by Geralyn Frances
Rethinking the approach to the RFP process can help treasury make better use of its time and resources. Here are a few tips.
Heavy in process and often light in outcome, the request for proposal (RFP) process is a time-consuming task. Despite months of reviews and a well-researched final selection for bank services, treasurers too often remain hesitant to give the green light to change vendors.
Reluctance to move forward is understandable—there are the sneaky unknown factors, the aggravation and the possible alienation of other credit providers looking for their share of the wallet. Even the most thoroughly executed RFP can result in a “do nothing” or final decisions that give high priority to
low-priority soft issues.
So why engage in an RFP? Generally speaking, practitioners undergo this traditional but arduous process to ensure that all relevant questions are covered before bank services are awarded. But the initial impetus can be varied—it may have been a number of years since bank services comparisons were performed in any depth, or updated technology has improved products in the market; or new needs arise in support of an underlying business.
Unless your current provider is tightening credit or providing poor service, awarding business to another bank is not a given outcome.
Whatever the circumstances, an RFP looks at existing banking services and processes to ensure that treasury is efficiently meeting the needs of the organization—a key responsibility of the cash manager. However, unless the current provider is tightening credit or providing poor service, awarding business to another institution is not a given outcome.
And before making a decision treasurers must be confident that a fair comparison of providers has been made. But when one considers studies showing that price, credit and relationship history are the driving factors behind bank selection decisions, is a full-blown proposal necessary? Of these three, only pricing is typically a section in the RFP document.
So before engaging resources to this onerous process, rethink your approach and use these suggestions to better administer the fractured process:
- Preparation. Be sure the right internal people are on board and engaged in the planning and selection process.
- Make a list. Create a short list of banks and limit the pool of bidders early on in the process; this saves lean treasury staffs extraneous effort and hours spent on proposal reviews. Unless there is an overriding reason why a new provider would be considered over an existing partner bank or a committed source of credit, don’t waste time asking new banks to join the bidding.
- Customize. Standard questions elicit standardized answers, so customize proposal documents. Focus on issues that are going to make an impact on your decision. Standard RFP documents are a good start and offer a framework in which to build upon and create a professional document. But use these templates as a guideline only. Asking multiple questions that are not relevant to your operations only muddies the waters, and makes sifting through the answers, comparisons all the more difficult when the proposals are reviewed.
- The wrong questions. Eliminate questions that do not differentiate and develop the request to challenge the banks to pinpoint where they really stand out from their competition; be it price, service and/or systems. Know your banks before the RFP goes out for bids by conducting bank-product research ahead of time. Limit redundancies up front.
- Info first. The request for information is used to solicit information on products and services. With an RFI, which typically does not include pricing, you can canvass providers in a less formal way and still get key information, thereby limiting your RFP discovery to critical issues like pricing and customization. This is also a good way to eliminate bidders from a pool of current providers, cutting down on RFP reviews.
- Nix non-competitive bidders. Have initial meetings with all listed bidders. Face-to-face discussions can answer some of the basic questions and determine a provider’s experience and expertise, thereby offering an opportunity to eliminate the undesirables. There have been cases where partner banks withdraw for one reason or another. For example, a bank might be introducing a new product in a year and due to poor timing, knows it cannot compete with the other providers and meeting target dates. Better to know upfront the interest level of your bankers and hone in on relevant decision points early on in the process.
- Be upfront. Company-specific challenges and essential processes should be clear to the banks so that they can customize their solution to your needs. Established goals and understanding of corporate banking needs should be communicated upfront and be included in the summary page of the RFP. Bidding banks can get guidance on how better to approach the RFP, streamline and customize their solution and therefore avoid numerous pages of product variations in submissions.
- Spread the workload. Get more expertise but keep it in treasury. An RFP team that includes, say, supply chain and the A/P process managers can add knowledge and resources to the process. This not only results in a more complete analysis and a faster decision, it also engages key players in the organization who have a stake in seeing a successful implementation of the product once it is ready to be rolled out.
The RFP is made more palatable once a strong case is made internally for its necessity and there is clarity in the treasurer’s appetite for change. By adding quality versus quantity to the RFP process, treasurers can make it more manageable and can speed up outcomes.