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Detailed RFPs Set the Stage for the Best Negotiation

by: Ronald Escanlar

Tuesday, March 8, 2011 |

Get the best RFP

A multi-million RFP will definitely get service providers scrambling with their best offers, but companies looking to outsource some or most of their operations need to keep in mind that clear-cut, well-defined RFPs can set the stage for professional and detailed negotiations.

One of the world’s leading outsourcing consultancy firms, TPI Inc., says a good RFP enables companies and service providers to “align their interests.” “When you issue an RFP, you’re signaling that you are willing to pay for certain services. Lots of service providers will be interested, especially in the payment part. You’re interested in the services part.”

TPI lists five guideposts that can help companies in getting the best RFP:

1. Outline exactly what you need in the RFP. A detailed RFP will go a long way in preparing an organized negotiation. Involve the departments in drafting the RFP. If the RFP will affect the marketing department, then they should have a say in it. Also, a vague RFP can be used as an excuse by a service provider in jacking up their bid.

2. Stick to a schedule in issuing an RFP. Asking for RFPs signals the onset of negotiations between a company and service providers. A well-defined schedule helps the company in controlling the whole RFP process. Keeping to the schedule in earnest shows that the company is “serious and organized” about the RFP.

3. Gather data as comprehensively as possible - and provide this with the RFP. TPI says, “you get what you pay for.” A high quality RFP can also expect high quality bids from service providers. Having clear, reliable data also helps to prevent service providers from making assumptions in their bids.

4. Enforce your rules: steer clear of service providers who do not toe the line. There are service providers that play mind games with company executives, spreading fear, uncertainty, and doubt to get another chance at bidding after being rejected. Executives must be able to deal professionally with such providers, walking away if they must.

5. Establish a structured decision process. TPI recommends creating a trustworthy team that will decide at pre-defined checkpoints in the process, such as downselecting bidders, negotiations, due diligence, etc. At the onset, involve the business, procurement, and legal departments. Stop other executives from being “tourists”, walking into meetings to offer their counsel. There’s a difference between involvement and commitment.

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