Consulting firms know the story: They receive an RFP (Request for Proposal) from a current or prospective client, put a ton of time and energy into completing it and barely get an email stating they didn’t win… Maybe the firm simply did not have the most desirable proposal, but maybe the firm didn’t win because the buyer sent out the RFP as a mere formality when they already had a partner in mind. Inc.com published an article about RFPs stating: “They’re Rigged…the decision is made in someone else’s favor before you even submit your proposal.”(1) Further, we surveyed over 450 consulting buyers and found 65% of respondents indicated they will solicit multiple bids for a project even if they already know who they will select.
Let’s estimate the impact of this practice on a consulting firm’s time and cost:
Assume an average salary of a consultant of $150K, which would be for an associate or manager, depending on the firm. This equals roughly $75/hour. Assume two resources working four hours per day on the RFP response for two weeks. That’s 80 hours of total work, which comes to almost $6,000 in cost to the firm!
Let’s make some additional assumptions; we estimate there are one million total consulting projects each year in the United States and let’s assume 2% of them go to RFP. That is 20,000 projects to RFP. Let’s also assume five firms participate in an RFP and only 1 has the proposal already built. So, essentially, we have 60,000 losing proposals each year (5 participants minus 1 pre-built minus 1 winner = 3 losers). That is $360,000,000 (Million!) dollars in salary dollars spent on RFP losses (60,000 * $6,000).
Of those 65% of respondents mentioned above, we’ll assume practice this behavior for only half of their RFPs. That leaves $117,000,000 in WASTED salary dollars on proposals (360M * 65% * 1/2), which had a slim chance of winning. Divided by the average resource cost of $75 per hour, that leads to 1,560,000 hours.
If the firm is large, bidding on a large project, or expected to win, this cost is nominal when compared to the resulting revenue. However, if the RFP is a formality and the client has no intention of truly going to market, that $6,000 could be spent on a higher propensity prospects or billable hours.
So why do clients put on the RFP show?
There are several reasons why this may occur, and it should be noted that some of those listed below are opportunities for a firm to stand out and win the contract. (We have noted them with an asterisk (*) below)
Some industries are required to go market and conduct RFPs to indicate they have practiced fair solicitation of the market. This is common in government, military, and other public works contracts where funding sources are public.
Likewise, private organizations may have internal policies which require all or some projects solicit bids to level the playing field. Another interesting practice, which is more common than one might think, is the incumbent helps or leads the creation of the very work they have been engaged in.
Appease a stakeholder
We could call this an informal formality, where a higher-up encourages an internal buyer to include a specific company or consultant. The person running the RFP may include them just because they were asked to. This consultant may even be the preferred supplier for the project.
Need to give the appearance of fairness
Optics are everything, and whether perceived internally or externally, it may be prudent for the buyer to give the appearance of a fair process, if not to have a defensive talking point in the event the selection is challenged.
This is a very common reason for RFPs, whether phantom or not. The current partner may be a good fit, but the buyer wants to be sure the price is still at market rate. This could be used for incumbent negotiations or if the client has not gone to market for a few years.
Gain additional insight*
Sometimes, a client will want to gain additional insight into a project or approach and will just fish for information on how to attack an opportunity in-house or with the current partner. Bidders must be careful about disclosing the “secret sauce,” as this is a very common tactic used by companies.
Conduct initial evaluation of new strategic options*
A company may not yet be ready to take a different approach to an opportunity or strategic plan but could be anticipating upcoming changes in market landscape. This could be a company feeling out the thoughts of the experts or potentially evaluating future partners.
Assess new players in market*
Lastly, if new players have entered the market, a company may be tempted to solicit bids from them just to have a grasp of their approach; the client may have no intention of partnering with them. Unfortunately for new players, they will probably need to respond to many RFPs to get their names out there. In our experience, losers of an RFP are often invited to the same business opportunities in the future.
Many consulting firms will not respond to RFPs, such as the consulting firm Sumption & Wyland. As they put it: “It’s often difficult to assess from the outside whether an RFP process is truly “open,” or whether there is a “preferred vendor” awaiting a final decision.”(2)
However, not all RFPs are facades, so respondents must be careful not to skip or haphazardly build proposals which may yield partnership. But how can we tell if an RFP is in fact just for show? It’s difficult, but below are a few simple tactics for assessing the openness of a bidding process or RFP.
Ways to assess soundness of RFP
A consulting firm can ask their friendly competitors or other partner companies of the client if the company is serious about the opportunity or has a habit of putting out RFPs assessed to be unfair. It will be difficult to know exactly who to ask, but asking can certainly yield information, particularly with local contacts. But BE CAREFUL not to just throw the client name around; there is risk to both trust with the client and in alerting competition to an RFP process.
Ask the client
“The worst thing they can say is no.” It can pay to ask a client about this, but do not ask directly. Questions like “Who else is participating?” or “Where do we sit?” or “Is there a favorite?” can be very insightful and shows the client you want to win by assessing your position. Consultants can also pose general questions to gauge interest in their product / service. If the client seems generally disinterested in hearing the sales pitch or answering questions, it might be a red flag.
Meet in person
Some clients may fight an in-person meeting, especially if they are not meeting with everyone respondent, but if you haven’t connected with the RFP issuer, it is a great way to get a read. Further, if you have not met and they are not willing to meet you in person before evaluating a bid, it is highly likely the proposal will be treated the same.
This trend should not discourage consultants, and losing bids is a part of the business. However, attacking the opportunities above, having a stellar value proposition, and distancing your work far from feeling like a commodity will help win business or at least attention and future consideration.
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- Warrillow, John (2019, May). Death by RFP: 7 Reasons Not To Respond. Inc. Retrieved from: https://www.inc.com/john-warrillow/death-by-rfp-seven-reasons-not-to-respond.html.
- Wyland, Michael (2012, February). Why We Don’t Respond to RFPs (Requests for Proposals). Institute of Management Consultants. Retrieved from: https://www.imcusa.org/news/83597/Why-We-Dont-Respond-to-RFPs-Requests-for-Proposals.htm.