Wednesday, October 10, 2012

Getting Supplier Information Back in Your Desired Format

As part of the contracting process frequently you go through a process to solicit information from the Supplier. Different locations, and companies may call them different things so I thought I would describe the ones that I am most familiar with. To simply solicit information about potential work you would normally use a RFI which is short for “request for information”. RFI’s are informational and are not intended to be a binding offer to conduct business by either party. The next acronym used is RFQ which stands for “request for quotes”. An RFQ usually solicits minimum information such as the price, lead-time and availability if the buyer were to place an order. RFQ’s are not intended to be a binding offer and usually what occurs is the buyer may issue a purchase order based on what was quoted based using the buyer’s standard purchase terms that the supplier can accept or reject. An RFP, which is an acronym for “request for proposals” may be used in multiple ways depending on the language that is used in the RFP. For example it could include complete terms that the buyer wants to purchase under and advise the supplier that their signing of the proposal is an offer that buyer may accept. An RFP that doesn’t contain those two things normally does not constitute a binding offer as the terms of the agreement have not been established, so there is no meeting of the minds that is required to form a contract. The last document IFB is an acronym for “invitation for bids”. Invitation for bids normally include the buyers standard agreement, and a format that they want the suppliers to complete and sign that constitutes a formal offer to perform the work at those terms at the price(s) quoted. There are a number of other variations or permutations that may exist by geography, by industry and especially where it is a public or commercial activity.

One of the biggest frustrations of the individuals that manage these processes is you request information be provided in your format, so you can do a simple “apples to apples” comparison and what you get from suppliers looks nothing like what you asked them to provide, so you now have to compare “apples to pears, oranges, and pineapples”. The reasons why suppliers do this can be:

1. They have a standard system they use that breaks the information down a different format and don't want to convert that to your format.

2. They may feel that their format makes them look better and if they used the standard format their proposal wouldn't look as good.

3. They may be concerned about your using the information they provide in a further negotiation and are trying to avoid giving you that tool.

4. Unless they will get all of the business, they may do it to avoid having you "cherry pick" (which means to take the best from all of the different bidders).

5. They may also be concerned that any breakdown would be used for deductions to the scope of the work.

Like everything in negotiating a lot depends upon the leverage you have. The bigger you are, the more they want your business, they will listen more. If you have leverage make it expressly clear (Bold and Underline) a statement that only proposals in your format will be honored. Allow them to submit an alternate only if they have responded to your format. In the document you provide them, tell them in advance what the basis is for the award, and that will potentially eliminate some of their concerns and get better responses. If a supplier doesn’t use the format, let them know that it their document was non-responsive to the requirements and was disqualified because they didn’t follow the specified format. When a bid team has to go back to their management and explain that not only did the not win the work, their proposal wasn't even considered because it was considered non-responsive, that sends a message to not do it the next time. That sends a message that will get out to other suppliers.. Once they know that you are serious about having the responses be in your format, suppliers will either respond correctly, or won’t respond at all. The only time you can't do that is when you need them or you don't have sufficient competition. In those cases you probably should be negotiating with them instead of taking in proposals.

I personally always provide a copy of the agreement I want them to sign and require them to identify any assumptions and exceptions in their proposal. That way I can quickly see what they want changed. If you take in their contracts with their wording it creates a much more difficult task that requires detailed evaluation. A change in one word can make something have a significantly different meaning.
A clause may look similar, but if you read and understand the difference in terms of what it means, normally what a supplier wants to offer you is something that transfers a higher percentage of the risk and cost to the buyer.

If you did work off their contract there are three focus to a review:
1. What is different from your proposed agreement or standard, and what is the impact of that different?
2. What is in addition to your proposed agreement of standard agreement, and what is the impact of or those additional items?
3. What is missing in their agreement from your proposed or standard agreement, and what is the impact of those missing items.