Industry pundits have debated the value of conventional RFPs for more than a decade. Researchers at the University of Tennessee have been leaders in studying the shift to bidding approaches of greater collaboration, and have recently weighed in on the debate.
Interested in making a switch? This article provides a comparison between a traditional Request for Proposal (RFProposal) and more collaborative Request for Partner (RFPartner) processes.
First things first
The purpose of any competitive bid process is to help a buying organization find a supplier that best meets its needs. But what many organizations fail to understand is the nature of what you buy should drive the approach to your bid process. For example, many times a CIO or tech leader needs to find a suitable supplier to solve a business need. But all too often, what gets translated into the bid documents is the buying organization’s defining specifications for a product or task.
Think of it this way: you want a supplier to bring their expertise to help you think outside the box to solve a business need, but your procurement team puts the supplier in a box with a detailed spec. We call this the outsourcing paradox because the buying organization outsources to the expert and then tells the supplier how to do the work with the product spec or a detailed statement of work for services. This catch-22 can be avoided knowing the key differences between an RFProposal and an RFPartner, and when to use each.
Focus of bid documents
Regardless of whether you’re using RFProposal or an RFPartner, make sure you have a capable supplier. In many cases, organizations will use a request for qualification before issuing an RFProposal or an RFPartner. Doing so lets you shortlist the capable ones, and once you have them, the nature of the bid documents starts to change. An RFProposal is an efficient choice when the nature of the work is standardized, while an RFPartner is the better choice when the buying organization is seeking a strategic partner for the overall best fit to meet its needs.
When using an RFProposal, the buying organization provides detailed requirements like a description of the goods, services, program management, or support they want. The focus on the bid documents is transactional in nature with the goal of finding a supplier to fulfil a specific request.
Companies often use bid software, such as Ariba, GEP, or Coupa, to manage the bid processes. Buyers enter the question, and the supplier provider provides the answer. One key item the supplier answers is the price. Often, an RFProposal will help the buyer understand a supplier’s prices associated with specific billable line items.
In comparison, an RFPartner changes the focus of the bid documents away from the detailed specification, and focuses on helping the supplier understand the buying organization’s overall business situation and goals. The bid documents typically start with a detailed overview of the situation and provide the bidding suppliers with access to data or information they need to develop their solution.
Unlike an RFProposal, the questions are more open-ended in nature and include a dialogue period where the buyer and supplier collaborate on the best overall solution as described below. The bid process concludes with potential suppliers providing a proposal that outlines their approach to best meet the buyer’s needs.
The result? An RFPartner is better able to help buyers find the best supplier for tailored solutions. To be effective, the nature of the bid processes and the selection criteria for an RFPartner are very different than a conventional RFProposal.
Selection criteria
The transactional nature of an RFProposal makes it easy to compare potential suppliers apples to apples. For example, the selection criteria are based on factors such as technical capability, price, and capacity. The conventional selection criteria are price or lowest price technically acceptable, but the concept of using best-value criteria is growing, which allows buying organizations to factor in selection criteria such as past performance.
When organizations shift to wanting to find a partner with the best possible solution, it’s important to understand the nature of the selection criteria change. With an RFPartner, buyers evaluate suppliers not only based on technical capabilities but also on the best value of the solution. And then there’s the cultural fit with the supplier, which doesn’t mean sameness, but avoids incompatibilities that can create conflict from incongruent management philosophies. For example, do the business partners have a similar view on transparency, or do organizations use a top-down hierarchical approach as opposed to a bottom-up collaborative approach?
Nature of the process
As noted, an RFProposal is best suited when buying standardized goods or services while an RFPartner yields better results when seeking a strategic partner to provide a tailored solution. When making the shift to find a strategic partner with a tailored solution, the nature of the bid processes shift from transactional to collaborative in nature.
For starters, an RFProposal process is typically led by the buying organization’s procurement team and the supplier’s business development team, with the parties focused on buying and selling with a transactional lens. The best practice for an RFPartner process is to create a cross functional deal architect team where a supplier team can work directly with its counterpart from the buyer, which allows the supplier to co-create the best solution for the buyer.
A second difference is the levels of communication and collaboration during the actual bid. A hallmark of an RFPartner process is highly collaborative, in-depth dialogue workshops where the buyer and supplier co-create the best possible solution for the buying organizations. This differs significantly from an RFProposal that generally limits collaboration to Q&A sessions with bidding suppliers.
In addition, when running an RFProposal, the supplier’s questions are almost always shared with other suppliers, and the buyer’s answers are shared with all suppliers to create a level playing field. In contrast, an RFPartner process treats supplier questions as proprietary, and the questions and answers are not shared with other suppliers. The result is that suppliers come to life in the dialogue sessions because they don’t feel they’re sharing trade secrets that will get back to their competitors.
A third difference is in how the contract is negotiated. In an RFProposal, buyers and suppliers often find themselves in tough contract negotiations after the supplier is selected. An RFPartner, on the other hand, integrates the contracting phase into the bid process with the preferred supplier.
Because the tailored solution is so critical to the success of what the buyer is seeking, typically at least a third and up to 80% of the supplier’s deal architect team is part of a stay-behind team to ramp up and operationalize the solution. This prevents the supplier from having their sales team sell a solution that may be a challenge to operationalize.
While buying organizations are leaning into the idea of using an RFPartner approach, many question whether it’s worth the effort. EY’s Magnus Kuchler, markets leader and country managing partner for EY, Sweden, has advised 185 deals using both RFProposal and RFPartner approaches with a range from highly traditional and transactional relationships to true strategic business relationships.
“On the surface, an RFPartner sounds like a heavy lift, but we find that the overall time and effort is about the same,” he says. “In an RFProposal, the buyer is spending more time upfront defining the specs and in contentious negotiations. The RFPartner process flips this on its head and creates a more integrated bid solution that generates better solutions, spending more time together with the supplier co-creating, especially if your aim is making the shift to a highly collaborative vested business model to achieve strategic business outcomes.”
The bottom line
Complex sourcing initiatives demand a more collaborative bidding strategy. If you find yourself in a catch-22 buying a transaction when you need a more nuanced solution or business outcome, consider investing in learning more about how to run an RFPartner. For more information, UT has two white papers and three case studies on the RFPartner approach as part of its research library on collaborative win-win business relationships.
