A version of this article was published by the Institute of Management Consultants (IMC USA) in February, 2012. The article may be accssed using the following link:
Sumption & Wyland avoids RFP or other competitive bid situations. There are three basic reasons, and a couple of "dishonorable mentions."
First, consulting services are inherently qualitative and difficult to assess quantitatively. Even when results can be quantitatively compared (e.g., strategic plan, audit report, HR policies & procedures manual), the inputs may not be indicative of the quality or applicability of the results. [Even where RFPs are usually required due diligence, most corporations and governments have an exception for single-sourcing professional services.]
Second, many RFPs are poorly written and difficult to respond to. The most common difficulty is that organizations write RFPs designed to address problems they themselves have diagnosed and use processes they themselves believe to be the least costly and/or most effective. The problem is that, sometimes, the "patient" (organization) doesn't always self-diagnose properly. Further, even if they do diagnose properly, the remedy envisioned in the RFP may or may not be the best way to address the issue.
As a corollary to the second reason, the RFP process sets up a barrier between the consultant and the client which actually makes it more difficult for each to assess the other and determine the appropriateness of a business relationship.
Third, there are times when an organization uses an RFP process to provide documented cover for a contracting decision already made. It's often difficult to assess from the outside whether an RFP process is truly "open," or whether there is a "preferred vendor" awaiting a final decision. Again, since consulting services are not commodities, even if a consultant were tempted to become the low-cost bidder, there would be no guarantee that that strategy would secure a contract.
We aren't addressing sham RFPs in the three reasons, because they aren't worth serious discussion. Some organizations try putting out an RFP to sample consultants' problem-solving approaches with no intention (and sometimes no capacity) to sign an agreement for services. They believe they can harvest good ideas without paying for them and implement them without assistance of the experts who developed the ideas. Good consultants are better off without such organizations, and are well-advised not to waste time on them.
Sometimes, the RFP and the project work involved are delegated to a committee. This is bad news for both the organization and the consultant. It's a signal that the work is not viewed as a priority by the organization's leaders (if it were a priority, the leaders would be making the decisions). Communicating through a group is far more difficult and time consuming, and often less productive, than communicating with a single point of contact with decision-making authority. It's also far tougher to determine whether the organization's decision-makers are happy with the consultant's work and results. The presence of an RFP committee rather than a leader may even be indicative of critical leadership problems in an organization.
When we work with a prospective client, we discuss - not propose - various strategies and approaches to address the agreed-upon issues and goals. Our agreements often specify quantifiable project phases. For strategic planning, for example, interviewing all board members and selected stakeholders, reviewing relevant written materials, conducting a board retreat, producing a draft report, revising comments into a final report, working with staff to develop implementation strategies and work plans, and follow-up meetings with the board chair and CEO/ED.
Since we've discussed the processes (and their rationale) with the prospective client first, the agreement provisions are no surprise when seen by the client. However, it's still about the activities and how they contribute to project success - it's not about number of hours worked or number of miles travelled. The consultant-client conversation should be focused on outcomes and processes rather than on inputs - it's far more productive, even when it's more difficult to measure.
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We understand the desire to spend as little as possible for any contracted services, including consulting services. However, trying to reduce a fixed-price quote to an hourly fee does little to guide the decision-making process.
With a nod to Alan Weiss ("Million Dollar Consulting," et. al.), let's assume that we're talking about consulting - adding value to a client's organization, rather than contracting - providing alternate labor resources to a client's organization. Contracting for labor is much more quantifiable and measurable in terms of "deliverables," hours, and other inputs. It's a commodity that can be selected, generally, based on price with little effect on quality and, therefore, client mission.
Let's also assume that the client's goal is to maximize value - get the most "bang for the buck" from engaging a consultant. If the client's interest is in minimizing expense without significant regard to outcomes, then quality becomes irrelevant and we're back to a contracting/commodity scenario. [BTW, many consultants, including my firm, have walked away from prospective clients willing to engage us when this inattention to outcomes becomes apparent. More on this in a moment.]
A consultant's "stock in trade" is their expertise, their experience, and, often, their ability to extrapolate and see connections (leading to solutions) where others do not. Their value in the marketplace is their ability to use these gifts, among others, to add value to their clients' organizations.
Since the barrier to entry for consulting is very low, there are consultants of all quality and effectiveness levels in practice. Some work for large firms, some work alone; some have been in practice a long time as a full-time occupation, while others "moonlight" from full-time paid employment or as "fill-in work" between employment opportunities.
There's a John Ruskin quote that used to hang in every Baskin-Robbins ice cream parlor: "There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey."
Unit price is a very poor indicator of quality or effectiveness, especially in a largely unregulated, difficult to measure (qualitative, not quantitative) market. So how does one assess successful negotiation?
Focus on value rather than on price. Select consultants based on their reputation and body of work. Assess their willingness to work with you rather than either for you or above you - neither high priests nor sycophants make effective partners. Do they understand and identify with your organization, its challenges and opportunities? Do they seem able to deal with the people - not just the issues - involved in the process and solution? Do they represent fair value for the money, time, and personnel you can afford to devote to the project? Do you have a sufficiently high comfort level to believe the consultant can deliver value to your organization -- in other words, is there a good "fit" between you?
As I said earlier, a consultant's "stock in trade" is intimately involved in their "body of work" and resulting reputation in the marketplace. Successful consultants know better than to risk their reputation for quality work in order to secure a fee from a client who does not share that priority.
In our firm, we seek to be neither the low-price resource nor the high-price resource. We seek to be the high-value resource for our clients, and we seek only clients who share that goal. After decades in practice, we have almost never had a client engagement where cost was as major concern, either to the client or to our firm. Where cost was a concern, we either worked on the value proposition or adjusted the scope of work to meet the client's limitations. In a very few cases, we recommended they seek help elsewhere and wished them the best of success.
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