I was out drinking with a former co-worker the other day and he had with him a RFP, which stands for a “Request For Proposal.” When he and I worked together, handling RFP’s was a regular part of the job. In other parts of my work career, I was on the other end, helping craft these things. As a result, I’ve had the misfortune to have read hundreds, maybe thousands of the documents. After a while, you lose track. As is the case with most of them, this one was poorly written, with some hilarious errors and omissions.
For those unfamiliar with the RFP, which is sometimes called a request for quote or even a request for information, it is a document companies produce when they wish to buy a capital product or service. In theory, the document describes the item or service, the conditions that have to be met in order to be considered and the process by which the company intends to evaluate potential vendors. These are popular in government and large corporate environments. Here’s a useful overview for those interested.
Not having had to field one of these for a while, I’d forgotten just how dumb it is to try and do business via this process. If an organization or government is buying a well defined product or a commodity item, it makes sense, but for something like a complex service, then it is a recipe for failure. Even in the case of well-defined item like a machine tool, I’ve seen RFP’s that appear to be written by enemies of the issuing company. The people creating the document use it to impress their boss, rather than make a sound purchase.
In the case of the one my buddy had with him, it was missing key information, like what it is the company actually does and why it is they are buying the service. Worse yet, it was written by a consultant. Even after having been away from this stuff for a long time, I can spot the greasy fingerprints of the consultant. Every industry has these creatures and they are always the same. I’m probably being unfair, as I’m sure there are some who are honest and conscientious, but most are just grifters, who prey on the stupid.
Anyway, we got to talking about why it is this stupid way of buying stuff persists, despite the fact that it often ends in tears. You don’t have to be in the business world very long to notice that good companies have strong relationships with both their customers and vendors. They cultivate their vendor relationships, just as they cultivate their customer relationships. They train their vendors to be conscientious and to think of themselves as partners in the enterprise. That way, the vendor becomes an asset to the business.
I think if I were going to write a business book on how to buy stuff, the first rule I’d have is never use an RFP. The second rule I’d have is make sure to visit the vendor’s facility and ask for the nickle tour before making a purchase. If they have a business culture that fits your business culture, or even better, one you strive to cultivate, then you will have a good working relationship with that vendor. If on the other hand, the vendor is running a sweatshop where the employees are miserable, that will show up in their service.
Another thing that I’ve seen often, and it always shows up in RFP’s for a service, is that the prospective customer starts off by lying to the prospective vendors. It’s the strangest thing, but I’ve seen it a lot. For example, salesmen are often trained to ask about a budget for the project. That way, they can gauge how serious the prospect is about actually doing the deal. Countless times, I’ve seen companies lie about their budget or simply refuse to disclose it. The result is they waste everyone’s time, including their own.
Similarly, salesmen are trained to find the motivators. If a company is buying a new five axis machine for their manufacturing facility, they are expecting to spend a lot of money for the machine and the training. They are not doing this on a whim. They have identified a serious problem or a serious opportunity. As a result, they are willing to invest a lot of money to address it. That’s important information that will help get the right machine and vendor, but the company will often hide that from the vendor, like it is a state secret.
Back to the book idea, the third and fourth rule for buying any big ticket item would be to quantify the return on investment and set a budget. Make that part of the purchasing narrative by disclosing it to the pool of vendors. Most likely, the guy you select will look at your reasoning and find additional opportunities for you to turn the purchase into an investment. Again, this is something I always see successful companies do for themselves and for their clients. It’s why they attract strong people and vendors.
The other thing that always turns up in RFP’s is the underlying assumption that the person who wrote the thing is a genius. The specifications will be hilariously narrow, which results in the request being for an exact copy of what they have now, but newer. My suspicion has been that there is a correlation between the level of specificity and the lack of understanding of the problem to be solved by the purchase. Smart companies buy products and services to solve problems. Stupid companies tick boxes on forms.
Again, this circles back to cultivating relationships with vendors. The RFP that spawned this post was obviously the result of some serious business problem the company needs to solve. The trouble is the RFP so thoroughly obscures it, no vendor will be able to identify the problem, so they will not be able to solve it. Instead, they will answer the RFP in a way they think gets them into the next round. In other words the purchasing process moves from problem solving to a long drawn out game of liar’s poker.
That would be another chapter in my book on buying stuff. This actually applies to every aspect of life, not just business. If you have a problem to solve, make that the starting point for proposals. Unless you have a monopoly or an exotic niche, you have competitors who are solving the same problems. One of them may have come up with a great solution and his vendor may be willing to sell that idea to you. Even better, the competitor of that vendor may have an even better solution. Smart people spend money to solve problems.