From the June 2009 Issue
Birmingham, Alabama, Mayor Larry Langford loves projects; the bigger dollars,
the better. He campaigned for mayor of Alabama’s largest city with the
slogan “Let’s Do Something,” and he holds no patience for
those who stand in the way of buy now, pay later ideas like baseball museums,
equestrian centers or a domed stadium. His weakness for all things fancy has
landed him in some hot water with the government, and he’s now under federal
indictment, in part for accepting clothes, designer watches and cash to pay
his personal debts from people who might have benefitted from some of his prior
public service project ideas.
RIDING IN THE HERO
So it was viewed as a “here comes another Larry idea” when Langford
pitched the City Council on his plan to repave all the city streets. He asked
for $12 million in his Birmingham Stimulus Plan and directed purchasing to put
out an RFP to see what it would cost to pave 26 miles of downtown streets.
The laughing stopped when the bids were opened: The down economy had made contractors
hungry, and the lowest bid came in just under half of what was expected. Langford
rode in the hero with enough money left over to expand the paving to the neighborhoods.
The much heralded Request for Proposal (RFP) saved the day — and lots
of money — proving once again the value of an RFP when the work you need
done is the same in Boise as it is in Birmingham.
It wasn’t such clear sailing (or soaring) for the RFP when the U.S. Air
Force set out to find a replacement for its aging fleet of KC-135 aerial refueling
tankers. The RFP process clarified what was needed and weeded out the wanna-bees
who were thinking they could manufacture 170+ wide body planes to meet military
specs. That left the two big players — Boeing and Airbus — to spend
millions of dollars proving they could fill the order.
But with a potential $40 Billion at stake (and all those jobs), the low bid
on an RFP for building flying gas stations was apparently not enough. After
awarding the bid it said best met the specs, the Air Force back-tracked and
ordered a “cooling off period” to deal with the fallout. A year
later, Congress is still politicking about what to do next, and the best-equipped
Air Force in the world waits not-so-patiently to find out what will replace
the refueling tankers it has been nursing along for 50+ years.
GOING THE EXTRA MILE
If it was a good business practice for City Hall and Uncle Sam, the owner of
a food distribution company figured the RFP would be just the ticket for determining
who could best help them upgrade their accounting and business management system.
The 28 year-old company had been a survivor in a marketplace that saw competitors
disappear or get bought up by larger companies. Their niche was specialty foods
with international connections supported by a strong focus on customer service.
They always went the extra mile for their customers. Bob Jones, the second
generation owner, thought nothing of personally delivering a case of Indian
rice to a client in need after hours or on Sunday. Lately, however, Bob was
concerned that continued growth was straining customer service because their
business systems just weren’t keeping up. The time had come to see if
a new system would better serve their needs and renew their competitive edge.
To get the process rolling, Jones tapped Bret, his assistant operations manager,
to take on the project to see what a better solution might require. He felt
good that Bret could use his technology knowledge to help design an RFP and
identify software vendors who could compete for their business. Bret talked
to accounting and production, shipping, inventory and others in his quest to
list the “features and functionalities” they wanted in their new
system. It was a time-consuming task, gathering it all then designing an Excel
spreadsheet with columns and rows where those competing could checkmark if their
system included a specific feature or had to customize to add it.
By the deadline, Bret had received four responses to his RFP. He marched into
the boss’ office, plopped them on his desk and said with great excitement,
“The one on top came in close to $10,000 less than the other three.”
He then added, almost as an afterthought, “If you want a good laugh, check
out the one on the bottom. Not only did they not give us a quote, they suggested
we give them $2,500 up front so one of their consultants could do some assessment
and see for himself how we run our business.”
That night, as Bob Jones slipped into bed and thought about what had taken
place that day, sleep did not come so easy. The RFP had succeeded in identifying
companies who could meet the request. So wasn’t it good news that one
vendor could implement a new system for $10,000 less than the others? Yet their
food distribution business was different from their competitors. Was the bid
that came in cheapest really best for his business? And what was up with that
last company that wanted to charge them before they could provide a quote? They
were suggesting a consultant spend a day at the company and follow the workflow
process before they could offer a solution.
CHECKING THE RIGHT BOXES
Where the RFP had succeeded was in identifying companies who said they had a
good solution. They checked the right boxes for features, but did the RFP really
capture Jones’ particular business issues, let alone how they were going
to be solved? The list was also gathered as stand-alone information from all
areas of the business. In the end, it really didn’t (or couldn’t)
take into account the interactions between sales, purchasing, warehousing and
delivery that are vital to business success.
As Jones sat down to review the RFPs the next day with his morning coffee,
he was concerned that the answers on the RFP may not have hit home on what his
company really needed. While the RFP process brought some structure to the procurement
decision, how could it work when part of his business was unique? How could
a prospective software provider drill into the nuances of what that company
needed by just working off a list of features without really understanding what
was driving that need?
By the time he got to the RFP at the bottom of the stack, Jones was beginning
to think that maybe he did need someone who understood all this new technology
to look in-depth at the company’s business processes. His thought was
interrupted by the intercom buzz from Bret: “One of the vendors who completed
the RFP wants to set up a time to demo. When do you want to do it?”
What would you do? Join us next month to see why Bob Jones was seriously considering
tossing out the RFPs and taking out his checkbook to pay the company that wouldn’t
even give him a quote.