until they are able to arrive at a mutually beneficial agreement.
Awarding the Contract
The final step in the RFP process is to award the contract. Typically the final selection is made by the project sponsor or senior management in response to the evaluation results and the recommendations of the evaluation team. Generally speaking, Hulston (1996) recommends awarding the contract to the vendor that scores the highest on the evaluation.
Once the vendor is selected, the project team will notify each bidder of the RFP selection decision. The organization will work with the winning bidder to formalize the contracted negotiated during the evaluation process. In addition, the project team will update its project management documents to reflect the decisions made during the process and to reflect the new contract relationship.
My Company's RFP Process
The IT department at my company uses some standard practices to manage its RFP process. However, my company can improve its approach by incorporating RFP best practices into its standard process. The following sections will outline my company’s processes and recommend improvements in each area.
Planning the RFP
The IT department follows the first step in the planning process by determining which products and services they will procure from an external source. However, for most projects they do not perform a formal make or buy analysis. Instead, they rely mostly on expert judgment and experience to select the products or services to outsource. In addition, IT negotiates fixed-price contracts. My company believes fixed price contracts help reduce its cost-related contracts. However, unless the scope and requirements are fully determine prior to contract signing, my company opens itself up to cost increases incurred as a result of change requests. In addition, the IT department is often unable to define the deliverables of the project in enough detail to define fully the scope of the project. The lack of detail further exposes my company to change requests and increased costs. In order to create enough detail for more accurate contracts, my company should spend additional time on the front-end planning for projects that require external procurement.
My company does a good job of identifying potential vendors. Due to its global presence, the IT department has established relationships in most markets and the products and services they procure are industry standard. However, my company should occasionally revisit its list of standard vendors in order to improve negotiating leverage.
Creating the RFP
The procurement group at my company has established default supplier agreements that are used for all procurement. In addition, my company has a clear set of policies and procedures that project managers are expect to follow when interacting with potential suppliers. However, the actual RFP documents differ widely across the departments within IT. The RFP documents are typically created from scratch for each project. my company can improve its RFP process by develop standard templates to use for its RFP documents. In addition, as part of the lessons learned after each projects, my company should develop a feedback mechanism that will allow for adjustments to the templates to improve the RFP documents for future projects.
In addition, my company is inconsistent in its use of a legal review as part of its RFP process. The legal department is involved with the final contract terms and conditions. However, the RFP process would benefit from involving legal sooner in the process.
Finally, the use of formal evaluation criteria is inconsistent at best. Most of the selection is perform subjectively by the project team and management will rely on the team’s recommendations. The subjective nature of the decision can become problematic if a conflict later exists with the vendor and management must reassess the selection process.
Issuing the RFP
The IT department at my company does a good job of issuing and managing RFP responses. When appropriate, the IT department will hold bidders conferences and they ensure that any follow-up information is distributed to all responding vendors. my company believes in keeping the bidding process as fair as possible.
my company will also keep at least two bidders in the RFP process in order to provide leverage in negotiations. In addition, they will try to eliminate as many vendors as possible early in the process in order to reduce its workload and to ensure vendors that have little chance of winning the bid do not invest time in the process if unnecessary.
Evaluating the RFP Responses
The primary concern for my company’s evaluation process is the lack formal evaluation criteria. As addressed earlier, most proposals are reviewed subjectively. The team discusses the pros and cons of each proposal and works together to select the solution that they feel provides the most value to my company. Historically this has worked fine for my company, but they could benefit significantly through the use of formal evaluation criteria.
Awarding the Contract
Finally, my company does a solid job of awarding its contracts. The IT department involved the legal team to ensure contracts are clear and that everyone involved with managing the ongoing relationship understands the roles and responsibilities
Conclusion
In general, the IT department at my company has an RFP process that works well for them. As outlined, IT could improve its process by adding a make or buy analysis, considering other contract types, developing standard templates for RFP documents and developing formal evaluation criteria for each project. By adding these additional best practices my company can improve on an already excellent RFP process.
References
Huston, C. L. (1996). Management of Project Procurement. The McGraw-Hill Companies, Inc.
Project Management Institute. (2004). A Guide to the Project Management Body of Knowledge. Newtown Square: Project Management Institute.
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