Re-think the RFP
If you’re a buyer, seller, owner, constructor or designer of buildings, you’ve undoubtedly used or responded to an RFP, or request for proposal.
The RFP, and the standard process in which it is used, is a tool to solicit, compare and ultimately choose team members for a construction project. If you have been intimately involved in the RFP process, you know this process often is costly in terms of resources and time. I have often wondered whether all this time and effort results in the most valuable partnerships and what the costs are to buyers and sellers using this very traditional and, in my opinion, wasteful process.
As part of a thesis project for a certificate program I completed through the New North Center, I set out to answer some of these questions and discover new ways to approach the RFP process.
First, I broke down the typical RFP process for a medium-sized construction project in West Michigan into about a dozen steps. Using a combination of interviews and my own experience, I determined that the typical RFP consumes over 250 hours for the buyer and over 220 hours for the responder. Yes, that’s right. It actually takes the buyer more time than the seller to complete the traditional RFP process. When you apply dollars to these hours using average industry billing rates, the opportunity cost to each party is between $8,000 and $10,000! In an era of scarce resources and lean staffing models, time is precious, and rethinking all of our traditional business processes will save much of this valuable resource.
So, what can be done? Here are few steps that can save you time and money when creating an RFP, as well as increase the chance that you will find the most valuable construction and design partner:
1. Skip the pre-qualification and start with a conversation
One of the most fascinating interviews that I conducted for this thesis was with the vice president of a local community foundation. This person was in charge of assisting nonprofits in their pursuit of foundation grants. Instead of handing out applications to every nonprofit leader whot walks in the door, this individual requires that each potential applicant have a half hour phone interview with the foundation to determine their eligibility for the grants. Some applicants are quickly disqualified for not meeting specific qualifications and others rethink their desire to apply just by hearing about the process and the determining factors for successful applications.
Think about this on your building project. Why not conduct a phone interview as opposed to a lengthy pre-qualification request? A half hour now will save countless hours later for both the buyer and seller.
2. Don’t ask for fees unless you know exactly what you want
One of the most frustrating aspects of the RFP process is when a buyer asks the vendor to price an incomplete or confusing scope of work. This puts the vendor in an awkward position; should I price all the services necessary to meet the client’s goals or should I price only what they are asking for and charge them later for the missing services? To avoid this problem, I recommend using a tool called an Expository Sketch. This tool starts a conversation between the vendor and purchaser about the steps and services required to achieve project goals. Instead of the buyer dictating the services they need (or believe they need), the buyer requests that the seller recommend a project approach and then develop a fee for that specific approach. This approach gives each seller a chance to be creative and provide options that the buyer may not have considered. For more on Expository Sketches, visit this blog from Stanford University.
3. Interview first to see your vendors in action
In my analysis, the most wasteful portion of the RFP process is the interview. I don’t consider the interview wasteful in the sense that meeting vendors face to face is not important when picking a partner, but the interview process could be updated to produce the most valuable impact for both parties. A typical interview for construction or design services is held at the buyer’s place of business. Consider holding the interview at the vendor’s office or, better yet, one of their project sites. Seeing your vendor in action will give you a much better sense of who they are and how they work than seeing them in your board room with a slick sales presentation.
Secondly, rethink the format of your interview. Almost all the interviews I have been in are structured the same way. The vendor has an allotted amount of time to “present” to the selection team and the time left over goes to questions from the selection team. The problem with this format is that it usually follows the exact information the seller provided in the written proposal! Consider holding your interviews before proposals are submitted. Your vendor will thank you because they just saved a boatload of marketing hours, and your internal selection team will thank you because they will not be forced to see and hear the same information twice. Good interviews create a smaller pool of potential partners who can then move on to submit a complete proposal and fee.
I challenge you to think about why you use the traditional RFP process to select design and construction partners. Many of you will likely say that it is an even playing field for all the vendors, produces proposals that are “apples to apples” or, probably most of all, because that’s how we have always done it. However, rethinking the RFP process will save your organization significant time and resources you can spend working on the actual project. It will also provide you with a project team that better aligns with your goals and a team that takes creative approaches to the design and construction of your next building.