Bullet-Proofing Your RFPs

Welcome Michael Asner Consulting Suite 2003 1028 Barclay St. Vancouver, BC Canada V6E 0B1

Handout Material Notes michael@rfpmentor.com

Agenda 1 – Procurement is a zoo! 2 – What can go wrong? 3 – The view from 30,000 feet (world wide issues) 4 – The view from 20,000 feet (RFP issues) 5 – The view from 10,000 feet (The Evaluation Process) 6 – My five favorite problems 7 - Conclusions

Procurement is a Zoo!!!! 1.

Emergency!!

Sole Source

Tender RFQ ITB ITQ  A tender is used when the purchaser knows exactly what good or service they want and is looking for the best price to deliver it. 11 11

RFPs……

When to Use an RFP Types of Procurements

What can go wrong? 2.

Procurement IS the news at 6 p.m.

There are NO valid proposals!

Management INTIMIDATES the Evaluators!

The view from 30,000 feet 3.

A World Wide Trend FAIR OPEN TRANSPARENT BEST VALUE

fair  • adjective 1 just or appropriate in the circumstances. 2 treating people equally.

open • adjective 1 allowing access, passage, or view; not closed, fastened, or restricted.

transparent • adjective 1 allowing light to pass through so that objects behind can be distinctly seen. 2 obvious or evident.

best value ???????

The view from 20,000 feet 4.

The RFP Document

The RFP Process Developing Specifications Forming an Evaluation Team Issuing the RFP Vendors’ Meeting Evaluating Proposals Finalizing the Contract Preparing for Public Inspection

Choices in Selecting an Evaluation Methodology Do we compare proposals only with the defined requirements, or do we compare them directly with each other? Approach #1: A Comparison With Requirements Approach #2: Comparing Proposals Directly 30

Choices in Selecting an Evaluation Methodology (cont’d) Which rating method do we use? ► color coding ► adjectival rating ► ranking ► numerical scores and weights ► non-numerical scoring 31

Real World Examples State of Montana: Evaluation Process Review all proposals. Determine status. Score proposals. Discuss proposals. Interview. Conduct discussions/negotiations. Obtain best and final offers. Prepare recommendation. Review documents. 32

The view from 10,000 feet 5.

Inside the Evaluation Process The Building Blocks of The Evaluation Process 34

What the Courts Have Said

DUTIES on OWNER Duty to disclose Duty of Fairness Duty to Award as Tendered Duty of Fair Competition Duty to Reject Non-Compliant Tenders

Constructing the Evaluation The Building Blocks of The Evaluation Process Establishing Compliance With Mandatory Requirements Scoring the Proposals Imposing Upset Levels Evaluating the Cost Developing a Short List Interviewing Suppliers Negotiating the Contract Requesting Best and Final Offers Using References/Past Performance 37

1. Establishing Compliance With Mandatory Requirements Be precise, legalistic. Establish the rules for rejecting proposals. Definitions are important. 38

Establishing Compliance With Mandatory Requirements (cont’d) Best Practices Put Definitions in the RFP. Provide a Table of Mandatory Requirements in the RFP. Publish the Rules for Rejecting a Proposal in the RFP. Restrict the number of Mandatory Requirements. 39

2. Scoring the Proposals Evaluation Factors Weights Scoring Systems 40

Evaluation Factors (Criteria) Families of criteria Technical Management Cost Effective Criteria Objective Related to the requirements definition Discriminating Non-discriminatory Measurable Economical to use 41

Weights Determining the Weights Publishing the Weights 42

Scoring Systems The Bar Can’t Get Any Lower! An Excellent Approach #1 43

The Bar Can’t Get Any Lower! 10 - Excellent - meets all requirements/very desirable 7 - Good - most requirements met, it is good enough 4 - Satisfactory - some requirements met, not sufficient 1 - Unsatisfactory - requirements essentially not met 44

An Excellent Approach #1 Air Force Regulation 70-15 If the majority of the (sub)factors evaluated meets standards, the requirement is not overly difficult to meet, and the (sub)factors which are deficient are of a very minor nature or are susceptible to easy correction, the item should be scored "5". 45

