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1 Washington, D.C. London New Delhi Chicago San Francisco Scottsdale West Chester Sydney The Corporate Executive Board: What the Best Companies Do Toolbox.com is a wholly owned subsidiary of the Corporate Executive Board. To find out if your organization is a member of the Corporate Executive Board, please visit or call to learn more about the research and services provided by an annual membership. The Corporate Executive Board is where the world s best companies turn for guidance. We help executives and business professionals work smarter, faster, and more effectively in their role within their company. Fueled by our global network, we find out what executives need to know and do next. Our Membership Proposition All-inclusive for one annual contribution Ongoing guidance and support by an account management team Backed by a service guarantee All-Inclusive, Unlimited Access to a Comprehensive Suite of Services Dynamically Delivered Through Multiple Channels High-Quality Insight Intelligent Networking Execution Support Research and Analysis Executive Forums Implementation Tools and Diagnostics Identify Proven Solutions Best Practices Quantitative Analysis Daily News Highlights Frame Thoughts and Stimulate Ideas Senior Executive Retreats Member-Hosted Forums Leadership Briefings Save Time and Reduce Risk Implementation Toolkits Emerging Issue Resource Centers Department Performance Assessment Benchmarking and Data Peer-to-Peer Networking Online Resources Make Better-Informed Decisions Budget and Spend Benchmarks Emerging Issue Surveys Vendor Fee Database Get Answers Quickly Practitioner Teleconferences Online Executive Directory Discussion Groups Execute Faster Decision Support Centers Presentation Template Library E-Learning and CPE Credits Strategy, Procurement, and Finance Membership Programs Audit Director Roundtable CFO Executive Board Controllers Leadership Roundtable Corporate Strategy Board Division Finance Forum Government Finance Roundtable Investor Relations Roundtable Procurement Strategy Council Real Estate Executive Board Risk Integration Strategy Council Tax Director Roundtable Treasury Leadership Roundtable CFO1AOT7M Corporate Executive Board. All Rights Reserved.

2 PROCUREMENT STRATEGY COUNCIL MAY Understanding RFP Evaluation Mechanisms Related Council Research: AUTOMATING THE RFP/RFI PROCESS (AUGUST 2002) Properly developed and written RFPs are powerful tools for selecting the best solution and developing straightforward relationships with vendors. OVERVIEW Procurement organizations issue formal Request for Proposals (RFP) to obtain a consistent body of information upon which to compare offers from interested vendors. The RFP serves as the foundation for the overall relationship, enabling companies to officially establish budget constraints, define project requirements, develop an implementation strategy and construct an effective management plan. The RFP process should produce a document that details a company s requirements and serves as the baseline for vendor proposal analysis, contractual terms and conditions, and vendor selection. In order to make certain that the RFP achieves desired results, procurement organizations must ensure that a process exists to adequately evaluate the capability of those firms interested in performing the service. Time Well Spent Importance of effective evaluation of RFPs Evaluation of proposals and awarding a contract is the link between a successful RFP effort and a (future) successful project. Choosing the wrong supplier or carelessly approaching the evaluation phase will have a direct impact, mostly likely an adverse effect, on the future project." -Bud Porter-Roth Council Research indicates that many procurement organizations find the evaluation of RFPs to be an intense, time-consuming and difficult process to accomplish on a limited schedule. By adhering to a decision process with exact procedures and evaluation criteria, procurement organizations can ensure that the proposals are assessed in an efficient manner and that top-notch services are secured at competitive prices. The following list identifies criteria organizations must consider to ensure a successful RFP evaluation process 1 :! Technical requirements! Management requirements! Price! References! Qualifications! Site Visits/Oral Presentations! Product tests or demonstrations! Overall completeness EVALUATION TEAMS After receiving RFPs from vendors, procurement organizations must organize an evaluation team to score the proposals based on the company s established criteria. Depending on the complexity and importance of the RFP, the evaluation team may consist of the writers of the RFP, subject matter specialists and company consultants. 1 Roth-Porter, Bud. Preparing an RFP

3 PROCUREMENT STRATEGY COUNCIL PAGE 2 The members of the team will independently score the RFP using the specific company criteria and then will team together to discusses their impressions on each proposal in order to eliminate unintended biases and ensure fair and consistent evaluation of the proposals. EVALUATION PROCESS RFP proposals are evaluated using several criteria, including price, relevant technical merit and overall best value, in accordance with the selection method specified in the RFP. The proposals will undergo a preliminary evaluation to determine if basic administrative and technical requirements have been met. Often times, purchasing organization s rank proposals, and only those capable of providing an acceptable solution receive further evaluation. Proposals may also be rejected from further consideration for such deficiencies as being late, being incomplete, missing required sections, or being inadequately prepared. The following chart outlines the process steps involved in evaluating an RFP: RFP Evaluation Process Systematic approach to ensure that RFPs are evaluated effectively By adhering to a decision process with exact procedures and evaluation criteria, procurement organizations can ensure that the RFPs are assessed in an efficient manner. Preliminary Evaluation Comprehensive Evaluation Onsite Visit/Vendor Presentation Award contract to the chosen vendor Discontinue process Source: Council Research 2003 Preliminary evaluation: This process should cover the following criteria 2 :! Understanding the basic issues and problems as presented in the RFP! Complying with the administrative requirements of the RFP! Satisfying mandatory technical requirements! Ability to meet demonstration requirements! Project management plan proposed! Fair pricing of the proposal relative to other proposals received Comprehensive evaluation: Further screening of potential remaining vendors should include a close evaluation of the following criteria 3 :! Price of vendor's product! Quality of vendor's product! Qualifications and reputation of vendor! Warranties and Guarantees! Delivery terms and conditions 2 Request for Proposal Newsletter, Bud Porter-Roth 3 ts/greenwichct_purchase/ f /bid3944.pdf+evaluating+rfps&hl=en&ie=utf-8

