The request for proposal process can be complicated - to say the least. Mark Frary asks whether buyers and suppliers can work together to make things easier
TOO LONG and full of irrelevancies. I'm not talking about the final season of Lost, although lost is often how many people feel when they are halfway through a tender document that rivals War and Peace in its number of pages.
This feeling is perhaps behind Nicola Lomas's declaration at the Institute of Travel & Meetings' annual conference, that she "doesn't do tenders". After such an announcement it was perhaps no surprise that Lomas, Omnicom Group's director of corporate travel services and the ITM's incoming chair to replace the BBC's Jamie Hindhaugh in January 2012, won the prize at the conference for having had her contact details requested the most often. Perhaps after fielding enquiries from every travel management company (TMC) in the room, she may reconsider her point. But, then again, perhaps not.
WHAT AN RFP SHOULD BE
The request for proposals (RFP) process is a core part of modern travel management. Every three to five years, you go back to the market and put your travel spend and travel patterns on the table, offering them up to the bidding TMC with the best combination of price and service. You might also look at things such as the technology offering, the TMC's corporate and social responsibility credentials and so on.
Simone Buckley, of travel procurement consultancy Bouda, has a neat analogy: "I liken going through the RFP process to the television programme Location, Location, Location. We sit with a customer and ask what is more important - price or service - rather like on the programme where they ask whether the buyers want a smaller house in a desirable location or a larger house in a less desirable location. The important thing in the RFP process is to really understand what the client will compromise on. The scoring matrix needs to be detailed enough so that you can drill down and find out which element of the service, and which element of the savings, are important."
Where the RFP process is run properly and the responses weighted and scored in line with a corporate's objectives, it works well. Unfortunately, the reality is sometimes different.
What RFPs often are
Some consider RFP documents to be unnecessarily large and complex. Andy Hampshaw, managing director of Travel by Appointment (TBA), says his biggest frustration is where a number of different questions are posed that ask more or less the same thing.
"In such circumstances, we have started answering by referring to the previous question, rather than re-wording the same response time and time again," says Hampshaw.
BCD Travel's director of sales, UK & Ireland, Tony McGetrick, says tender documents are often far too large. "There are a lot of very large RFPs for customers that spend £1 million or less. You don't really need to have to write a Bible for the smaller companies," he says.
Juliet Price, head of marketing and business intelligence at Hotelzon, agrees. "SMEs [small and medium enterprises] with accounts worth only half-a-million pounds in hotel spend are now sending out RFPs where the questions are more suited to a large organisation, asking about rebates and fee models You feel that they have been 'over-consulted' and have overcomplicated things for themselves."
The increasingly high-profile role of consultants in the RFP process is also being questioned, particularly as tenders become more complicated and the number of TMCs on the shortlist increases.
Some argue that a good procurement manager should be able to undertake an RFP themselves without recourse to consultants. But are consultants working in the client's best interest? "We're sure we're not alone in the TMC community of possibly questioning the impartiality of a handful of consultants," says TBA's Andy Hampshaw. "However, we undoubtedly come across tender exercises where the consultant brings much needed value and expertise to the process."
money, money, money...
So what is going in the typical tender of today? The recession has meant that companies have focused even more on cost in their RFPs.
Stuart Tandy, BSI's business communications manager, says: "Difficult economic times always have an impact down the supply chain so it is understandable that companies focus even more on cost savings and process efficiencies, but that's what a good business outsourcing process delivers anyway.
"The last 12- to 18-months have seen more corporates looking for a commitment from suppliers to deliver targeted cost savings within a true gain/share model, where the successes are shared, rather than a risk and reward model that's heavy on the penalties and light to non-existent on the rewards."
Tandy says the content of tenders has not changed dramatically but that their frequency has increased, often as a means of benchmarking prices rather than acting with any real intention to change. "Rolling year-on-year contracts - and even contracts with a significant proportion of the term to run - are suddenly subject to a formal review," he says.
Some buyers and TMCs say that consultants are using the RFP process to improve their own knowledge or contacts list rather than asking questions that are relevant to the client itself.
Andrew Solum, of Travel Industry Associates, who works as an outsourced buyer for some organisations and consults for others, says that items cropping up include sustainability, carbon reporting and outsourcing (whether it be hotel booking or rail booking solutions), or self-booking solutions, which were not commonplace 12 or 15 years ago.