An Excellent Approach #2 Ontario Government Factor 2: Project Team (Weight = 40) 1. Project Manager is experienced in all 3 key areas 2. Project Manager has managed large, similar projects 3. Key assistants (2 or 3) are experience in 3 key areas 4. Extra (contingency) resources are available 5. Two or more specialist to assist team 6. Experience with a similar system 7. Commitment/dedication of resources 46

3. Imposing Upset Levels What are they? When do you use them? Best Practices 47

4. Evaluating the Cost COST IS ALWAYS AN ISSUE. 48

Different Ways of Handling Cost Best solution (within budget) Cost is just another evaluation factor ‘Bang’ for the buck Two steps: first, merit; then cost 49

Best Solution (Within Budget) 1. Score the proposals on technical and management evaluation factors combined. 2. Select the proposal with the highest score, regardless of price or within budget. 50

Cost Is Just Another Evaluation Factor Arguments against this approach Assigning weights Determining the score 51

Ratio of Costs Proposal Cost Calculation of Points Points A $300,000 (250,000/300,000) x 100 83 B $250,000 (250,000/250,000) x 100 100 C $275,000 (250,000/275,000) x 100 91 52

‘Bang’ for the Buck Concept of value Determine the score for management and technical factors Divide by dollars: points per dollar 53

Two Steps: First, Merit; Then Cost Determine management and technical scores. Eliminate all those that fail to get some minimum established by evaluators. Proponent Technical & Management Score Company A 86 Company B 75 Company C 70 Company D 82 Company E 65 54

For those remaining, look at the cost and select the minimum. Proponent Technical & Management Score Cost Company A 86 $250,000 Company B 75 $225,000 Company C 70 xxx Company D 82 $200,000 Company E 65 55

5. Developing a Short List Consider these scores: 82 80 78 72 65 63 50 48 56

6. Interviewing the Suppliers Clarification meetings Oral Presentations Demonstrations 57

7. Negotiating the Contract Solid reasons for negotiating: Increase the number of high-scoring proposals (providing greater competition). Reduce risk to both parties. Eliminate unnecessary costs. Reduce costs. Improve benefits (better quality, performance, delivery etc.). Identify alternative solutions not initially apparent. Clarify requirements and proposals. Create better understanding and relationships between the parties. Improve the contract. Improve the proposal. Identify/explore opportunities for partnership. 58

Negotiations Can Be Scary! Many procurement people receive little if any training. The supplier is better prepared. Roles and responsibilities are poorly defined. Many people find negotiations awkward. 59

The Negotiation Process 1. Preparation 2. Fact Finding 3. Bargaining 60

PRICE IS ALWAYS AN ISSUE! 61

8. Requesting Best and Final Offers What is BAFO? How does it work? Montana’s rules 62

Montana’s Rules Best and Final Offers (Optional Step) The committee may decide to seek best and final offers from one or more offerors if additional information is necessary or responses will be altered in order to make a final decision. The committee may request only one best and final offer. Offerors may not request an opportunity to submit a best and final offer. The procurement officer must be notified of the offerors who are provided the opportunity to submit best and final offers and the areas to be addressed. 63

Montana’s Rules Best and Final Offers (Cont’d.) The procurement officer will send out the request for best and final offers in a letter stating the areas to be covered and the date and time in which the best and final offer must be returned. Proposal scores are adjusted in light of the new information received in the best and final offer. A best and final offer cannot be requested on price/cost alone unless so stated in the RFP. 64

9. Using References/Past Performance To confirm your selection As an evaluation factor 65

Inside the Evaluation Process The Building Blocks of The Evaluation Process Establishing Compliance Scoring the Proposals Imposing Upset Levels Evaluating the Cost Developing a Short List Interviewing Suppliers Negotiating the Contract Requesting Best and Final Offers Using References/Past Performance 66

My Five Favorite Problems 6.

Favorite Problem #1 The process is politicized.

Favorite Problem#2 Senior management/ politicians want to be involved.

Favorite Problem #3 INFORMATION TECHNOLOGY!!!

Favorite Problem #4 Specifications are biased.

Favorite Problem #5 All proposals are over budget.

Critical Success Factors A well constructed RFP A tested evaluation process An empowered Evaluation Committee Documentation and probity A knowledgeable, experienced, ethical procurement officer

Conclusions 7. What have we learned???

Thank you. Michael Asner 604/530-7881 michael@rfpmentor.com 75