4 PROCUREMENT STRATEGY COUNCIL PAGE 3 Vendor presentation: The oral presentation can be beneficial for both the vendor and the evaluation panel. It allows the vendors to clearly express the ideas in their proposal and judge the sentiments of the evaluation panel, allowing the evaluation panel to ask questions of the potential partners. If possible, all potential vendors should be given the opportunity to present on the same day, making certain that the time allotted for presentations and question-andanswer sessions should be the same for all proponents. Award contract to chosen vendor: Once evaluators have determined the best proposal, contract negotiations start. Failure to negotiate an acceptable contract within a predefined time is reason to reject a proposal and consider the next best. In some companies, "best and final offer" is used to give suppliers judged capable of satisfying the requirements an opportunity to revise their original proposal. This allows finalists to correct deficiencies and provide a better solution. SCORING METHODOLOGIES The method used to select a supplier will vary according to the requirement. Three options include: When evaluating RFPs, most procurement organizations use numerical ratings in order to establish a range of compliance. Selection on the basis of the lowest valid proposal: Only those proposals that meet the evaluation criteria are deemed to be valid and will qualify for further consideration. Within this category of valid proposals, price is the determining factor in selection. Selection on the basis of best overall value: The requirements usually include mandatory and point-rated criteria. Price is not the single determining factor for value methods. The following worksheets are examples of evaluation systems organizations can use to evaluate best overall value: Evaluation Matrix Simple weighting to score RFPs Requirement Point Value Hardware Solution Software Solution System Design Maintenance Training Documentation Support Project Plan Total Rank Source: Porter-Roth, Bud. Preparing an RFP

5 PROCUREMENT STRATEGY COUNCIL PAGE 4 Sample RFP Evaluation Worksheet Criteria measuring vendor capability, work plan and cost CRITERIA (0-1 Minimally addressed requirements; 2-4 Meets requirements; 5-6 Exceeds requirements) Total Points Given A. VENDOR CAPABILITIES (30% of Total Points)! Experience with commercial corporations or government clients: Does the bidder demonstrate experience with clients similar to the size and scope required in the RFP?! To what extent do the references reflect ability?! Did the bidder provide sufficient detail to determine ability? Reference checks?! Years of experience (Experience relates to the amount of time in providing the RFP service requirements)! Project personnel qualifications: Are key personnel roles, responsibilities and resumes identified and provided? Did they clearly identify personnel? Does the organization chart support the level of service required?! Professional memberships and certification: Does the bidder provide information on current professional memberships and certifications? TOTAL VENDOR CAPABILITY POINTS B. WORK-PLAN (30% of total points)! Completeness of descriptive narrative work-plan: Did the narrative sufficiently explain how work will be performed, identifies staff, time lines, equipment, supplies, subcontract supervision, strategies, reporting, overall quality of the work-plan?! Acceptability of proposed plan: did the bidder provide sufficient detail and insight into the responsibilities? Is the work-plan clearly and explicitly defined? Was the plan well-organized and presented in a clear concise and logical manner?! Does the workplan explicitly explain how services are to be provided? To what extent?! Extent of quality control, emergency procedures and thoroughness: Did the bidder reflect quality standards to be utilized and describe policies or procedures for implementation?! Management information reports, capabilities and examples: Did the vendor clearly and concisely explain their report capabilities for management reports and provide examples? TOTAL WORK-PLAN POINTS C. COST (40% of total points)! (Low bid/this bid) x total maximum points for cost= points GRAND TOTAL WORKSHEET POINTS (A+B+C)=D Source: EVALUATION REPORTS RFP evaluation teams often create evaluation reports in order to defend the final vendor selection and justify the elimination of other vendors. The reports also assist procurement organizations in creating a formal basis for supplier selection presentation to management.

6 PROCUREMENT STRATEGY COUNCIL PAGE 5 An RFP evaluation is organized in the following way 4 : 1. Executive summary 2. Summarize RFP team and participation/contributions 3. Evaluation methodology 4. Review suppliers in competition and why not chosen 5. Review winning supplier 6. Review project start plan, noting initial tasks and dates RFP CONSULTING SERVICES Porter-Roth Associates: Consulting in RFP Writing, Planning and Development Services include:! procurement strategies and planning! vendor evaluation and selection criteria! contract negotiation support! project implementation oversight! business case development! requirements development & analysis! workflow requirement analysis! system feasibility development! cost justification/return on investments of projects RECOMMENDED READINGS Mielke, Deb. Writing an RFP: Step 4 Network World (June 1998). Pawlucy, William. Select the right tools when evaluating an RFP AMC Connection (September 2001). Porter-Roth, Bud. Request for Proposal : A Guide to Effective RFP Development (December 2001). 4 Porter-Roth, Bud. Preparing an RFP

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