Request for proposal
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(RFP).
1. Treasury - banking.
A request for proposal is a formal tender which communicates a customer’s requirements to the banks which are being asked to bid to provide services.
The request for proposal is used to facilitate selection of a bank or banks.
2. Operations - procurement.
By analogy, similar communications in relation to the provision of non-banking services, or of goods.
- Wrong assumptions render traditional RFPs suboptimal
- "Whether used by Treasury or any purchasing department, RFPs rely on a standardised process: suppliers are shortlisted; the RFP document is created; the RFP is sent to suppliers; responses are received; responses are scored; the winner selected, and; all suppliers are informed of their win or loss.
- This traditional way of running an RFP process makes an unconscious assumption that the humans on both the customer and supplier side are unbiased, logical and sufficiently knowledgeable about all facets of the customer, supplier and items being purchased that the process will allow the buyer to select the best products from the best suppliers.
- In most cases, all of these assumptions are wrong.
- Consequently, advanced RFP processes include steps and variations on the 'old-fashioned way' to eliminate or mitigate unconscious biases, ensure alignment within buyer organisations and between buyers and sellers, and holistically compare offerings, using behavioural science to compensate for human frailties.
- An example of better practice is the UK Crown Commercial Service Guidance on Purchasing (see link in Other resources below).
- Advanced methodologies like these are not currently mainstream, and no one standard exists.
- Too many treasuries currently purchase using the 'old-fashioned way' only and do not compensate for human weaknesses.
- It is more common, in fact, to see old-fashioned processes being automated and, therefore, becoming more rigid than the underlying process being improved."
- (Source - Nicholas Franck AMCT, Treasury Executive.)
- Automating a bad RFP process doesn't turn it into a good one
- "Well-meaning organisations tell you how to run an RFP in the old-fashioned way.
- It doesn't work. Most treasurers will tell you RFPs produce poor results and most bankers - in fact suppliers in general - will tell you it's not an effective process either.
- And, for the Lord's sake, Treasurers and Procurement, automating a bad process does not make it better!
- Consider the following:
- When in an RFP, scorers mentally compare the responses versus a benchmark. Is there a step in the normal process that aligns scorers' benchmarks before looking at the responses? No.
- Are there strong personalities in the scoring group who dominate others, leading to skewed decisions?
- Will most junior staff managing the day-to-day work stand up to senior executives involved? They provide the base data and workload that feeds the information needed by the senior executives in their reports. How will the process consider the importance of one versus the other, considering they're bound together?
- Do you really believe suppliers can be scored through a one-dimensional analysis? Are you, as an individual, one-dimensional? How, therefore, can organisations - entities with many individuals, working in different cultures and facing different contexts, be one-dimensional?
- Does your RFP process minimise the impacts of unconscious individual and group biases?
- 1:10:100:
- 1 = amount of time spent improving your RFP process first will save you at least
- 10 in implementation plus
- 100 and more in day-to-day use afterwards.
- There's research and practical implementation on how to improve decision-making selections - it's just not been used by Treasury (or Procurement) yet."
- RFPs - Stop making the same mistakes - Nicholas Franck AMCT - September 2024.
See also
