Request for Proposal (RFP) Do’s and Don’ts - How to avoid the common mistakes that derail the procurement process

Author: Erin Weaver

With the outsourcing rate increasing at pace globally, executing an effective procurement process has become a crucial skill in business. In financial services, this is especially important as many businesses will find themselves at some point on both sides of an RFP.

For any business, the decision to outsource is a strategic move that aims to save costs, improve efficiency or otherwise put the business in an advantageous position. However, without proper planning, executing an RFP can do the opposite by blowing out costs, wasting time and jeopardising the desired outcome.

Decision-making prior to RFP

In a previous article, we covered the key considerations when deciding to outsource a function of business. Needless to say, it’s a decision that needs to be carefully planned out - if you haven’t read our first article, here’s the link.

Once the decision is made to outsource, the RFP comes next and deserves the same level of consideration. Whilst a quality RFP will undoubtedly result in quality proposals and candidates, the initial planning is crucial in getting all internal stakeholders together and working through objectives, goals and issues. In this way, an RFP is a discovery project as much of a procurement one.

Having both created RFPs and been invited to participate in a good few, here at Mayflower we have learnt a fair bit about what makes a successful RFP. In short, there’s a lot of ways to get this right, however in this article we are focusing on the key ways that it can go wrong.

Here are the common mistakes we’ve seen, the potential impacts and, importantly, how to do better.

1. Background information

Mistake: Overcooking. An RFP does not need to contain any other information on the business except what’s relevant to the project.

Impact: Medium. It may be difficult for the candidate to wade through the necessary information to really come at the business reasoning behind the tender.

Do: An RFP should provide enough background information to justify the decision to outsource a function and allow candidates to understand your business. Clear and concise is the name of the game.

2. Delivery of objectives and requirements

Mistake: Failing to articulate objectives and requirements and/or having a shopping list rather than a well thought out set of key needs.

Impact: High. Ambiguity in objectives and requirements will result in misinterpretations and returned proposals that don’t align with the projects needs. The secondary impact is you will likely receive very lengthy proposals back that cover everything under the sun because the candidate understand of the focus.

Do: Objectives need to be clearly articulated and these should be quite specific if they involve revenue/costs or timings. Furthermore, detail any requirements that are must-haves for the function upfront.

3. Performance evaluation

Mistake: Not establishing evaluation criteria upfront.

Impact: High. You may receive underperformance from the provider if there’s no structured evaluation process in place. This can be highly detrimental if locked into a lengthy contract and there’s no performance clauses in place.

Do: Be very specific in what happens if your objectives aren’t achieved as agreed and how these will be monitored and dealt with. Include periodic performance reviews, KPIs, bonuses or anything else your business deems reasonable to ensure the candidate follows through on everything promised during the tender process.

4. Setting submission timelines

Mistake: Setting unrealistic expectations around the proposal submission OR drawing out the process unnecessarily.

Impact: Medium. Rushed timelines will impact the quality of the proposals and… too long and you leave open the possibility for misinterpretation or hefty proposals that will take days to get through.

Do: Timings for submission will vary based on the scale and nature of the tender. Certainly for an out of the box function or solution, most companies will have standard proposals. If you’re asking for innovation or creativity, add time to the deadline. Speak to your candidates to gauge what is reasonable as this shows respect for their existing workload however, we think 2-3 weeks is reasonable in most cases. And for goodness sakes, please do not send out a several hundred question RFP to a business with a week or less timeline. Yes, this has happened to us and made us very wary of participating in the tender as this gave us a strongly negative impression of how it would be to work with this company.

5. Communication

Mistake: Sending out the tender and then shutting down channels of communication with candidates.

Impact: High. Same as not clearly stating objectives and requirements – the submissions you receive may not hit the mark. Another by-product is that the quality candidates may drop out if they find you non-responsive.

Do: Set aside time in the calendar for a quick follow-up meeting with the candidates after sending out the RFP. At the very least, provide contact details of a few key stakeholders that will be prepared and willing to answer questions. In essence, you are auditioning for the chosen candidate as well and being helpful and responsive in the RFP process and this will ensure a good working relationship with the chosen candidate. Start as you mean to continue.

6. Budgeting and costs

Mistake: Stipulating a precise project budget or costing without prior research.

Impact: This is a slippery slope, whether you set a budget too high or too low. Setting a budget too low will deter quality candidates but if you set it too high you may get stuck paying more than you should.

Do: Research prior to have an understanding of general costs, allow for negotiation after receiving proposals.

How Mayflower can help in your next tender process

Whilst we mainly promote our strengths in the financial disclosure space, consultancy across varying levels of financial services businesses is a significant part of what Mayflower does. This includes helping clients design and execute tender processes to secure the best outcome with least impact to the business. Recent RFPs where we have assisted have involved clients changing REs, moving investment management duties to an external provider and change of custodian/unit registry. If you are looking to make a change in your business and need help starting things off, finishing, or doing the whole thing, please let us know. We can also guide your team through any operational changes that may follow. Sarah, Erin and Victoria work on the consulting side of the Mayflower business and we’re keen to meet you!