Month: November 2018

For busy procurement teams, benchmarking your RFP process is often the lowest item on the to-do list. With many teams facing growing project volumes and limited resources, it’s easy to see why.

When it comes to tracking your team’s performance, you don’t need spreadsheets of data to sort through. Instead, you need actionable insights that help you get your job done better and faster.

To help, we’ve pulled three key RFP benchmarks that you can start tracking against today, to improve your sourcing function tomorrow. To put these in perspectives, we’ve included relevant industry benchmarks from the State of the RFP, the most comprehensive RFP study ever conducted. Compiled from 6,600 RFP projects conducted through the Bonfire Strategic Sourcing Platform, this data gives you a unique window into how RFP spending decisions are conducted at 190 organizations across North America.

Use these as a starting point for smart, practical benchmarking that leads to better purchasing performance.

1) RFP Process Duration

When someone in your organization comes to you with a sourcing request, are you able to accurately forecast how long the procurement process might take?

Many teams have an anecdotal knowledge of how long certain types of projects take, but have not put in place a process to regularly track and review their RFP cycle times.

Why you should track this:

• Provide end users with an accurate assessment of how long it will take to procure their good/service, for better customer service and organizational planning.
• Track and identify patterns in project progress, for visibility into common bottlenecks and areas of improvement.
• More accurately allocate staffing resources to projects.

Industry benchmark:
According to the State of the RFP data, the average RFP process takes 56 days.

2) Vendor reach

Reaching a wide community of vendors is key to the success of a project, not only from a transparency standpoint by also a project competitiveness standpoint.

With most procurement teams using some form of electronic posting and submission, most teams have greater visibility into how many vendors are viewing their opportunities and how many go on to submit.

Why you should track this:

• More accurately predict and plan for the number of vendor submissions you can expect to receive.
• Ensure projects are sufficiently competitive and identify which types of projects are not reaching a wide community.
• Determine need and measure success of vendor outreach (e.g. reverse trade shows).

Industry benchmark:
The State of the RFP study finds that 33% of vendors who register to view project details go on to submit to the RFP opportunity.

The average project receives 4 vendor submissions.

3) Vendor Disqualification Rates

Disqualifications are a negative outcome for both vendors and procurement professionals, but there are a variety of reasons that they might occur. These include failure to provide a piece of mandatory qualifications, not meeting necessary certifications, conflicts of interest, or other factors. Tracking your disqualification rate helps you to gain visibility into why this might be happening.

Why you should track this:

• Identify recurring issues or patterns in the types of projects or proposals in which disqualifications are more frequent.
• Modify your submission process to decrease the incidence of disqualifications (e.g. teams have found that separating the proposal into several pieces of content rather than requiring all information in a single PDF reduces the incidence of incomplete responses).
• Identify the need for further vendor outreach or training to ensure vendors understand the process and avoid future disqualifications.

Industry benchmark:
According to the State of the RFP study, 11% of vendor proposals are disqualified. This has decreased slightly from 2015, when the disqualification rate was 17%.  

More RFP Insights

While far from an exhaustive list, these RFP benchmarks are an actionable place to start with tracking your own procurement performance.
For more RFP process benchmarks and best practices, view the State of the RFP Benchmarking Webinar On-Demand, with insights from:

• Omar Salaymeh, Director of Client Success at Bonfire; and
• Diane Horvath, Manager, Procurement Fairness and Advisory Services, BDO.  

Procurement professionals know that when it comes to RFP pricing, the lowest price isn’t everything. Nevertheless, the myth of price as a silver bullet persists.

Unlike their price-only counterparts like Requests for Quote or simple bids, RFP decisions balance technical requirements with pricing considerations to arrive at the best value proposal. However, procurement professionals still hear objections from stakeholders who dismiss the RFP as a bureaucratic vehicle for driving down prices, or vendors who seek to avoid them entirely.

To determine the truth of this oft-debated point, we turned to the data from over $4.4 billion in RFP decisions managed through the Bonfire eProcurement Platform. The State of the RFP Benchmarking Report provides a definitive — and surprising — answer.

The truth about RFP pricing

Across over 6,600 RFP decisions, the least expensive proposal won in only 10% of all projects. Conversely, the most expensive proposal won 2.9% of time.

This finding shows that while price is important, it is rarely the be-all-and-end-all that it is often assumed to be. Furthermore, the vast majority of the time, the winning proposal is neither the highest nor the lowest priced. Besides putting to rest an old myth, this finding carries important implications for procurement teams.

Clear specifications help vendors price RFPs right

Unstructured or unclear RFPs make it difficult for vendors to put forth their best proposal, and also for buyers to make apples-to-apples comparison to determine the best value for their organization.

