Last week the ZMan changed tack a little and wrote about procurement in large organisations. It’s worth a read, not least because the comments did not immediately fill up with morons explaining every bad thing which occurred since the Thirty Years War is the fault of (((the Rothschilds))).
For those unfamiliar with the RFP, which is sometimes called a request for quote or even a request for information, it is a document companies produce when they wish to buy a capital product or service. In theory, the document describes the item or service, the conditions that have to be met in order to be considered and the process by which the company intends to evaluate potential vendors. These are popular in government and large corporate environments.
This struck a nerve:
If an organization or government is buying a well defined product or a commodity item, it makes sense, but for something like a complex service, then it is a recipe for failure. Even in the case of well-defined item like a machine tool, I’ve seen RFP’s that appear to be written by enemies of the issuing company. The people creating the document use it to impress their boss, rather than make a sound purchase.
The other thing that always turns up in RFP’s is the underlying assumption that the person who wrote the thing is a genius. The specifications will be hilariously narrow, which results in the request being for an exact copy of what they have now, but newer. My suspicion has been that there is a correlation between the level of specificity and the lack of understanding of the problem to be solved by the purchase. Smart companies buy products and services to solve problems. Stupid companies tick boxes on forms.
When I was in Nigeria, the acquisition form an engineer would complete in order to buy something had space for no less than nine approving signatures. Whole weeks would pass as these documents moved at the pace of a snail from one desk to another. Occasionally we’d get a question or two but they were never sensible, more along the lines of “Do we really need this?” or “Can we use two 100lb flanges instead of one 200lb?” The people reviewing the acquisition and (eventually) applying their signature added no value whatsoever; they were certainly not to be held responsible for any errors therein. But their involvement was important nonetheless, just not in the way you’d hope: it justified their existence in the organisation.
A similar thing happens with RFPs (and many other documents produce in large organisations). Thirty-three departments will all insist on being involved, requiring an endless series of meetings where each person sticks his oar in. You’ll notice this when you design by committee: every department needs to be seen to contribute something, even if it’s completely stupid or irrelevant. If they don’t, they worry they’ll not be seen as important. The result is a jumbled mess of narrow interests, pet projects, hypotheticals, and competing priorities written up by a junior employee for whom English is very much a second language. I was once involved with an integrity inspection and risk assessment project in the Middle East and tacked on the end of the RFP was a single paragraph saying the contractor had to create an entire IT system which allowed each document to be uploaded, accessible to everyone, and modifiable with automatic revision upgrades. It was obviously the bright idea someone came up with at the end of a meeting; that risk and safety consultants probably aren’t the best people to be setting up IT systems didn’t occur to any of the geniuses in Contracts & Procurement. Another requirement you see is for the contractor to train client personnel in some area, giving no guidance as to how many people and to what level you must train them.
The RFP that spawned this post was obviously the result of some serious business problem the company needs to solve. The trouble is the RFP so thoroughly obscures it, no vendor will be able to identify the problem, so they will not be able to solve it.
The arrogance of a modern company is such that they believe vendors are both stupid and liars, and they don’t need to know what the actual problem is. All they need to do is read the RFP, submit the lowest price, and be prepared to do exactly as the client tells them.
This is a good anecdote, too:
A story I’m fond of telling is about going to the initial RFP meeting for a government contract. I was a young guy and still a little green. They handed out the RFP’s and discussed the schedule. An old guy sitting next to me thumbed through the document and found the poison pill in about ten minutes. He stood up, told everyone to look at the specific section. In a few minutes everyone left the room other than me and one other guy. He was the predetermined winner. It was a good lesson.
A lot of times when a company issues an RFP it’s simply for compliance reasons. Most companies have to get quotes from a minimum three (and sometimes five) bidders, even if they have an incumbent who’s CEO is good pals with the client’s MD and they have the job in the bag. One of the first things a contractor or vendor needs to do when they receive an RFP is work out whether they’re just making up numbers on a bid-list. If you’ve never done business with this outfit before and you get a call from someone in bad English expressing disappointment you’ve not submitted a tender and offering you more time, you know the job’s gone to someone else but they need to make it look kosher. I even ran an experiment on this once, and used to turn in bids at ever decreasing prices just to see what would happen. Then I stopped responding and I got a call from a chap in contracts who asked why I hadn’t submitted a bit.
“Because it’s obvious we’re just making up numbers on a bid-list while every job goes to that company you always use,” I said.
He was most indignant.