In my experience, many project failures can be traced back to poorly written requests for proposals (RFPs). When you buy the wrong thing, you get the wrong result.
RFPs that are unclear generally result in poorly defined service requirements and produce suboptimal results. They increase costs unnecessarily and contribute to disasters down the road. RFPs that are unclear typically cause one or more of the following problems:
- Low bids: Unclear requirements may cause some bidders to submit low-priced minimal bids. These providers accept very low margins on the initial requirements but plan to make profits on the inevitable change orders.
- High bids: In contrast, unclear specifications cause some bidders (often good ones) to bid extremely high to cover their risk. When part of the RFP is unclear, these providers usually assume that the actual project will require the most expensive options and bid accordingly. If the client later uses less-complex services, has lower volumes or needs less-rigorous service levels, these bidders pocket the difference.
- No bids: Fuzzy RFPs force bidders to make numerous assumptions, which increase their risk. This raises concerns about their ability to make a profit, particularly with fixed-price bids. When this happens, even strong suppliers frequently decide not to bid. The result of less competition is that you may incur higher costs or be forced to select a second-class supplier.
- Incompatible bids: Not all bidders will make the same assumptions when presented with an unclear RFP. As a result, the final bids may not provide apples-to-apples comparisons.
- Requirements mismatch: Fuzzy specifications may result in a supplier bidding on what it thinks you specified, not what you actually intended or needed. Unless the bidder realizes that there is a disconnect between the RFP and the intended requirements, it will bid based on its interpretation of your requirements. When the disconnect is discovered, it may be too late to change the bidder’s proposal and still meet your submission deadlines. Even worse, the realization may come after the contract is signed, adversely affecting not only the supplier’s ability to deliver, but also your project deadlines.
- Inability to deliver: Large, complex RFPs may require more services than a particular supplier can deliver. Some suppliers will bid on the RFP anyway, hoping these holes in their delivery capability will go unnoticed. They assume that if they win the contract, they will figure out how to deliver those pieces later. Unclear RFPs make it harder for your due diligence team to ask questions that will uncover the supplier’s delivery problems. If the bidder’s weaknesses aren’t discovered during due diligence, you may not learn about them until it’s too late - and far more expensive to fix. Clear RFPs help weed out those suppliers that knowingly promise more than they are capable of delivering.
- Rigid contract compliance: When projects and supplier relationships go south, you can get into “letter of the law” situations and even litigation. In these cases, clarity in the RFP and other project documents can give you important leverage.
I’m always amazed when an ambiguously-written RFP crosses my desk. There are times we simply refuse to bid on a project, knowing that it will end in failure, given the approach demanded in the RFP. As I’ve discussed before, the technology selection and purchase process is important if you want your project to be successful.
[Thanks to the always-amazing Jeff Tarter for this reference.]