The research shows that most RFP decisions are not hinging on price alone, but rather a nuanced combination of technical and pricing considerations. As a result, it is imperative for vendors to have enough information to develop their proposal and pricing accurately. The more assumptions that your vendors have to make in order to answer your RFP, the greater the risk that they will:

• Submit low-priced minimal bids that will need to be upgraded later at additional cost;
• Submit high-priced bids to cover their risk;
• Choose not to bid because it’s not clear whether they will be able to make profit.

Very clear specifications make it possible for vendors to make their pricing decisions with a higher degree of accuracy, leading to a better process for them and a better outcome for you.

Defensible RFP decisions are key

Another important takeaway is the imperative for teams to ensure their RFP decisions are well-justified. In today’s climate, procurement is under great scrutiny to follow a fair process and provide value. With the majority of bids not being awarded to the lowest price, it is important for teams to be able to justify this decision.

Procurement teams must be able to demonstrate that they have performed a detailed review of each proposal’s strengths in context of their respective prices and found the higher priced offer to provide better value. A thorough RFP evaluation process is key to ensure that you have confidence in the scores and selection. Meanwhile, thorough documentation ensures that you can adequately justify the decision after the fact, in the event of vendor debriefs, bid protests, or internal audits.

More RFP questions, answered

RFPs provide structure to manage complexity and ensure a level playing field in some of the world’s most important spending decisions. However, they are often conducted behind closed doors. The State of the RFP uncovers industry benchmarks for RFP set-up, RFP pricing, evaluation, and outcomes, dispel common myths and shed light on the best practices of leading procurement teams.
For more answers to your RFP questions, view the State of the RFP Benchmarking webinar-on-demand. 

Managing the RFP evaluation is one of the most difficult parts of any RFP process. From coordinating everyone’s schedules for meetings, to facilitating an award decision that everyone can agree on, there’s no shortage of challenges.

In spite of this, procurement professionals have few benchmarks into how the process is handled at other organizations. To shed some light on a process that (by necessity) takes place behind closed doors, we analyzed the data from $4.4 billion in RFP decisions conducted through the Bonfire Strategic Sourcing Platform.

This research, from the State of the RFP Report, provides insight into how 190 organizations across North America manage their most important spending decisions.

Use these benchmarks as a jumping-off point to reflect on how your team can manage this challenging process more effectively.

The average RFP evaluation committee consists of 4.4 members

A successful outcome from your RFP decision depends on the expertise of your evaluation committee, which could include subject matter experts, end users, member of peripheral departments, or even community members.

The report shows that the average RFP project includes 4.4 evaluators. However, there’s really no one-size-fits-all answer for how big your evaluation group should be. Ultimately it depends on how widely the decision will impact the organization and whose expertise is crucial to the decision.

Many teams would like to include more diverse perspectives (e.g. including community members’ feedback in social services decisions), but find themselves hampered by a cumbersome process. To ensure the procurement process is not a limiting factor on your evaluation committee size, consider ways to reduce the administrative workload of including more evaluators. Bringing the evaluation process online is among the most impactful steps you can take to include more evaluators without an exponential increase in photocopying and other manual work.

27% of evaluator scoring happens outside of work hours

Evaluators are typically busy people with many competing priorities — and as a result, they occasionally procrastinate on their evaluation duties.

The State of the RFP report shows that the average evaluation period is 37 days in duration — however, 53% of scores are recorded in the last 7 days before the deadline, and 10% of scores are recorded on the last day before the deadline. For people with a lot on their plate, it’s no surprise that scoring often gets pushed off to the last days before the deadline. However, with 27% of scoring recorded outside of normal business hours, this data hints that evaluators are struggling to get their scoring done within their work hours.

Given this, procurement teams should seek to make it as easy as possible for evaluators to participate productively in the RFP process.

35% of RFP proposal scores lacked consensus

Once the scores are in, the hard part begins. This is where your skills as a procurement professional really shine, as you work to understand areas of disagreement, build consensus, and ultimately come to a mutually agreeable decision.

The report data shows that a surprising 35% of all proposal scores lacked consensus among the evaluation committee. (Lack of consensus was defined as an instance where any two evaluators’ scores for a given criterion on a given supplier differed by 30% or more). A further 41% of scores featured soft consensus. Only 21% of scores featured a hard consensus.

Lack of consensus is neither ‘good’ nor ‘bad’ — but it certainly can slow down an evaluation process.  To ensure effective resolution, procurement professionals should focus the meeting around outlier scores or areas of significant disagreement, and avoid line-by-line reviews of scores that are in agreement. Attention should also be given to thorough documentation of the decision, so that in vendor debriefs, bid protest, or audits, the decision is well-justified and defensible.

As with any benchmark, these stats are not intended to provide a prescriptive target for your team to hit, but rather to put your process into a larger context and surface ways that your own process could be enhanced for greater effectiveness and more value.

For more insights from our study on RFP processes and outcomes, watch the State of the RFP Benchmarking webinar on-demand.