My post a couple of weeks ago about the RFP process generated a lot of public and even more private comment. It got me thinking about one of the more contentious issues in the vendor-customer relationship – price.
It is rare to read an RFP (request for proposal) that states that price will be an important consideration, much less the primary evaluation criterion. It’s always service, innovation, creativity, ability to demonstrate a commitment to the customer, yadda yadda yadda.
And its rarely true.
Here’s how it usually goes. The prospective customer receives the RFPs, and the committee immediately flips to the back of the binder, where the pricing pages are. Calculators appear, spreadsheets are consulted, and a flurry of button-punching commences. Rather quickly, the committee members rank the responses according to price.
Now, on to services offered, implementation plans, outcomes reports, cost/benefit analyses, and comparison of deliverables. Again, rather quickly, confusion sets in – services are not directly comparable, metrics are different, and deliverables have unique attributes. Turns out the deliverables are different; a couple of the vendors have come up with creative, solid, unique proposals that have strengths and weaknesses that defy quick-and-dirty comparison. Clearly, the vendors have done their homework.
The committee, struggling to hit its timeline, has to come up with a recommendation. How can it compare the different proposals, each of which is unique, does not exactly fit the specs but is a creative solution to the prospect’s problem.
Easy. Price.
And, all too often, that’s what they do.
What does this mean for you?
If you are a prospective customer, realize this ‘methodology’ is short-sighted, burns vendors, and rewards liars. Instead, meet with each prospective vendor, tell them your problem, and have them come up with a creative solution.
And award the business on the basis of their creativity, value, and ability to deliver on same.
You are exactly on the mark. From your electrons to the customers’ eyes.
A good subject to explore. Do “customers” understand that a poorly constructed RFP process (for all of the reasons cited in your two blogs) ultimately results in higher vendor costs and prices?
Also – has no-one ever heard of the RFI – Request for Information? These broader and more strategic information exchanges can assist the customer in solidifying its objectives and produce a subsequent clear and concise RFP which is sent to a select few vendors. The RFP response is then used to produce and write the contract.
Finally. price should never be discussed until after all of the research and reading is complete!!!
Great post – but it is just human nature. They will always go to price first.
I (VENDOR) always say (explicitly) to prospects that the hardest thing they have to do in the selection process is to figure out the differences between the finalists.
We look similar, say the same things about commitment to service, etc, etc.
The hard part is figuring out who really does what they say.
Tom O’B
http://www.tomob.wordpress.com
Just to follow up on what Tom said, the effect Joe observes is neither inherently bad nor inherently good, even if the attempts by others to justify it are disingenuous.
Despite the capricious nature of human beings, Americans (and American companies) rarely deviate from acting in their own financial self-interest, hence the phenomenon of adverse selection. The solution is to be found in aligning the laws that govern healthcare delivery, access, and financing so that the consumer’s financial interest is always oriented in the same direction and toward the same behaviors as medical evidence would indicate.
Very easily said. Not easily done.