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and resources.
• Contact information for this RFP: Account manager, delivery sales rep-
resentative, senior manager in charge.
• Financials: Three- to five-year revenue and profitability history for
vendor.
• Financials: Three- to five-year revenue and profitability history for the
product or service in question.
• Company size: Total company employees or other reasonable proxy for
understanding overall company resources.
• Service or product definition: Details about the service or product
under consideration.
• Overview of vendor product or service lines: Include revenue distribu-
tion among product lines.
• Customer qualifications: Positive references from existing customers
with similar requirements.
• Customer input method: How it works and frequency.
• Service levels: How does the vendor measure its delivery or product or
services”measures might be quality, user satisfaction, support calls, or
other; how does the information get reported internally, and how often;
how does information get reported to the customer?
• Economics: Vendor list pricing schedules; drivers for pricing.

To facilitate later comparison and analysis, the RFP should provide a clear
format and organization for responding to questions. The RFP should also
specify the number of hard copies that the vendor must provide, as well as de-
sired electronic formats. The responses should be standardized as much as
possible; reading through a large number of responses inconsistent in format
and organization adds considerable work to an already labor-intensive process.

REQUEST FOR PROPOSAL ISSUE. After the RFP has been created, it
should be distributed to the target vendors. The best way to manage the is-
suance process is to send paper and electronic copies to the sales profession-
als who have been identified at each vendor. A team member should be
designated to make a follow-up call to each vendor to ensure that the pack-
age has been received.
To gauge interest in the RFP and provide an equal-footing forum for ven-
dor questions and answers, the evaluation team should consider conducting a
bidders™ preconference one to two weeks after the RFP is issued. This timing
ensures that the vendors have had enough time to review the information
and show up with good questions. The invitation should limit the number of
attendees per vendor to three or fewer. Otherwise, vendors sometimes send
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a small army of salespeople, particularly for large proposals. More than one
bidders™ conference we have attended has been so oversubscribed that it had
to be postponed or moved to a new location. The conference is also an ideal
time to distribute additional information to interested vendors in electronic
or paper form.
The agenda for the conference should be simple. The vendor manager
should introduce the selection team members and give a brief overview of
the material in the vendor orientation portion of the RFP, with a particular
focus on expected business benefits and evaluation process. A brief explana-
tion of how the vendor invite list was created may be appropriate here as
well. The bulk of the conference should be an open-end question-and-answer
session for the vendor representatives. A scribe should document the ques-
tions asked (and answers given). If vendors ask questions for which the team
does not have a ready answer, the question should be documented and a re-
sponse sent later. In some cases, the team may simply choose not to answer
the question. The entire process should take between 60 and 90 minutes, de-
pending on the RFP complexity and the number of vendors in attendance.
After the conference, the team will have some new information to pro-
cess. First, the vendor attendance should indicate the level of overall interest
that the RFP has generated. If a number of vendors do not attend, there may
be several reasons, including a mismatch between the RFP scope and ven-
dors™ capabilities, a misread of the RFP by the vendor, or even a simple mis-
take. In any case, the team should contact the vendors who have opted out to
solicit their feedback and possibly revise the scope, RFP, or process based on
the information.
Second, based on the questions asked by the vendors, the team may find
holes in the RFP process. In this case, the team should decide whether any of
the previous work should be revisited or refined and what corrective action,
if any, to take. Unless the fault is particularly egregious, there should not be
any disappointment in a few mistakes. Vendors are highly experienced in
scouring and picking apart RFPs.
Within a few days of the conference, the full transcript of questions an-
swered during the session, as well as follow-up questions, should be e-mailed
to all vendor representatives. As incremental questions are asked by vendors,
they should be documented and the questions and answers should be sent to
all vendors.
During the RFP analysis process and the following vendor due diligence,
the team should resist the urge to hold information too closely. While some
information should not be revealed (e.g., targeted pricing), most information
should be shared as widely as possible. A common misconception is that
keeping information concealed or responses ambiguous and nonspecific
somehow improves the team™s negotiating position or negatively impacts the
selection process. Quite the opposite is true”most vendors want to put their
best foot forward and win a deal by having the superior product or service
420 The Back Office: Efficient Firm Operations

for the client™s needs. Sharing as much information as possible with the ven-
dors facilitates the process and ensures a quality selection. Often, a selection
team™s hesitance to share information with the vendor is indicative of a lack
of confidence on the part of the team.

