How can the herculean tasks of issuing and fulfilling requests for proposals be improved? Bob Papworth investigates
THERE IS A TENDENCY among dyed-in-the-wool travel professionals of a certain age to lay the blame for all the slings and arrows of outrageous fortune fairly and squarely at the door of ‘procurement professionals’.
And, since fortune’s slings and arrows don’t come much more outrageous than RFPs – requests for proposals or, in plain and unabbreviated English, invitations to tender – it is, once again, the poor procurement types who introduced them into travel who get it in the neck.
To be fair, these applecart-upsetting interlopers with all their fancy, new-fangled ways could have been a lot worse. They’ve tried to convince corporate travel buyers of the need for RFIs (requests for information), but since everyone already knows everyone else’s business, those haven’t really caught on.
And by and large, the corporate travel sector doesn’t concern itself with RFQs (‘requests for qualifications’, to prove the supplier can actually do the job), or RFTs (‘requests for tenders’, mostly used by buyers who know exactly what they want but can only guess at the price) or the other RFQs (‘requests for quotations’, when the buyers know exactly what they want and are just seeing how far they can drive the price down).
In some instances, procurement people even demand a BAFO, or ‘best and final offer’, and even a subsequent BARFO, or ‘best and revised final offer’. This rather misses the point that there is nothing ‘final’ about a ‘final offer’ that later becomes a ‘revised final offer’, which is probably why the travel industry has had nothing to do with them.
On the other hand, corporate travel’s refusal to countenance all these other strings of initials may be down to the fact that everyone is just too busy with the one set – RFP – that they have adopted. One leading travel management company (TMC) recently revealed that it spends an average of 25 days to respond to each of around 300 such requests per year. That’s 7,500 working days per annum, and since there are only around 240 working days in a year, that means the equivalent of more than 30 staff are doing nothing but responding to RFPs.
Even if they’re only being paid the minimum wage, the total bill for salaries alone comes out somewhere north of £1.75 million…
Make it all better
With that in mind, the killer question has to be whether the corporate travel industry – buyers, suppliers and intermediaries alike – couldn’t make a better fist of the whole tendering process.
The killer answer, it seems, is that it probably could, but – infuriatingly and frustratingly – it doesn’t. Adam Knights, group sales director at ATPI, suggests that one reason might be that travel buyers are simply covering their backs. “One of the most important things from a buyer’s perspective is not just rate, it’s the duty of care, traveller safety, and the value-added benefits,” he suggests. “By having a formal RFP, the travel manager can demonstrate that there was a process which was followed. If you stipulate that all female guests must be booked on to a certain hotel floor, you have got that comeback if the supplier doesn’t live up to it.”
Justin Cole, commercial director of both Capita Business Travel and its sister hotel booking agency BSI, agrees – after a fashion. “The RFP process allows buyers to meet their organisations’ wider duty of care and CSR [corporate social responsibility] objectives,” he insists. “For example, some organisations will only accept properties on to their hotel programme which subscribe to Carepar and/or are Green Tourism Business Scheme-accredited, and these regularly change.”
Keeping up to date
The RFP, then, is less of an insurance policy and more a means of keeping up to date with latest developments; laudable, perhaps, but Cole isn’t entirely happy. “With legacy hotel RFP systems, either manual or electronic, the majority of the challenges arise because most ask for repeat information,” he says.
At a recent Buying Business Travel-sponsored ACTE-Management Solutions (UK) forum in London, one leading financial sector buyer openly admitted that he didn’t even read – at least not fully – the responses he received to his RFPs.
If the buyer, or the corporate, doesn’t care or need to know about a meeting venue’s green credentials, then page after page of time-consuming twaddle about heat-exchange systems and reed-bed filters can, mercifully, remain unwritten.
Even without such sloppiness, RFPs can be as exhausting as they are exhaustive. Pauline Valiquette, who buys travel for the Canadian Broadcasting Corporation, recently revealed that her belief in “the importance of details” often results in a document that is getting on 100 pages long.
BCD Travel sales director Tony McGetrick is resigned to the fact that while RFPs may be cumbersome, they do actually do the job. “Until a better selection process exists,” he says, “then the current structure meets the objective – only in a somewhat clumsy, costly and often inefficient manner.
“An RFP process is more of a tick-box exercise, which is fine if we [TMCs] were a product, but service industries are by their very nature, dynamic, variable, reactive and adaptable, depending upon client need. Our service is so reliant upon literally hundreds of other suppliers and associated companies fulfilling their part in the travel process, that understanding the complexity of what we offer is often lost in the fog that surrounds the primary objective of obtaining a single cost-effective transaction fee.”
