Updated on 23 September 2010
Every organisation feels the need to depend on a few groups or individuals for business sustenance. Transactions are constantly happening between groups, either verbal or written, and proposals floating across aspects.
However, amidst the urgency to get the task done, most organisations, executives or managers overlook certain finer aspects of the transaction process and documents, in particular the RFP (Request for Proposal) details. The Information Technology industry is not an exception to this. IT managers are constantly challenged to make the right choice in terms of the product or technology deployment. Given the plethora of technologies, products and vendors invading the market, IT managers are on the edge of ambiguity.
One of the ways to get it straight and right is to have a clear proposal which is self-explanatory. This is indeed difficult, as there are always discrepancies in any document.
Must Factor in RFP
There are a few ingredients which form a critical part of an RFP design, irrespective of the product, technology or business that one cannot ignore. They include:
a) Organisational overview: the brief about the organisation one represents. This component should include details of primary business expertise, history, net worth, global presence and employee head count.
b) Target audience: clearly addresses as to whom this RFP is meant for. You may want to add industry credentials like ’Looking for an ISO 9001 vendor‘; or look for past implementations like ’Vendor organisations who have undertaken large bridge-building projects exceeding INR 150 crore’. You can also add sector-specific details like ‘Should have worked on multiple government projects concerning micro-finance and credit’.
c) Required deliverables, materials, services and maintenance: this section needs to contain as much detail as possible of the desired outcome from the overall deliverables, services or materials.
d) Providing technical details is mandatory in the proposal, for the vendors to clearly understand the challenges. For example, you need to mention details like capability of flying to the moon and back, should run on clean bio-fuels, and have a maximum speed of at least 1000 km/hr etc.
e) Some obvious assumptions may be excused; however all contractual bindings, agreements should be mentioned here. The selected vendor will not engage in a similar engagement of extra-planetary travel, until the cessation of the contract in 2021.
f) Deadlines, stages and milestones: The entire activity needs to broken down in phases, and each phase should have a clear deadline. It is very important to clearly define this section as it can be linked to payments in stages. Hence you can keep a track of progress, and also budget the outflow accordingly. For instance, assign desired deadlines and percentage payout of the total project bid- Finalisation of design, build prototype, pilot training, crew training, test flight, etc.
g) Realistic deadline for the vendor to produce the final deliverable.
h) Maximum bid criteria: Based on your budgets you need to specify the penultimate monetary figure which you are not willing to exceed for the particular activity. You can also mention a disqualification criteria if any vendors bid exceeds the said value.
i) Award of contract: The selection criteria must be very clear and precise. The criteria may be lowest bid, maximum implementation experience, best industry credentials, maximum subject matter expertise, best third party negotiated prices, etc. While mentioning date of award of the contract is vital, providing multiple contact details is critical.
Credibility at Best
Some of the clauses that should be incorporated and which determine the authenticity of the proposal would be around legal, penalty, personnel, project re-negotiation and modification claims.
Legal bindings on the vendors must be clearly mentioned, e.g. signing of non-disclosure and non-compete agreements; and applicable laws like trade secret, employee health and safety, etc.
Similarly, should the vendor delay the overall project or delivery; you should have a penalty clause in place to protect your organisation from the resultant financial harm. The penalty clauses should be clear in terms of the amount of deviation and the amount (or percentage) or penalty.
For instance, would the vendor forfeit an amount of Rs 10 lakh for every 30 days of delay in the project; or in case the reliability and efficiency of the space craft drop below 99 per cent at anytime, should he be penalised an amount of Rs 50 lakh.”
Vendors may often look to further outsource the work to other parties or consultants for a small margin. Having a personnel clause in place can protect your organisation from these freelance or third parties. It is a good idea to mention a mandate like: “All vendor personnel must have served in the vendor organisation for a period of at least third years” or “All personnel deployed by the vendor are subject to scrutiny like reference checks and technical interviews”.
It is normal for large projects running over a period of 4-5 years, to deviate from the deadline or budget due to reasons which are beyond the control of your or the vendor organisation. To normalise such a loss; you should have a re-negotiation clause to protect the interests of both the parties.
Dhananjay Rokde is Global Head, Information Security, Cox and Kings Group.
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