REQUEST FOR PROPOSAL RESPONSE ASSESSMENT. The process should
allow between one and four weeks for the vendors to formulate a response,
depending on the complexity of product or service, the level of investment in
question, and depth of the RFP questions. Vendors should provide the re-
quested hard copies and electronic versions of their responses by the date
and time established in the RFP.
Vendors should also be asked to refrain from additional contact with the
evaluation team during the evaluation period, with disqualification as a pos-
sible penalty. Without this threat, the most resourceful (or aggressive) ven-
dors will pester the team (and anyone else in the company that may have
inf luence) endlessly with follow-up questions, status checks, and offers to
“provide additional information.” By communicating clearly the evaluation
process and setting hard deadlines for the decision, the team can satisfy the
vendors™ need for understanding the timing of the next steps.
In some cases, the team may have determined additional questions or data
points to gather during the RFP response period or after reading the re-
sponses. In these cases, supplemental questions should be aggregated and
distributed to all participating vendors via e-mail with a reasonable, but
rapid, time frame for response.
The actual evaluation process should have the team reading each RFP in
no particular order and scoring the vendor response based on the require-
ments and weighting determined before the RFP distribution. If possible,
the team members should conduct individual reviews of the RFP responses
to avoid biasing one another. Team members can debate the merits of each
RFP after all the individual scoring is complete.
After the RFP reviews are complete, the scores should be summarized,
with a final score by vendor created from the mean of the team scores.

SELECT FINALISTS. After the vendors have been scored by the selection
team, it is a straightforward exercise to force-rank the vendor options by
total score.
The team should conduct a final round of debates to ensure that the out-
come passes a “sanity check” and that everyone agrees with the results of the
analysis. After any alterations to the score have been made and a final force-
rank vendor list is complete, the team should decide which vendors to carry
through to the due-diligence process. The team should make the cut at the
first point in the force-ranking where there is a significant drop-off in score.
This point should usually be between two and three vendors, although a
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thorough due diligence on more than two vendors can be a challenging effort
and can consume more value than it creates.
After the results have been finalized, the team should inform each of the
vendor participants of the outcome in writing. The notification should thank
them for their participation and provide a contact if the vendor would like
follow-up information. It is not necessary to inform the losing vendors of the
scoring or disclose which vendors will be carried forward through due dili-
gence. A courteous, professional notification ensures the future participation
of the vendors and provides a backup set of vendors if the due-diligence pro-
cess produces unsatisfactory results. If time permits, the team should provide
feedback to the losing parties. Most good sales professionals are interested in
understanding how they can compete successfully in the future; they appreci-
ate the feedback and will incorporate it into their next sales pursuit.

Vendor Due Diligence
The focus of this piece of the work is to prove to the satisfaction of the team
the assertions made by the vendors in their RFP responses. The particular
focus is on understanding the details of how the product or service will fit the
firm™s requirements. The team should also begin conversations with the ven-
dors™ customers to understand how well the vendors have served them, as well
as beginning to build relationships with them for future information ex-
change. The team accomplishes this primarily by working with the vendor
sales teams and taking the actual product through its paces.
As the team proceeds through the due-diligence exercise, it should focus
the majority of its attention on points of differentiation among the vendors
because it is on those points that the ultimate vendor decision is made. For
example, if vendor locations are a consideration and both vendors have the
same geographic coverage, the team should not spend time attempting to dif-
ferentiate the vendors based on this criterion. Because vendors are often at
competitive parity on many aspects, this approach dramatically cuts down
the breadth of analysis required for due diligence, as well as ensures that the
ultimate selection is based on the factors that provide real differentiation
among the competing alternatives.
In vendor selections where investment is low, the product or service well
understood, or a single vendor is the clear winner, the team may elect to
deemphasize certain portions of the due diligence. In these cases, minimum
research by the team should include a set of good reference checks.

