Problem: Short RFP Project Proposal Response Times
When you issue a request for quote (RFQ), request for tender (RFT), request for proposal (RFP) or invitation to tender, you expect to get a number of quality responses.
However, sometimes you don’t get many responses and sometimes the responses do not appear to be of very good quality.
I believe a significant contributing factor to this is the amount of time you allow for companies to respond to the tender. I.e. how long they have to prepare their project proposal.
I see many project requests issued with a two week due date.
If the recipient (such as me) works in a large company, that is usually not enough time to prepare a quality proposal. This is particularly so for anything complicated and especially for any project that would be over $100k or so.
I will make a completely arbitrary definition and define:
Request for Quote (RFQ) = under $100k
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Request for Tender/Proposal (RFT or RFP) = over $100k
A typical process before we start preparing a project proposal in response to a RFP is often:
- Someone in our company spots the RFQ/RFP via a tendering website during their regular check or via a call with a client. This may be a few days or a week after it was first issued.
- If we already have projects or good contacts with the issuing company or government department we might get contacted directly, so we find out about it on the day of issue.
- The recipient person on our company sends that RFQ/RFP to the people who they think would be appropriate to do a proposal. If it is not their direct discipline that email may go through a chain of a few people or more before it arrives at someone who knows that topic sufficiently to organise a proposal.
- That person (hopefully a manager) allocates that RFQ/RFP to one of their subordinates to read, investigate and decide if we should submit a proposal.
- That person may decide that yes we should and can submit a proposal. They may decide no, it is not worthwhile or we are too busy, or it is in our area but we don’t have the skills or capacity. Or they may realise that it is not that department’s area of skill and direct it on again to other people.
- Assuming they decide to proceed, a meeting would be held to decide if we should proceed, and approval to quote is sought from the manager for an RFQ or from senior managers for an RFP.
- If below a certain value (RFQ), approval to proceed is issued. If above a certain value (RFP), a meeting is booked and then held with senior managers to get approval to proceed (this meeting can take up to a week to get).
- A team is allocated to work on the proposal.
- The project proposal team starts work on the proposal, completes cost estimates, writes up the proposal document (understanding, background, experience, methodology, proposed schedule etc).
- If it is a response to an RFQ (i.e. lower value) then they get a quick review and approval done and submit it to the client.
Week 4 to 5::
- If it is a response to a RFP (i.e. above a certain value), the proposal team completes the proposal, goes through multiple reviews and requests approval from senior managers to submit it to the client.
From the above, you can see that a large company really needs three weeks to receive, assess and prepare a response to a RFQ and five weeks to respond to an RFP.
Yet clients often expect a response in 2 weeks.
The result of this is:
- This short time frame means that some of the steps above end up being rushed and squashed into one week (as week one is rarely avoided).
Low Quality Proposal:
- That can lead to low quality proposals, with often an inaccurate cost estimate being prepared, and a low quality methodology and project team being developed.
Badly Priced Proposal:
- That results in either over pricing the proposal (i.e. if chosen, the client is not getting the project for the best price), or more likely, under pricing (i.e. the client gets a good price, but the project company makes a loss or has to cut costs elsewhere).
In reality, most good companies do their best to avoid the above three results.
The options many of them pursue are:
- Not tendering for short duration tender periods due to the suspicion (and sometimes knowledge) that the client has already chosen their preferred tenderer, and is just after a price check (often due to their internal policies requiring multiple quotes).
- Not even looking at any RFP’s from certain known companies or government departments, as those organisations are known for their short response timeframes.
- Briefly assess the RFQ/RFP and choose not to respond to any with a response timeframe less than three weeks.
- If the response timeframe is short but the project is desired or the client is a key client, then they load extra resources on the bid team. This means the cost to prepare the project proposal is much higher than it should be, leading to the company having to recoup those costs via a higher submitted price, or wearing those costs internally, pushing up their overhead costs. If this happens a lot, then the hourly cost rate of their staff increases higher and higher over time.
- Focus only on key clients, and have bid teams trained and templates prepared such that they can respond to key clients in short timeframes. This is usually only possible for very standard projects that they do a lot of for that client. It usually does not allow time for proposing innovative solutions or proposing ways for the client to save money or get better outcomes.
I believe some of the ultimate consequence of all the above are:
- Overhead costs for many companies increases above inflation. If this is consistent across the industry then project costs increase overall for clients.
- Quality of work reduces across the industry.
- More work is outsourced to overseas staff.
- Safety issues increase across the industry, resulting in increased safety controls or regulation, resulting in higher costs.
- More and more project schedules are over run.
- There is an increased chance of companies going out of business, or leaving certain industries due to continued losses (leading to less competition, and even higher costs for clients).
- Only small companies can cost effectively compete for and deliver many projects. However, many large companies and government agencies will not deal with small companies due to their perceived higher risk, perceived lower quality assurance and lower insurance coverage. I.e. Many small companies are just not eligible to tender for many projects.
All because clients don’t allow enough time in their requests for project proposals.
Interestingly, some procurement specialists recommend a 30 day starting point for proposals (often longer for larger projects)
Solution: Allow longer for project proposals
The solution to this is obvious..
Allow longer for responses to requests for quotes and requests for tenders/proposals.
I believe three weeks should be the absolute minimum allowed for any project over $100k (dependent on the country and industry of course, I am in Australia).
For projects of significant size (say $1 million or more) it is better to allow 4 to 5 weeks. The larger the project the more time should be allowed.
Rushing the submitting companies will rarely lead to better prices, or better quality, and very rarely to innovative solutions.
In reality it leads to few companies submitting project proposals, and to lower quality delivery of projects, as the submitting companies didn’t get the time to consider what would really be required to deliver the project.
It can also sometimes mean that evaluating tenders is difficult, as the quality could be quite low.
You should find out who in your organisation (the decision maker) decides the allowed timeframe, and convince them to increase it.
If you are on the receiving end (i.e. you are the one preparing the proposal), you should request an extension.
You should also try to convince the client to increase the allowed time for responses on future requests. Usually you would do this through your client relationship manager or key contact.
Short response periods for requests for quotes and requests for tenders or proposals is not conducive to good outcomes.
It often will lead to some or all of the following:
- Less companies will submit proposals.
- Prices will not be accurately calculated, possibly leading to higher than needed prices being awarded, or awarding to companies with low prices which then make a loss.
- Lower quality proposals relating to proposed methodology, examples, offered staff etc.
- Lower quality in the project delivery (due to companies having to cut costs, or not understanding what they were agreeing to).
- More variations being raised by the delivery company (due to them having low or negative profit margins).
- Proposed schedules being unrealistically short or unacceptably long.
- Project schedules going over schedule (due to the delivery company trying to keep costs down or having not fully understood the requirements).