The “Hidden” Pitfalls of RFPs
By Debbie Scott, CWCC Member
Many owners believe that they should respond to all proposal requests that come across their desks where the scope of the work falls within the capabilities of their company’s expertise. It’s easy to fall into the Request for Proposal (RFP) trap. It “feels” like a warm lead and is far more desirable than “beating the bushes”, especially by cold calling, to turn up an opportunity.
Desirable, yes. But smart???
Responding to an RFP carries with it costs that are often hidden. First, calculate your hourly rate in dollars. Got that?
- Calculate your time (or others you may consult) invested in identifying the solution you believe will best solve the prospect’s problem.
- Calculate the time invested in researching your competition and the solutions that they might offer relative to yours.
- Calculate the time invested in developing your best solution relative to what your competition might propose.
- Calculate the time invested in writing the proposal and developing the appropriate supportive materials.
- Calculate the “opportunity cost” of spending time writing the proposal instead of pursuing other opportunities (if you happen to lose this bid).
- Consider that all of the above is based on “assumptions” you’ve made especially if you haven’t had a thorough interview with the prospect.
- Consider that you are also giving the prospect a “written document” that can be used to “shop” what you’re offering, or worse yet create it in-house.
Now add up all of the hours invested and multiply that by your hourly rate. What’s the cost of just doing the bid? How many bids are you losing? Multiply that by the cost of preparing each bid. How much does that add up to? Another term for this is the cost of “unpaid consulting”.
It’s important to realize that not all RFPs are created equal and there are various reasons that buyers send out RFPs…not all of which are for the intention of doing business:
- To obtain some no-cost consulting. For example, they may be considering doing the work in-house and gathering RFPs is a way to obtain valuable relevant and FREE information about processes, costs, implementations, and timetables to guide them in their development efforts.
- To gain leverage with a group of potential suppliers, giving the buyers bargaining chips that they can use to pit bidders against each other. It’s also an effective way to pressure an existing supplier especially when negotiating contract renewals or requesting additional services at the “cheapest” price.
Appropriate reasons for requesting RFPs include solidifying a verbal agreement to move forward in writing, or obtaining information to be comfortable moving forward and to secure confirmation of the arrangements discussed.
What should be clear is that blindly responding to an RFP is an iffy proposition and costly on the part of the preparer. It’s essential that you have a dialogue with the decision maker in order to qualify the opportunity, and at the very least, determine the reasons for the request. Then, and only then, can you determine if the request is worth your time and effort.
Debbie Scott is a professional trainer and sales/business coach for Achievement Dynamics, LLC, a Sales and Management Development firm based in Denver, Colorado and certified by the Sandler Training Institute. She has been a top producer and leader as well as trainer and coach for over seven years. She is dedicated to nurturing and inspiring the human spirit to change for the better through coaching, training and motivational speaking, as well as leading by example, using Sandler communication tools and Law of Attraction concepts. Learn more about Debbie and Achievement Dynamics, LLC at http://www.linkedin.com/pub/debbie-scott/0/752/61