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Tuesday, March 27, 2012

An RFP... Really!!???

A couple of weeks ago we received an RFP (request for proposal).  It was from a county based EMS organization and they were looking for an online employee scheduling system just like ours.  At first we thought "Great, we're perfect for this".  But then we looked deeper into the RFP...

It was 59 pages of rules and specifications - not untypical for an RFP I guess.  After spending a few hours reviewing it we felt confident our EMS Manager system was a perfect fit.  We guessed it would take us about another ten hours to provide written answers to all the questions, and a few more hours to put together the necessary proposal documents to apply for this sale. We estimated our quote would be less than $7000 per year for this customer - including all setup, hosting, support and training.

Then we came to the section in the RFP that stated "The maximum budgeted amount for this project is $120,000".  SERIOUSLY!!!???  $120,000???  

Don't get me wrong, we'd love to make a $120,000 sale, but we think we can meet their needs for less than $7000 per year and still make a profit.  We already have over 780 customers using our system for the same purpose.

It seems the person writing this RFP had lots of help from one of our bigger competitors, because many of the specification requirements were word-for-word copies from that competitor's specification document.  And that $120,000 seems to be in their price range. 

We realize many city and county governments require purchases over certain amounts to be awarded through the RFP process.  We also realize these processes were put in place to encourage competition and eliminate cronyism, nepotism, or kickbacks - the most honorable of reasons. 

But, imagine your county needs to buy a car.  Does it make sense to have Lamborghini help you write the RFP?  Does it make sense to budget $1,600,000 (the price of a Lamborghini Reventon)?  And does it make sense to require vertically opening doors, zero to 60 in 3.3 seconds, a top speed of 211mph, and an instrument panel milled from a solid block of aluminum?  I'm not suggesting anyone is dishonest here.  I'm sure the Reventon is a fine care, and I'm sure that if Ford or GM can meet those specs for a lower price they will get fair consideration. 

I am however suggesting that using the provider of the most expensive solution to help you write the specs is not the best approach.  I am also suggesting that when you can find multiple vendors selling off-the-shelf products in quantity outside the RFP process for reasonable prices, you may want to abandon the RFP process.

Are we 100% certain that our solution will meet this particular customer's precise needs?  No, but we're 99% sure.  We're even willing to set up a complete system for them for FREE so they can try it before they buy it.  If they don't like it they owe us nothing.  We have a handful of competitors who would offer them the same deal - but they probably won't - because this RFP is out there and everyone knows who helped them create it and who will probably get the sale.

We keep hearing about our larger competitors winning RFPs like this one and then taking two years, along with “add-on phase II” or “phase III” money, to get the installation finished.  We wouldn't need a phase II, or a phase III - we can have our solution up and running within three days.

We called the county who posted the RFP, and told them our system would meet their needs, is already used by 25 nearby emergency services and costs less than $7000. We also offered to let them use our system free of charge for a while so they could verify that it really does meet their needs.

They told us to just complete the RFP and we'd be given fair consideration.

The problem is, we don't even know if the RFP is the final step in their process.  In the past we filled out an RFP, and after a few months we received a CONGRATULATIONS LETTER to inform us we were a finalist and AWARDED with the OPPORTUNITY to present our solution IN PERSON at THEIR LOCATION.  We declined.

You see, we sell a SaaS subscription.  We have almost 800 customers as of today running the same software.  We upgrade it periodically based on customer feedback.  Our tech support is free.  Our hosting is super high-end.  We can do all this because we keep our sales costs very low, we don't spend a lot on travel, we don't install equipment at customer locations, and we don't waste a lot of time filling out RFPs.

I don't know what the solution is.  As a matter of fact I don't even know if there really is a problem.  After all, we made all of our sales so far without filling out RFPs.  And our biggest competitors seem to be happy with the process.  It just seems like the customers that go the RFP route (in our industry at least) waste a huge amount of time and money.  But I probably shouldn't complain - oh well, too late for that, right?

1 comment:

  1. Another interesting twist on this particular RFP: this service was informed by a nearby EMS service who "made the mistake of switching from EMS Manager to" the $120,000 system that this switch "caused an increase of $1.2 million in overtime costs" over the course of one year.

    If I were a tax payer in that county I'd be quite upset.

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