Capita’s Justin Cole is even more defensive of the prevailing system. “Given the amount of money some companies spend on travel, it is not surprising that tension mounts among suppliers with the approach of the RFP season,” he says. “However, an RFP is still an essential process if the customer has significant volumes and wants to ensure robust rate performance during fluctuating market conditions, while also ensuring consistency and quality of the product used by its travellers.”
He does, however, add: “The important approach is ensuring each RFP is tailor-made and customised in the first place, so that process itself delivers to the agreed objectives and provides the necessary and relevant content for benchmarking and contracting purposes.
“And as increasing numbers of clients engage in project-related work which can impact at any time of year, it is also essential that the RFP process isn’t a static ‘once a year’ event, but more fluid. Ultimately, RFPs work well in conjunction with supplier partnerships, which evolve with a customer’s business needs.”
Back at ATPI, Adam Knights is still concerned about the lack of trust between some corporate customers and their TMCs – a ‘disconnect’ which, he believes, means that RFPs don’t always produce the best results. “I cannot get my head around why this situation still exists. I am not sure why they don’t leave it more to the TMCs – if customers let TMCs manage the RFP process, you would get better consolidation than if each individual client does it for themselves.”
He uses the example of Aberdeen, where many of ATPI’s clients have been chasing relatively little room-stock. Left to his own devices, Knights could have combined clients’ volumes and negotiated better deals. In particular, “SME clients get excellent, market-leading rates and, more importantly, a great back-up service”, he says.
If it is broke…
Given that there are too many of them, they are often way too big, and they don’t necessarily achieve the best results, the RFP’s longevity is remarkable. However, if Andrew Burch has his way, that could all change. Head of client communications at Hillgate Travel, Burch is a firm believer that the system is broke, and does need fixing. “You have this ‘sword of Damocles’ situation where we have got to go out to tender every three years or so – why? If there’s a problem, or something is missing, talk to the incumbent – they can usually sort it out, and if they can’t, then is the time to look elsewhere.
“The only thing that has changed in the past 10 years is that we now have things called bidders’ meetings, but the problem there is that they are meetings with everybody, so nobody asks any questions that might relate to anything they see as a differentiator. There are too many people involved in the process right now.”
The current system of sending out RFPs in bulk – a situation made easier, and therefore worse, by the invention of the e-RFP – merely makes extra work for everybody because, Burch believes, some suppliers will bid out of bravado rather than with any serious prospect of winning the business. “We need enough people to ‘no bid’ if the system is to be changed; the message is being diluted by people rushing to bid,” he says. He suggests that detailed RFPs should only go out at the final reckoning, to the two final contenders.
“Maybe we approach the process in the wrong way – maybe we need to reverse the whole thing,” he suggests, advocating an earlier elimination process. “People need to do more diligence at the outset. If you take the top 20 TMCs, all of us can do pretty much anything you want, so it’s a question of looking at the differences.
“Having accepted that we can all do the job, then pick the ones that can help with IT, or help with cost, or help in some other way. That gets it down to 12, and there are maybe four you want to shortlist. Then, and only then, do you go to a full RFP for the final two to fight it out on CSR, or cost, or whatever.”
And if that doesn’t work – well, one can always blame the procurement professionals.
MY VIEW: RFP PIONEER KAREN MCKENNA
Travel technology guru Karen McKenna, whose ETABid e-RFP system transformed the corporate travel purchasing world, now openly admits that “all” she did was turn a slow, cumbersome process into a faster cumbersome process. Having sold ETABid to Dallas-based hotel technology company Lanyon in 2007, McKenna has now launched a new company, Callisto, to help the industry improve its purchasing processes.
“The current processes are fundamentally flawed,” she says. “The private sector stole the [RFP] idea from the public sector, but they didn’t do the job properly. “Something like 75 per cent of tenders that go out to travel management companies don’t result in a change of supplier. Buyers are going out to tender with no intention of moving their business – it’s just a long, laborious and hugely-expensive benchmarking process.”
McKenna further argues that travel buyers are shooting themselves in the foot – suppliers invest big money in responding to RFPs, and that money is eventually charged back to the buyer community. Suppliers don’t help themselves, either. “If they started no-bidding more, then maybe the buyers would stop wasting their time,” she says. “Maybe suppliers should start charging to respond. Either way, I think people need to step back and look at the way they do business, because it is costing the industry millions.”