How Not To Lose The RFP

RFPs are a competitive process that can cost you a lot of time and money chasing a project that you might never win. Most of the time, it's best to walk away.

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Congratulations independent consultant, you’ve been invited to participate in an RFP (request for proposal) for a large organisation.

The prize can be anything from $50k to $250k (or tens of millions of dollars for the big firms - but we’ll skip these for now).

You can probably feel your excitement level rising already. That’s a big payday for you - especially if you’ve been surviving on smaller contracts for a while.

Alas, you should probably say ‘no thanks’ and walk away from the process.

This has been our default response to around 80% of the RFPs we’re invited to participate in. We’ve had some good success recently, but that’s borne from plenty of hard lessons over the years (we’ll cover the secrets of winning an RFP in a different post).

Let’s go through the reasons why you should probably walk away.

Request for Proposals Can Be A Dangerous Trap

The logic of an RFP process makes intuitive sense. Every organisation is provided with the same information and is requested to provide responses which can be easily evaluated against one another.

The client can then score the responses against a criterion they may or may not share with you and select the best option. In theory, this should rule out favouritism and keep costs low by forcing competitors to compete on price as much as services.

However, there are numerous problems with RFPs. These include:

1. Time-consuming. By far the biggest problem with RFPs is they are time-consuming for independent consultants. The best response is often the most detailed response. This takes time….time you could be investing in other clients, work projects, or attracting clients who want you because of your reputation. You might need to spend weeks completing an RFP.

   The average amount of time spent on RFPs is 24 hours - but the more time you spend on one the more likely you are to win. But your time is expensive. That time comes at the cost of other things you could be working on. At a rate of $200 per hour, the cost of responding to an RFP runs to around $5k.

2. Slim odds of winning. Some of my favourite surveys highlight firms win 40% to 50% of the RFPs they participate in. Yet they also reveal an average of 4 to 6 firms are invited to participate in an RFP. Clearly, firms are fibbing. Assuming all things are equal (and we’ll get to that soon), your odds of winning an RFP are probably closer to 15% to 25%. So a $50k RFP is worth a maximum of $7k to $12.5k in present value (and potentially less). Remember, that you’re spending $5k to win the project in the first place.

3. Unfamiliarity. The biggest issue is the people soliciting the work are often unfamiliar with the work itself. This makes evaluation difficult. How can you truly know if one approach is better than another to solve the problem if you have no experience in that topic? I’ve occasionally lost RFPs to firms who have never worked in my industry. They simply promised the impossible and those judging the process didn’t have the expertise to see the difference.

4. An undetermined amount of work. Theoretically, whichever organisation submits the most information has the best chance of winning. This creates a temptation to create huge proposals so as not to be dwarfed by competitors. For example, what if you send three case studies and your competitor sends 10? The best RFPs will specify the number of pages to be sent to complete the process. This makes everything easier for everyone - alas it’s also not common.

5. RFPs can be changed without notice. I remember a process two years ago where we and two other firms were participating in the RFP process. We were given strict instructions to follow the terms of the RFP to the letter. When we didn’t win, the feedback we received was that ‘another firm took an approach which wasn’t outlined in the RFP which we preferred’. Kudos to the firm who took the bold approach and won (but does this feel like a good process?)

6. Difficult to highlight your strengths. The major problem with an RPF is it forces you into a straightjacket where it’s difficult to highlight your unique strengths. You might have a unique approach, some remarkable USPs, and vastly more experience than competitors. But the criteria might evaluate RFPs by standardised factors like the education level of the team, education certificates achieved, and even languages spoken (trust me, I’ve seen it).

7. RFPs don’t guarantee work. You might assume that if you win the RFP process, you then get to work on the project. And hopefully, that’s what happens. But any project can be cancelled for any reason. Even once the RFP is complete you usually need to agree on the scope of work etc…It’s not uncommon to win an RFP to become a preferred vendor on a project and then discover you aren’t utilised on the project.

