January 2008, Fleet Financials - Feature
Analyzing RFPs: Methodology for Best Practices
By Staff
All fleet program RFPs should include requests for basic information on the bidders’ programs.
- Data. Expense or program data format, accessibility, and ownership.
- Service. Service levels: driver and fleet staff on a day-to-day basis, and fleet manager on a strategic level, including program reviews.
- Implementation. Step-by-step description of the implementation process from contract signing to program rollout.
- Financial. Payment terms and prompt or early payment incentives.
Fleet program pricing takes many forms. If, for example, the fleet previously has been charged for maintenance management on a per-vehicle, per-month basis and prefers this method, the RFP should require the response reflect this preference. Pricing should take no more than a single page, perhaps two for a response for a leasing program (capitalization schedules can be relatively lengthy). Specifying the desired pricing form both simplifies analysis and ensures all responses are reviewed on an apples-to-apples basis.
Can you provide it?” is a far better form for an RFP than “Tell me what you can provide.”
Technology has enabled fleet managers to create RFPs in an electronic document and communicate via e-mail, rather than the exchange of voluminous proposal books and paper of the past. Most respondents also have electronic marketing material (pdf files, Word documents, Powerpoint, etc.) that can be attached separately to the responding e-mail.
Finally, the document should include a service level requirement, detailing the fleet manager’s expectations. It may well be that the details will be worked out during contract negotiations; in that case, simply notify all bidders that if they are awarded the business, they will be expected to negotiate clearly defined and measurable service levels, to be reviewed at a regular timetable (at least once per contract year), and that there will be consequences for failure to meet outlined goals.
Online RFP Gaining Popularity
Another, newer form of RFP gaining in popularity is the online bid. A number of formal online systems can be used to post bid requirements and gather responses. Fleet managers seeking bids for what are often complex service program should be cautious, however, when using these systems.
Most online bidding systems were originally developed to purchase items: parts, supplies, etc. Using Web-based systems to purchase a leasing program, for example, has disadvantages. Online RFP systems generally do not allow the simple entry of service pricing, i.e., they often ask for a “price” for a “quantity” of a good.
A fleet leasing bid is comprised of several components, including interest rate, administrative fees, capitalization schedules, and amortization. These components usually do not fit well into the “pricing” section of many online bidding systems. Bidders must attach documents to their responses anyway. For online fleet business bidding to be an improvement over other methods, it must provide some advantage. If responders must include attachments, effectively separating various portions of their bids, it is not an improvement.
Reviewing Responses
Once responses have been received, the next step is to analyze them in light of the requirements set forth in the RFP. If the fleet manager has been specific in the request, the job will proceed relatively smoothly.
The criteria by which responses are judged and the business awarded should have been finalized prior to issuing the RFP. The fleet manager must ask several questions to develop these criteria to ensure a sound decision.
Why is the company issuing the RFP? If it is because there has been an intractable problem with the existing vendor, the winner of the business must document how it will avoid the problem. If the RFP has been issued because the company believes it can obtain more advantageous pricing, that criterion determines the winner. Other needs, such as technology, service levels, data mining, etc., should be considered and scored overall as according to their importance.
Other than pricing, decision criteria should be measured or rated. Prior to issuing the RFP, such measurements must be outlined. Whether by a complex matrix or simple numerical rating, documenting the response rating criteria makes the analysis and decision-making process proceed more smoothly.
The process to handle incomplete responses must also be determined. It is short-sighted to simply eliminate incomplete RFPs altogether; after all, the incomplete response may ultimately be the best one. Focusing too much on the process itself rather the process as a tool to improve the fleet operation may preclude the company from choosing the respondent best suited to do the job. A simple e-mail or telephone call to the bidder, pointing out what was omitted (or other mistake) should do the trick. Put a deadline on the correction, so delay is minimized.
Depending upon the number of respondents, use the RFP as a “winnowing” process, rather than the final determinant. Some programs and services may only be provided by a relative handful of companies. If there are, for example, six or seven responses, use the RFP to narrow the field to two or three.
The next step is an invitation to finalists to meet and review responses in greater detail. Make it clear that any personnel who would be involved in servicing the account should attend, as well as the sales representative under whose name the response was submitted.
Site Visits Critical to Decision
It would be foolish to buy a new car without ever seeing it. Similarly, it would be equally foolish to award the business without visiting the bidder’s site and meeting with its sales and service team. When finalists have been chosen, the next step in the process should be a meeting, preferably at each vendor’s site, to review the RFP, their response, and see first-hand the vendor’s business operations.
Vendors as well as fleet managers see the value in site meetings, but from very different perspectives. Vendors see it as an opportunity to “show off” their people and the operations of which they are most proud. Fleet managers, particularly as it pertains to analyzing an RFP, should have a different purpose. It is an opportunity to get behind the scenes, to see how customers are handled on a day-to-day basis and how problems are solved, and to clarify the questions and issues arising from the vendor’s response.
The following practices should help maximize the value of a site meeting:
- Keep in mind the meeting purpose is related to the RFP and, in particular, the vendor’s response. The fleet manager should carry a copy of the response and notify the vendor that it will be covered in detail.
- Prepare for the meeting by annotating the response. Note questions, inconsistencies, or items that need further explanation. Write the notes separately.
- Create the agenda, including time limits and detailing exactly what will be covered.
- Control the meeting. The sales pitch has already been given so a formal presentation by the vendor is not needed. Stick to the time schedule.
- Insist on a tour of the facility, but not the standard visitor version. Focus on viewing operations directly related to the RFP.
A site visit’s ultimate purpose is to gather as much detail as possible to enable a thoroughly informed decision, detail unavailable in the RFP response, such as meeting and getting to know the people who will service the account.
Making the Decision
With reviewing and analyzing RFP responses and visiting finalists’ sites completed, a decision is made. Gather site visit notes and review the RFP analysis. The winner should be notified promptly, preferably by telephone with a follow up letter or e-mail.
Additionally, all bidders should be thanked for their time and participation and notified of the decision. (It isn’t necessary to name the winner. It will soon become common knowledge). It is not uncommon for unsuccessful bidders to follow up with phone calls or e-mails asking where they may have fallen short. It is considerate to accommodate such requests. However if time does not permit, the task can be deferred.
All in all, there are several key components to a successful RFP process:
- Preparation is critical. Know why the process is being done and its exact goals.
- Keep the RFP as simple, but specific, as possible. Tell bidders what you are looking for and ask them to provide it.
- Separate “boilerplate” purchasing language from the main body of the RFP, if possible, and make that section available in advance.
- Allow for mistakes, omissions, and errors. Don’t disqualify a bidder based simply on an omission or confusing answer.
- Establish criteria for judging the responses. Don’t “commoditize” them. Contracting for a fleet program is very different from purchasing bulk quantities of goods.
- Narrow the field based upon analyzing RFP responses. Notify those not included in the final analysis and schedule site visits with finalists.
- Create a site visit agenda with the same simplicity and specificity as the RFP. Control the meeting discussion and keep to the time schedule.
- Once the decision is made, notify all participants and try to accommodate unsuccessful bidders’ requests for the reasons they didn’t make the cut.