Scenario-based RFPs: Time to Change the Game

by Chris Arlen on October 31, 2008

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Assessing Service EngagementsThere’s no doubt putting a service contract out to bid is a game. The Request for Proposal (RFP) process is adversarial by design.

On one side is the customer, contract in hand ready to award it to the bloodied victor. On the other side are the tense, the confident, and sometimes the desperate contractors facing off against each another.

Exactly what you’d have in any game situation.

Except this game was supposed to be about how much value is received from service delivery – which is driven by the choice of service contractor.

By playing the current RFP game, customers have taken their eyes off the prize. They’ve lost sight of the purpose of contracting a service in the first place, which is to select and receive the best value available.

However, customers end up focusing almost exclusively on minimizing risk from non-compliance, and seeking out lowest cost rather than best value.

Contractors read these signs, tell customers what they want to hear in RFPs, and play the game as it’s setup.

As a result, customers spend too much money and time on an RFP process that creates a familiar, but ultimately less valuable contractor relationship.

Participate in any RFP as customer or contractor and it’s easy to see the process is broken.

So why do we do we continue with a broken RFP process?

Because it’s familiar. Everyone knows how to play the game, even though it’s flawed. And there’s not been an alternative to consider, yet.

This article is that alternative. We’re floating up a trial balloon to see what happens. It’s called a Scenario-based RFP.

What’s a Scenario-based RFP?

It’s one possibility in the evolution of contracting outsourced services.

The premise is for a customer to present it’s service scenario to a short list of pre-qualified contractors.

The scenario would give qualified contractors a clear view of the customer’s challenges, goals, expectations and business impacts relative to the contracted service.

With that understanding, contractors would submit proposals for solving that customer’s specific challenges, helping them achieve their goals, and contributing to their desired business results.

Isn’t that what a service contractor should provide?

Isn’t that how an RFP process should help customers select the most beneficial contractors?

The Strawman

Our Scenario-based RFP presented here is a strawman. It’s intended to be picked apart, but hopefully it’ll shine a light on today’s flawed RFP process – and raise questions about fixing it.

With our strawman comes caveats about sharing what some may consider sensitive and/or confidential information. The scary stuff. We’ll try to address those concerns at the end of the article, but recognize our answers won’t appease everyone.

As with anything new, there’s always a risk of something going wrong, but improvements shouldn’t be avoided only because they’ve never been tried before.

And if that rationale doesn’t persuade you, consider this; today’s RFP process is so flawed customers decisions are being challenged and contract awards are being overturned. With them goes untold missed promotions, egg on managerial faces, lost manhours and expense.

The Scenario-based RFP Process

I’m presenting the process here first, before introducing the components of the Scenario-based RFP later.

1) Educating Participants First

As with any new idea, there’s always the need to educate participants in the new model. That introduction would best occur nine or more months before the planned bid date. NOTE: The bid date is the planned time of bidding out the contract, and should be at least 30-60 days before the contract’s end date.

Time would be spent by a customer’s procurement staff educating both the customer’s business owners and a group of contractors, the usual suspects.

A customer’s business owners might participate in several meetings in a “lunch & learn” setting. Contractors may be included in these very same sessions, or segregated into separate educational meetings with the customer’s procuement.

2) Pre-Qualifying Contractors

Contractors should be pre-qualified through a Request for Information (RFI) process. Consider performing the RFI at least four to six months before the planned bid date.

This is the right place and time to ask contractors questions about their abilities in general, and consider their overall fit with the customer’s scope and culture.

Unfortunately, this pre-qualification step happens too infrequently.

As a result, customers spend unproductive time in the traditional RFP evaluations weeding out contractors who should never have been there in the first place.

And contractors spend an inordinate amount of time answering questions that have no bearing on what they’ll be doing at that customer’s sites.

3) Developing the RFP’s Scenario

This step best occurs no more than 45 to 60 days before the bid date. Any earlier and conditions may have changed when the bid date comes around. Any later and unexpected tasks may eat into the time available and produce a rushed, poor quality scenario.

In this step, the customer’s business owners compile data and write the RFP scenario describing their current situation and goals.

4) Putting the Scenario-based RFP Out

The customer puts out the Scenario-based RFP, but only to the pre-qualified contractors. This includes the traditional site tours and Q&A sessions. However, this time what’s requested of contractors is different than the usual.

Contractors respond.

This time their responses will have to be specific. They’ll have to desribe what they’ll do at a specific site, how they’ll do it, and show the positive impact on the customer’s business.

Contractors will always have to perform according to specifications, that’s an ante into the outsource industry. But now, they’ll have to communicate what they’ll do and how they’ll solve a customer’s specific problems.

Some contractors may pushback.

They may consider this a form of free consulting, thinking customers will take their good ideas and give them to the lowest bid contractor.

In reality however, a good idea is only as good as its execution. Unless a contractor has experience with a particular process, technology or procedure their execution will be lacking. And the customer will end up with lower value as well.

5) Evaluating Responses & Final Contractor Selection

Now a customer’s decision makers evaluate contractors’ solutions, and only solutions. No more sorting through reams of qualifying information.

Decision makers will compare solution to solution, and weigh their individual merits. These comparisons will provide more clarity and understanding of what the customer will actually receive.

Another benefit will be a greater ability to measure the contractor’s contribution and performance. When customers know what to expect, they’re looking to receive it, and can demand metrics to capture that data.

The selection of the best-value contractor will be readily apparent. And with that recognition will come more contractor accountability.