Others say the environment has taken something of a back-seat in the recession, remaining as little more than a box-ticking exercise for many companies.
"Whilst buyers' desire to identify green business-travel and hotel options is an important consideration, the extent to which a suppliers' green credentials are perceived by buyers as a serious selection criterion is somewhat questionable, particularly during an economic downturn when the focus is on reducing costs," says BSI's Tandy.
To bid or not To bid?
If any trend has appeared recently around the tender process, it is the increasing prevalence of no-bids on the side of the TMC and the increasing tendency for buyers to run a bid with little or no intention of actually changing their supplier.
TMCs are also getting better at knowing which RFPs to bid for and which to turn down. Bouda's Simone Buckley believes this is down to a recognition that they will not necessarily be a good fit to the client.
"TMCs have become much more professional when they assess the potential opportunity," she says. "Many TMCs now assess their likely cultural and technical fit with a client. The last thing you want is a TMC that doesn't really fit because it costs a lot of time and money [to go through the RFP process and be turned down]."
During the recession buyers have also used the RFP process as a bludgeon on their incumbent TMC, to force them to reduce their fees by suggesting they [the client] may look elsewhere - a significant threat given that TMCs have been desperately hungry for new business during the downturn.
As well as to obtain reduced fees, buyers use the tender process to get their TMCs to update their technology offering.
Technology, such as online booking tools, is making it harder to remove an incumbent TMC, but even so it is worth considering whether a change will save money. Five years is a long time in travel technology and what was state-of-the-art at the beginning of a contract can be woefully out-of-date by the end of it. The question is whether a process which can cost thousands of pounds and hundreds of hours of buyers' time is the best way to assess new technology.
In recent years the level of e-tendering - either an online questionnaire or an uploaded document - has significantly increased in line with organisations' commitment to minimise the environmental impact of their actions.
Travel Industry Associates' Solum says: "Technology has changed the way RFPs are done, in that we send out our RFPs electronically, and receive them back in the same format. Part of the motivation is for sustainability solutions and we fully support this."
BSI's Tandy, however, says electronic RFPs are not always as green as they could be. "We still come across RFPs giving mixed environmental messages. [There's sometimes] a hefty sustainability questionnaire with a request for hard copy tender responses in triplicate to different geographically disparate recipients."
Online is not always the best environment for a tender either. Bouda's Simone Buckley says that while procurement tools, such as Ariba, are used regularly, online auctions have not really taken off.
"Ariba tools and those like it have helped in keeping costs down but, on the negative side, they do restrict creativity for the TMCs and can be too narrow. You have to be specific in your questions. You have to allow your bidders to shine somewhere and sometimes when you use online tools, it is not easy to spot what the difference is [between bidders].
On the positive side, you can turn a bid around more quickly, taking less time and less resources, so keeping costs down."
It seems the parallels between the tender process and the television series Lost are hard to ignore - bizarre goings-on that few can explain, hugely expensive to be involved in (if you buy the multi-set DVDs) and, for many participants, lacking a satisfactory conclusion. But for a core group of fans, Lost was a hugely rewarding experience. Let us hope that the same is true for RFPs.
TIPS FOR PREPARING A TENDER
- Engage your stakeholders and let them raise issues, concerns and expectations. Early stakeholder involvement will help drive buy-in.
- Define the RFP's scope, service specification and key objectives.
- Clearly articulate the evaluation criteria and selection process timelines you have.
- Provide a detailed analysis of current spend to enable suppliers to compile a meaningful commercial proposal.
- Look to the future - seek to develop partnerships with suppliers that will evolve with your business needs and can demonstrate a track record in service and technology innovation.
- Allow sufficient time for your potential suppliers to respond to your RFP. It takes most companies between 12 weeks and six months to prepare and issue an RFP, at a time and logistics cost of around £20,000, yet most buyers give suppliers between just two to four weeks to respond.
- Don't use a scattergun approach, sending out RFPs to the top 20 TMCs in Buying Business Travel's latest '50 Leading TMCs' issue. Instead, at the start of the process it is worth identifying the style and size of the TMC you want to manage your travel account. This means you can cut the initial list down to four or five best suited to your criteria.