Procurement Watch: Is the RFP Process Stifling Innovation?

August 10, 2017

 

 

In Procurement, Requests for Proposal (RFPs) are a fact of life – along with their cousins, Requests for Quotations, Requests for Information and Requests for Bids. They’re the number one venue for interacting with new suppliers. They’re the best way for providing an even playing ground to assess of suppliers’ pricing, capabilities and solutions within a standard framework. They’re not going anywhere.

They’ve also – over the years, as more demands have been placed on Procurement – often become bloated and arduous for suppliers to complete. More and more organizations are revisiting their RFP requirements to make them more streamlined and competitive, in an attempt to make sure that the best suppliers are able to show their value, not just those suppliers most willing to submit to an ungodly amount of paperwork.

But despite these efforts, there remains a nagging doubt in the field: is it possible that the whole framework of the RFP is – despite all the best intentions – stifling supplier innovation by forcing suppliers into a rigid framework of responses? By treating sourcing as an “event” rather than an ongoing “practice,” is the RFP framework forcing suppliers to leave value on the table and shortchanging buyers in the long-term?

A great, very popular LinkedIn publisher article recently came to our attention about this issue. Titled “Death by RFP,” and written by European Procurement Professional Bjorn Molster, it outlines the myriad ways in which companies who hew too close to established RFP standards might be holding themselves back. The article specifically deals with sourcing in the IT services space. Its insights might not apply to those sourcing, say, office supplies, so much as they apply to more complex categories like IT, Professional Services, Travel, Marketing, etc., but at the same time, who knows? For our money, it’s worth thinking about for any categories of Procurement running RFPs.  

Molster identifies a few key shortcomings that RFPs often have – particularly for complex goods and services:

  • RFPs issue requisitions for a certain good, service or solution, but they don’t account for learning between the start and finish of a project. RFPs define what a company needs, and asses suppliers on their ability to provide it, instead of asking whether the proposed solution is what the buyer needs in the first place. They presuppose the right solution, as well as the right metrics to measure supplier performance, instead of letting suppliers provide innovations.

 

  • RFPs rank organizations numerically based on a set of criteria, but they don’t account for “fit” between supplier and buyer, and whether the supplier’s processes, leadership and culture will align with that of the buyer. In Molster’s words, RFP processes can lead buyers to treat people like robots. What you’re really buying when you do a large, complex Procurement is the supplier’s talent, and RFPs don’t always capture this.

 

  • For I.T, RFP processes often don’t budget for the continuous learning and development needed to integrate new technology. They treat buying technology as a one-time event, rather than an ongoing process of product development, and that opens the buying company up to risks.

 

  • RFPs themselves often place undue burdens on suppliers by being overly long, overly complex, and overly confusing. Sometimes Procurement professionals use RFP templates from previous roles, or downloaded from the internet, instead of tailoring them to the specific issue at hand. It forces suppliers spend more time playing to the system – answering ancillary questions to bolster their scores instead of nailing the ones that count.

In Procurement, it’s easy to fall into the line of thinking that because buyers hold all the cards, it’s up to suppliers to “dazzle us” – to go through the tap dance of earning our business. Of conforming to our RFP standards, in the particular format that we’ve outlined. That they fulfill our requirements. But Procurement is a collaborative process, and the true value the function offers is in letting suppliers act as partners. We agree with Mr. Molster that RFPs should be a gateway to allowing suppliers to innovate, rather than a gatekeeper preventing outside-the-box ideas from succeeding.

Don’t get us wrong: there are tons of Procurement professionals doing an outstanding job. The function has come a long way, and there’s lots of innovation happening in the sourcing space. Top performers are already following this advice – but it’s worth it for all of us to think about what limitations the RFP process might be imposing, and how to overcome them. In short, RFPs should be a challenge not just to suppliers, but also to those whom they’re supplying.

But what do you think? Are there other issues with RFPs we haven’t mentioned? Do you have any great examples of how to use RFPs to encourage supplier innovation, rather than discouraging it? Let us know in the comments! 

 

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