Price certainly is an important factor of any proposal, but in many cases price alone can disqualify a firm during the RFP process. Often, the process automatically discards both the highest and lowest bid. The theory being, by throwing out the perceived extremes a more level playing field is created.
To us, this is high/low mechanism is a red flag and a flaw in the system. Think about this. By throwing out the highest and lowest priced solutions, could you potentially be discarding the right partner?
While tossing out the low bid may rid the field of a firm who is competing solely on price, this isn’t always the case. Upon further review, the low bid may come from a partner that has combed through an RFP, has a great understanding of the requirements and can deliver a low priced solution that syncs up perfectly with an RFP’s goals, objectives and requirements.
On the flip side, by automatically disqualifying the high bid without matching the price to such important factors as agency longevity, size, specified resources (in-house vs. outsourced), experience and relevant work you may also be excluding the best partner.
Here’s another scenario that may come into play. The RFP issuer receives five responses and must discard two – the high and the low – theoretically leaving three similarly priced proposals. But what if one of the three remaining proposals is just dollars short of the previous high and the remaining low response is only dollars above the previous low? And what if the “middle” bid is decidedly closer to the remaining low or high bid? Then what? Have you really created a level competitive playing field based around cost?
The high and low bids do not automatically correlate to being the wrong bid – both may in fact demonstrate value upon full evaluation. Without taking all factors into account, a company really can’t evaluate any given proposal. There may be value in the high bid because it might save you money, time, and internal resources down the road. The value of the low bid may the delivery of a solid project solution that is under budget and on time.
Which brings us back to our to our last post, A Focused and Level Playing Field. If companies do their due diligence and narrow the field to five or six relevant players to begin with, guess what is likely to happen? The pricing issue will largely take care of itself.
As you can see, creating a true level playing field has almost nothing to do with high and low bid and everything to do with devoting time to determining a focused list of potential partners and writing a realistic RFP that includes well defined goals, objectives, requirements and deliverables. For companies that are required to issue RFP’s, making this upfront investment will allow them to focus on selecting the best partner.