1. The Procurement Process


1. The Procurement Process

a. Typical Process

The typical software request for proposal ("RFP") includes several standardized sections detailing instructions for responding to the RFP and includes a general description of the system the company plans to acquire and pages of detailed questions relating to features and functions of the relevant product. If it was typical for vendors to respond fully and fairly to each of the questions asked in the typical RFP, relatively little modification of this process would be required. However, most vendors are adept at transforming the legitimate customer designed vendor capability inquiries included in the RFP process into a vendor marketing exercise. Responses tend to be very general and are often not responsive to the precise inquiry, or are responsive with a material qualification. Even follow-up questioning by the customer is not likely to yield responses that are effective in differentiating one vendor from another. Interestingly, in many vendor organizations the marketing team is the unit with primary responsibility for the RFP content. Frequently the net result of the RFP process does little more than conveniently package the vendor's marketing material and provide a starting point for pricing negotiations. The typical process can be particularly frustrating to the customer when there are a limited number of vendors with the overall capabilities/product sought and the customer hopes to use the RFP process to assist it in making a meaningful differentiation among the vendors.

b. RFP Process Improvement Recommendations

When there is a limited number of vendors with the overall capabilities sought by a customer, we recommend use of a focused process to validate vendor service offerings, pricing, and credentials that we call "Directed Procurement." The Directed Procurement process is designed to both elicit meaningful information for purposes of vendor differentiation and to maintain competition between prospective vendors until the customer obtains the commitments it requires on its key issues so that it can meaningfully enter into an exclusive negotiating period with a preferred vendor or, if it prefers, dual track negotiations with two finalists.

The objectives of the Directed Procurement process are to:

  1. Transform the vendor capability inquiry process from a vendor marketing driven exercise to an effective vendor differentiating tool;

  2. Require focused, relationship-defining questions to be answered by proposed vendor project leads and management - not marketing staff;

  3. Focus the procurement process on identification and delivery of customer business objectives; and

  4. Obtain written commitments from vendors on key terms and relationship approaches such as scope of license and license restriction and tying payment to acceptance.

The engine behind the process is the use of targeted questions that require meaningful substantive responses and reveal quickly vendors that choose not to or are unable to effectively respond. The customer questions to the vendor are open-ended and require the development of unique responses, rather than "yes/no," or other canned responses.

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Directed Question, Example 1:
  • "Based on your experience with implementations of the Software in enterprises comparable to customer, identify the five (5) most significant technical problems you are likely to encounter"

  • "As to each of the problems, what steps have you used to avoid, mitigate, or resolve the problem?"

  • As to each of the problems, what new process improvements/changes, not discussed above, would you recommend to avoid, mitigate, or resolve the problem?"

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Directed Question, Example 2:

Based on your previous experience with similar implementations, describe how you would deliver each of customer's objectives as set forth in Section of the RFP, including with each general description responses to the following separately identified sub-questions?

  1. What are the typical challenges to completing this activity?

  2. What are the corresponding mitigation strategies?

  3. What steps can be taken in planning this project to avoid the typical challenges?

  4. What involvement (time and types of resources) would be required from customer to successfully complete this task?

  5. Can the process you have used in the past to deliver these requirements be improved, and if so, how would you improve it?

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In addition, we recommend that the customer include an agreement that it has drafted in the RFP for any software transaction to acquire key business applications for use across the enterprise (e.g.; Enterprise Resource Planning; Customer Relationship Management; financial, human resources; logistics) or other business critical software procurements in which there are realistic vendor alternatives available to the customer. It is important to note that the customer based agreement cannot simply be attached to the RFP with a request that the vendor comment, this approach will likely lead to the vendor simply restating its standard contract positions in response to each issue. Instead, the RFP should include language similar to the following with regard to the customer drafted agreement:

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Required Agreement Instruction

The Software License Agreement ("Agreement"), attached as Exhibit A, sets forth Customer's required terms and conditions. Customer requires each Vendor either to accept the Agreement affirmatively as presented or to clearly state in writing required modifications, additions or substitutions (collectively "Exceptions"). Every Vendor must review the Agreement and must set forth all Exceptions to the Agreement, if any, in the form of proposed alternative language or identify specific terms to be deleted, and must disclose any impact on the proposed price if Customer rejects the Exceptions. Customer may disqualify and terminate negotiations with any Vendor that did identify an Exception to a given provision in the Agreement in its proposal and subsequently attempts to do so during negotiations. Further, Customer reserves the right to disqualify any Vendor with whom Customer is unable to negotiate a definitive Agreement following notification of intended selection. Therefore, it is in the Vendor's best interest to have the Agreement reviewed by counsel prior to submission of their proposal in response to this RFP. The number and extent of Exceptions to the Agreement will be factored into the evaluation of the Vendor's proposal. Submission of the Vendor's form agreement in response to the requirements of this Section of the RFP shall be deemed non-responsive.

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Once a "preferred vendor" selection is made, a significant amount of your negotiating leverage as a customer is lost. Therefore, to insure that the responses are not just part of a "do what it takes to get to preferred vendor status" strategy and to avoid the frequently observed vendor memory loss and commitment slippage that occurs after traditional RFPs are submitted, the key commitments obtained in this process should be captured in actual contract language and signed off on by an authorized vendor officer before a "preferred vendor" is selected. This step is critical to driving value out of the RFP process, avoiding the use of the RFP responses solely as a negotiation starting point, and to expedite the overall transaction negotiation cycle.

Depending on the software being procured and the level of information your organization is seeking, the Directed Procurement process can be used by itself or as a supplement to more traditional feature and function inquiries. Regardless of whether you use a more traditional RFP approach or targeted questioning as recommended in connection with the Directed Procurement Methodology, staff your evaluation team appropriately and leave enough time in your schedule to require follow-up responses from the vendor. You deserve to receive useful answers to your questions and can expect to be disappointed with the initial response provided by most vendors.




Software Agreements Line by Line. How to Understand & Change Software Licenses & Contracts to Fit Your Needs
Software Agreements Line by Line. How to Understand & Change Software Licenses & Contracts to Fit Your Needs
ISBN: 1587623692
EAN: N/A
Year: 2004
Pages: 56

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