8. RFPs are a one-sided process. RFPs often force a wedge between you and the people you will be working with on the project. By necessity, you’re kept at a distance from one another to prevent biasing the judgement by factors like whether you click with one another at an interpersonal level. It doesn’t let you form a close, trusting, relationship and decide together if you would be good partners for one another. It often means the people doing the work didn’t get their preferred consultant.

9. Favouritism. While RFPs rule out favouritism in theory, they often fail to do it in practice. It’s common for firms to have an existing relationship with one of the participants in the process and invite others to make up the numbers. Sometimes one of the participants in the process has even helped write the RFP. Other times, RFPs are published on obscure internal sites and the company carefully selects who they invite to participate in it etc…

This isn’t a comprehensive list, but it’s some of the things to consider before engaging in the RFP process.

The thing to remember about an RFP process is you’re probably going to lose in the individual case, but it might still be worthwhile. For example, if you have a 1 in 3 chance of winning and you participate in 3 of them, is that worthwhile for you? i.e. Using the figures above, would you spend $15k to win that one project? Is that good enough for your profit margin?

It’s also not uncommon to win the RFP and then be afflicted by the winner’s curse.

You might realise the value of the RFP, while high, also reflects a huge amount of work. When you calculate your profit margin for the project (inclusive of the effort took to win it), you might find yourself in the negative.

When To Walk Away From An RFP Process

I’d say if any of the following is true, it’s probably a good idea not to participate in the RFP process.

1. When four or more organisations have been invited to submit responses. If you find yourself in a competitive pitch and know five other firms have been invited, just walk away (unless you’re the incumbent). If the prospective client won’t disclose the number of firms invited, you should also walk away. The odds of winning are just too low.

2. If an incumbent firm is pitching. If there is, don’t even bother. Incumbents win a competitive RFP 80% to 90% of the time. It’s very common for incumbents to be involved in writing the RFP. Always ask if one of the firms participating in the process has worked with your prospective client before.

3. If the value of the project isn’t disclosed. If the client writing the RFP doesn’t share the value of the contract, don’t participate in the process. The range is just too broad and you never know if a firm might go super low and win the business as a result.

4. If the value of the project exceeds $150k. There might be some flexibility here (I initially put the limit at $100k), but be mindful that the bigger the value of the RFP, the more you’re going to be up against competitors who will naturally be a better match for it. The sweet spot for an independent consultant is too small for big-name consultancies but large enough that you know the prospect isn’t just looking for the easiest option. I’d suggest $50k to $100k is the sweet spot.

5. If the project is poorly defined and written. If you read the RFP and sense the author had no real understanding of what they were describing, don’t respond to it. Even if you win, it’s likely to be a headache from start to finish. The best thing you can do here is try to see if you can help them improve the RFP.

6. If the RFP is disconnected from the start date. If you can’t get an idea of when the project itself will begin, don’t go through the RFP process. It’s simply not worth your time. You could win and then find the RFP has been cancelled.

7. If you don’t precisely match the criteria. Trust me, if you don’t match the criteria precisely (and can’t prove you fit the criteria with case studies) your odds of winning drop to close to zero. Your competitors will share case studies and testimonials proving the results they’ve achieved in the past in every aspect of the RFP. What will you share?

You might take a more lenient approach with some of the above, but I wouldn’t deviate too far from the principles here.

When To Engage In the RFP Process

The best time to engage in the RFP process is when you feel the odds are heavily in your favour (or at least not stacked against you).

I’d look for projects that match most of the following:

1. A small number of participants (max of 3).

2. Where you know which other firms participating and feel your story would is far more persuasive than any story they can come up with.

3. A mid-sized project value ($50k to $75k).

4. A pre-existing relationship with the organisation.

5. You have plenty of directly relevant case studies to the project.

Aside: Occasionally it might be a good idea to engage in an RFP process just to get practice doing it. It’s also an effective way to update any old or out-of-date information and learn how to tell a persuasive story. Even if you lose, you will learn a lot from the experience.