There are many reasons why Requests For Proposals (RFPs) fail. Most of the time it’s because the defined service requirements are poorly written. This can cause certain suppliers to make mistakes on their proposals that can cause significantly higher costs to the business.
These are the biggest RFP failures a team could run into because of poorly defined service requirements.
Bids Are Too Low
When you give unclear requirements, you invite some bidders to submit low-priced minimal bids. When suppliers do this, they aren’t looking at big margins on the original requirements, but they plan to increase profits when changes need to be made for orders.
You can avoid this by looking carefully at offers that look too low. Ask questions of these bidders to ensure you’re getting what you need for your business.
Bids Are Too High
In complete contrast to the first option, some businesses will find that they’ll get very high bids from suppliers. This is because the supplier wants to ensure they aren’t taking risks, and will assume that the buyer wants the most expensive options, or the top quality. If you then use less expensive requirements than the supplier has bid at, they’ll pocket the difference.
A very simple way to avoid this is to ensure all high bids are questioned. Make sure you’re getting the service you want.
If there’s too little information or clarity on your RFP, then you’ll find that some businesses won’t even offer a bid. This is because sometimes they see the risk of making little or no profit from the venture to be too high. Therefore, they are unwilling to start bidding on a contract that will waste their time.
This is often done by high-end suppliers and this can mean you are left with suppliers who have less experience or poorer quality of services and goods.
You Can’t Compare Bids
When you have poorly defined requirements, people are going to interpret them differently and then bid according to their own perceptions. This can make comparing bids challenging and therefore increases the risk of you making a poor purchasing decision.
In addition, you might also get some bids that don’t match your requirements because they haven’t understood your RFP requirements. This might make you think suppliers don’t have what you need, when in fact they’ve just misinterpreted your initial RFP.
All requirements in your RFP should be clearly laid out with metrics that can be measured. This way you have something you can compare bids against.
Inability To Deliver On Promises
Sometimes your RFP might seem reasonable, but you’ve missed out important information that’s critical to the final delivery of your supplies. For instance, that you have particular equipment to ensure you can use certain products, or you require higher amounts of supplies than you mention in your RFP.
When this happens, you can select a bid that seems reasonable, but the bidder can’t really facilitate you or that you can’t take advantage of. This can cause you to spend more money than you anticipated, or end up with a supplier that can’t match your requirements.
Not all contracts of supply work out for the best. Sometimes, you and a supplier should part ways. But if you have a poor RFP, you might be locked into a contract that doesn’t allow you to leave early or you’ll have to pay a hefty exit charge.
In an RFP, you should ensure you offer acceptable terms that give you freedom to exit a contract if the supplier doesn’t fulfill their obligations.
Do you need help with your procurement processes? Getting your RFP perfect is an important stage of any procurement process. Talk with a member of our team to learn how we can help you get the best bids in your next procurement process.