[HROA Essentials] World-class buyers: Getting more value-added proposals

by Joseph Vales and Gilbert Parker, Vales Consulting Group 

Today's buyers of outsourcing services have to provide bidders with more complete and detailed RFP information so they receive meaningful and comparable proposals that can be evaluated on an apples-to-apples basis for value and cost-effectiveness.

To be world-class, buyers need to form sourcing committees to manage the vendor selection process, including preparation of the request for proposal (RFP) documents. Committee members should include the multiple buyers and users of the proposed outsourced services - CFO, CIO, business unit leaders, process owners, procurement executives, risk management officers, and others. Such a multi-disciplined team can bring together all of the critical RFP information that service providers need to know to prepare more responsive, value-added proposals.

Smart buyers also need to engage RFP consulting firms to advise on vendor selection, which starts with the development of the company's RFP documents. Leading firms like TPI, Everest, EquaTerra, and PA Consulting have extensive experience with ITO and BPO programs; and they bring a highly disciplined approach to managing the RFP process and evaluating service provider proposals and presentations. 

So how can buyers provide better RFP information to get better proposals? We outline below five areas deserving immediate attention, based on our many years of experience working with service providers on 265 successful proposals:      

• Objectives/Goals. We still see RFPs being issued that fail to articulate the buyers' outsourcing objectives and goals, and some do not even discuss them. Smart buyers should clearly define their 10 major objectives (what they want to accomplish) as well as define the specific goals (or quantitative measures) for achieving each of these objectives. This will enable suppliers to better understand the broad purpose of the outsourcing program and develop solutions that focus on what really counts for the company. And once the objectives and goals are well defined, buyers could then ask bidders to discuss exactly how they plan to achieve each of them.
  
• Scope of Services. All RFPs cover scope of services, but not always in sufficient detail to avoid disputes in outsourcing relationships. Buyers should clearly define the scope of services required and prepare a comprehensive, detailed statement of work. They should identify which in-scope processes will be outsourced and which ones retained in-house or handled by other vendors. They should document the "current-state" processes and technologies, and outline their vision for what the "future-state" should look like. All of this information has to be written into the RFP so the different suppliers gain a common understanding of the buyer's requirements and submit competitive bids on the same scope of work.
  
• Operating Information. Many buyers are still reluctant to release the basic operating information that service providers need to prepare realistic pricing proposals, without over- or under-estimating the scope of work and costs involved. Smart buyers should provide more RFP information on: number of employees, job categories, locations, business processes, transaction volumes, performance metrics, technology platforms, software applications, infrastructure, shared service centers, baseline costs, and corporate overheads. The more operating information buyers provide, the more responsive the bidders' proposals will be.
  
• Value Proposition. Very few buyers ask service providers to prepare formal value propositions, as critical as they are; so bidders are not inclined to offer them. But we urge buyers to require suppliers to provide clear and concise value propositions in their proposals, and bring together in one section all of the value-added services and benefits they will deliver. Such value propositions should include a wide range of economic, strategic, operational, technology, human resource, and risk management benefits. This will give buyers have yet another way of identifying those suppliers that will deliver real value to the organization.
  
• Selection Criteria. Many RFPs do even not provide vendor selection criteria, which leaves bidders in the dark about the company's scoring system. Smart buyers should clearly define the 10 most important vendor selection criteria (and weighted rankings) they will use in evaluating the proposals. This will help suppliers better understand the criteria by which they will be judged, and align their proposed solutions with the very same factors the company deems most critical. And by including the criteria, buyers could then ask service providers to discuss exactly how they will meet or exceed each of them.

In summary, world-class buyers can make much better vendor selection decisions when they issue more complete and detailed RFP information about the business processes to be outsourced. And service providers will respond with more meaningful and comparable proposals that will distinguish the best-value firms from the runners-up.  
 
Joseph Vales is a special advisor to the SharedXpertise Forums. He is the Founder and Senior Partner of U.S.-based Vales Consulting Group, which focuses on helping clients build businesses that seek to dominate markets or market segments. Joe is an outsourcing industry pioneer and visionary with 30 years of management, consulting, and marketing experience with leading professional service firms including Booz Allen, Citibank, and PricewaterhouseCoopers. He is a Founding Trustee of the HR Outsourcing Association, and recipient of the "HR Outsourcing Thought Leader of the Year" Award in 2005. The Vales Consulting Group can be reached in Rye, New York at (914) 967-3200 or via e-mail at jvales@valesconsulting.com.

Gilbert Parker, Partner, Vales Consulting Group, leads the firm's sales proposal process services. He has 30 years of marketing and business development experience with Deloitte, McKinsey, and PricewaterhouseCoopers. He directed, managed, and authored over 265 successful proposals (72% win rate) to the boards and senior managements of Global 1000 companies. Gil is cited as "The Most Successful Proposal Director in the History of Professional Services Marketing," and the "All-Time Heavyweight Champion of Proposal Writing." He can be reached via e-mail at gparker@valesconsulting.com.