The Scenario-based RFP Components

The following lists key components in the Scenario-based RFP. This is not a comprehensive list, but does provide a starting point.

Several components listed require customer research and work not previously associated with an RFP process. However, the clearer the picture, the better contractors’ solutions. That translates into greater customer value and contractor accountability from the eventual winner.

Also, some customers may question why they’re providing some of this information, rather than having contractors dig for it themselves. The rationale is customers will have greater access to the various sources.

And it’s critical for contractors to see the customer’s world, the way the customer sees it. In that way, the selected contractor will be able to contribute more to the customer’s business.

1) Industry Situation

To provide contractors’ context for service solutions, a customer’s scenario includes industry information. This includes statistics showing their industry’s status (growing-shrinking-flat). Stats may include growth rate, size, rate, change, or any relevant indicator of the industry’s potential or health.

It may also include a simplified analysis of factors currently, or soon to be, affecting their industry. A PESTE analysis may be helpful. It’s an acronym for an analysis that considers factors from (P)olitics, (E)conomics, (S)ociety, (T)echnology, and the (E)nvironment.

Customers’ service scenarios may include their internal view of the industry’s future, or a trade association’s view of their industry’s future.

2) Customer’s Status within their Industry

A customer’s position within their own industry is included in the scenario. For example, information regarding the customer’s position in the market, i.e. 1st, 2nd, 3rd, etc. Also, whether it’s position is gaining, falling, or stagnant. The trajectory and movement help fill in contractors’ understanding.

Public companies can easily say where they are relative to stock price, earnings. Also, industry rankings are regularly published in industries’ trade publications.

The customer’s brand promise is a part of its positioning in its industry, and should be included in the scenario. This includes the customer’s unique value proposition, corporate culture, personality, and brand associations.

A customer’s brand promise is expected to be kept. Even when outsourced service contractors contribute to it.

3) Customer’s Improvement Snapshot

This part of the scenario includes a snapshot of strategic improvement initiatives the customer has in progress, or planned for the immediate future.

Contractors often contribute significantly to these customer initiatives. It’s helpful to see how contractors might do that. The Scenario-based RFP provides contractors that opportunity. As a result, customers gain a better understanding of contractors.

4) Customer’s Challenges & Goals

A customer’s business owners will write the service’s challenges and goals. They live it every day, they’ll know it best.

By explicitly stating these, contractors will propose solutions to address them.

This is the meat for customers to evaluate contractors. It provides the insight for determining which contractor can deliver the best value.

Rather than customers having to try and make meaningless comparisons between contractors’ number of employees or offices.

5) Contract Service Impact

This component spells out where the contracted service impacts the customer’s business results. It articulates how the service contributes to the customer’s overall business. It connects the dots.

Though this may seem obvious to a customer’s business owners, the connection is critical for contractors to see it exactly as the business owners do.

Contractors solutions can be designed to provide greater degrees of support and contribution towards these impacts. But guessing makes for poor design of a solution.

6) Contract Governance

This component spells out expectations for measuring and assessing the winning contractor’s performance. It might include the exact Key Performance Indicators (KPIs) that’ll be used, or request comments about suggested ones currently in use.

The customer’s business owners would also state their current performance review schedule of meetings, formats and recommended contractor participants.

In today’s RFP process, all these items are typically dictated by the customer’s choices after a contractor has been selected. In the Scenario-based RFP, the information is presented up front.

7) Specifications

Service specifications are included to provide contractors’ clarity on what should be done, where and when.

Along with the site visitions, specifications guide staffing levels.

In Scenario-based RFPs, contractors’ solution may include more activities than the specifications would ordinarily call for. Contractors would weigh the cost of these extra activities against the contribution of measurable value to customers and helping solve their challenges and achieve their goals.

Additional Considerations from Scenario-based RFPs

There are unique challenges to using a Scenario-based RFP process. Specifically when comparing the new to the old.

The following are some initial thoughts about areas to craft into the language and process.

1) Sensitive & Confidential Information

Customers may be concerned about sharing some of the information mentioned in the Components section above.

During a Scenario-based RFP, customers can only tell what can be told. Information already in the public domain, or common knowledge can be shared to contractors.

For publicy held customer companies, there may be more shared information available than in private companies.

Additionally, customers may have pre-qualified contractors (those approved in the RFI process) sign legally binding Non-Disclosure Agreements (NDAs) restricting disclosure and ensuring confidentiality.

2) Service Challenges in Scenarios Become Visible

A customer’s business owners may be concerned about publishing poor performance in a service scenario. It might not help their career paths.

In those cases, a considered use of language can present information in ways that everyone will see as needing help, without coming out and saying it was a failure.

Describing conditions as “having opportunities for improvement”, or “not achieving full potential” are not saying a customer’s business owner has bombed out.

Think about elementary school teachers’ comments describing mediocre grades on report cards. Their intent wasn’t to slam a student’s confidence, but to let them know honestly where they stood.

3) There are no limitations on Contractors’ solutions

In responding to a customer’s scenario, contractors are not restricted from proposing something new. For example, a customer’s scenario may list certain KPIs. Contractors would have the freedom to suggest changes to KPIs, their frequencies or customer suggested reporting formats.

A customer’s written instructions in the Scenario-based RFP would indicate it’s there as guidance, and not as a restriction to contractors’ alternative ideas or improvements. The goal is to promote creative and valuable service solutions.

 There It Is

The RFP process as we know it today may be coming to its end. Long live the new RFP process – whatever that may be.

And don’t laugh when you’re retired and your children are all working through Scenario-based RFPs. Who knows? It could happen.

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