CONDUCT PRODUCT OR SERVICE DUE DILIGENCE. Because the prod-
uct or service provided is likely to vary widely by vendor type, we do not at-
tempt to address the specifics that should be covered for all possible
vendors. The previous business scoping and vendor scoring effort should
422 The Back Office: Efficient Firm Operations

provide a more-than-adequate baseline of requirements for ensuring that the
competing products or services can be evaluated against one another.

CONDUCT COMPANY DUE DILIGENCE. The focus of the company due
diligence is the verification of the RFP data provided by the vendor. Be-
cause most of this information is factual, this portion of the due diligence
should be a fairly rapid “check the box” exercise. Information verifying the
vendor ™s locations, revenue history, and relevant product or service lines
should be readily available from a variety of sources on the Internet or from
business research services such as Hoovers.

CHECK VENDOR REFERENCES. Vendor reference checking provides two
important benefits. First, it provides independent verification and validation
of a vendor ™s claims. Although the odds of discovering adverse information
about the vendor are low, the effort expended is moderate, and the value of
any adverse information is very high. The search, therefore, must focus on
uncovering adverse or disconfirming evidence”any good management sci-
entist knows that “the value of information is inversely proportional to its
probability.” The evaluation team would appear foolish and shortsighted in-
deed if a few phone calls would have turned up such critical information.
Our consulting practice was helping a client salvage a particularly poor ven-
dor relationship, where a few reference checks might have changed the out-
come of the vendor selection. The client CEO remarked to the evaluation
team: “So, this was important enough to spend two million of my dollars on,
but not important enough to call a couple of people on the phone?”
Second, calling vendor references establishes a relationship with other cus-
tomers, which can later facilitate best practices sharing, vendor information
sharing, and other mutually beneficial exchanges. Over the long haul, having
a relationship with other customers increases the company™s ability to inf lu-
ence the vendor as well as provides additional information for negotiations.
There are usually two sources of customer references for a given vendor.
First, as part of the RFP process, the vendor should have provided a list of
clients according to similarity. The client references should be ranked ac-
cording to similarity to the company, size, geographic footprint, or other rel-
evant factors. The evaluation team should call on the references that have
the most similarities to their situation.
The second reference source is customers identified by the evaluation
team without assistance from the vendor. This is an important step because
by going off the preplanned program devised by the vendor, the team im-
proves considerably the odds of unearthing any adverse information. There
are a variety of ways of identifying vendor clients. Although vendor web sites
and trade-focused magazines can be helpful, we have found other methods
to be the most effective, including scanning Internet job board resumes to
determine which clients an employee of the vendor may have specifically
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worked with. If the firm does not have access to these boards, for a small
charge most staffing services companies will be glad to complete a brief
search for the team.
The vendor-supplied list and the team-constructed list form a master list
of references to call. Depending on the size of investment being considered
and the depth of the due-diligence effort required, the team should plan to
call between two and four vendors from each of the lists. The vendor-sup-
plied list provides contact information, and the vendor will likely prepare its
customer contact for the call. In the case of the team-generated list, the
team should identify the relevant purchasing decision maker at each poten-
tial reference and send a letter in advance of the call, outlining the reason for
the call and providing a list of questions in advance. The team should then
follow up with a phone call to perform the interview or determine whom the
contact would designate from his or her team to take the call. If possible, the
team should conduct the interviews in person and make a site visit as part of
the interview.
The list of questions that the team asks varies from selection to selection.
The team should have a specific list of questions prepared in advance but
should also leave time for open-end responses from the reference. Many of
the most interesting findings come from the unscripted portion of the inter-
view. The focus is on determining how the vendor has performed for the
client both before and after the sale, as well as getting a preview of any key
lessons learned during the implementation.
Questions that we have found effective in a reference interview include:

• What products or services did you consider as part of your evaluation?
• What were your key decision criteria when making this decision?
• How did you weight the criteria (what was important to you)?
• What period did (will) it take to achieve a payback?
• When did you make your decision?
• How long did you take to complete your vendor evaluation?
• How was the vendor service after the sale?
• What were the surprises (good and bad)?
• What are the key lessons learned from the selection process?
• Would you do it again?


Final Vendor Selection
Once the due-diligence is completed, a front-running vendor will emerge.
The final selection of the vendor should be confirmed with firm senior man-
agement. Following vendor selection, the final steps of contract negotiation
and product or service commencement can begin.
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