Vendor Goes Berserk and Demands "Where's My Reward!?"
I had one of my senior staff come to me to make me aware of a vendor "situation." The situation resulted from a lengthy competitive bidding process that this staff person had been managing. The expected spend was close to a million bucks--so it was a good-sized deal. Our internal customer had a project where the requirements weren't well defined, so we issued an RFI (request for information) to a number of vendors. As usual, my staff person (a "he") gathered all of the responses to the RFI, reviewed them with the customer, and then developed an RFP (request for proposal) with detailed requirements that was sent out to pretty much the same group of vendors as was the RFI.
We use an RFx template that can be tailored for use as an RFI or an RFP. The boilerplate language in the RFx template includes the following statement relating to the cost of responding to the RFx, "The issuance of this document and the receipt of information in response to this document shall not in any way cause [My Employer] to incur any liability or obligation to Respondent, financial or otherwise. [My Employer] assumes no obligation to reimburse or in any way compensate Respondent for expenses incurred in connection with Respondent’s response to this document."
Just to be really clear with the vendors, in another section of the RFx, it is stated that, "The entire cost for the preparation of a response, the attendance at any subsequent conferences or sessions (as further described below), or participation in negotiations (if conducted) shall be borne by Respondent."
In the section of the RFx describing the evaluation criteria, there's a section that states "[My Employer] reserves the right to make a contract award without any further discussion with the Respondents regarding the responses received. Therefore, responses should be submitted initially on the most favorable terms available to [My Employer] from a price, contractual terms and conditions, and technical standpoint. [My Employer], however, reserves the right to conduct discussions with Respondents who submit proposals that pass the initial screening process of this document. [My Employer] is not under any obligation to reveal to a Respondent how a response was assessed or to provide information relative to the decision-making process."
In summary, what that boilerplate means is that the vendor is taking on some expense in responding to an RFx that may ultimately be awarded to some other vendor for any reason whatsoever. I could be wrong, but my 15 years of professional experience in procurement tells me that this is pretty standard in the world of commercial competitive sourcing. If the vendors don't want to "place their bets," they can decline to respond to the RFx.
My staff person, being the professional that he is, conducted the pre- and post-proposal conferences in a fair and unbiased manner. To ensure continued competition, my staff person proceeded to negotiations with two finalists (Vendor A and Vendor B). Vendor B was not entirely compliant with the RFP instructions: we had asked for audited financial statements and redlines to our contract template (which we always include in our RFx templates that we send out). Despite this, my staff person elected not to eliminate Vendor B, although he did repeatedly ask for those two requirements to be fulfilled by Vendor B (to no avail).
During the negotiation process--at the "best and final offer" stage--my staff person repeatedly gave non-proprietary and non-confidential "guidance" to Vendors A and B as to how they could make their proposals more competitive. Vendor A listened up and Vendor B, uh, not so much. Consequently, my staff person spent even more time with Vendor B (than Vendor A) in helping them sharpen their proposal--one could argue that doing so was unfair to Vendor A...
As much as possible, I like to "processize" everything I and my staff do--including vendor correspondence during a competitive bidding project. Typically, when we notify a vendor that we have elected not to continue negotiations with them on a competitive bid, we send out a form e-mail that reads as follows:
Subject: Notice of Finalist Non-selection ~ [Name of RFP] RFP
Your company has not been selected as the finalist Respondent to [My Employer]’s [Name of RFP] Request for Proposal (RFP). [My Employer] appreciates the time and effort of your company in providing a response to the RFP. Please note that the communication protocol described in the RFP is still in-force. [My Employer] is unable to provide specific non-selection information until the contracting process with the final Respondent has been completed. Following such completion, [My Employer] will make a determination as to whether to provide non-selection information.
Basically, the e-mails says that "hey, we're busy right now, but at some point we may be willing to provide you with information as to why you lost the bid." I understand the pressure that sales people have on them, so the e-mail is also intended to help them out a little bit with their bosses.
Ultimately, Vendor B wasn't selected due to price, functionality / capability, and unwillingness to comply with the other RFP requirements (such as providing the financial statements). Unfortunately, when we ask for things like audited financial statements and redlines to our contract templates, we mean business. Or, when we give BAFO guidance, and vendors elect to ignore it, we also mean business.
Because this particular RFI / RFP process had been lengthy and required some interaction with the vendors that was a bit more than normal, my staff person decided against sending the form "notice of finalist non-selection" e-mail to Vendor B. Instead, he got with the internal customer and had a conference call with Vendor B rep to notify that the vendor had not won the business and why the vendor had not won the business.
Apparently, that wasn't good enough for the vendor. I really do feel for the vendor not winning the business (despite all of our efforts to guide the vendor) but that's not an excuse to go on an emotional tirade--which Vendor B proceeded to do with both my staff person and the internal customer. In the conversation, the vendor rep went through a broad range of emotions (expressed in words) from anger to indignation to pleading. At one point, the Vendor B rep repeatedly demanded "Where's my reward!?" for the work it had done on its RFP proposal. On the pleading part of the call, I guess the vendor was willing to offer a better deal when told of the bad news than its absolutely best and final offer given before. Oops.
No one likes to deliver bad news face-to-face, but my guy was professional enough to have a conversation instead of sending an e-mail--only to get blasted for it. The calls with Vendor B didn't end there, but I'll spare you the details...
The good news is that I have known of this type of tirade happening to me or my folks only a few times over my career. Most vendors are extremely professional (to our face; I'm sure they're cursing us behind our backs) when they get the bad news and many are very appreciative to learn why they weren't awarded the business.
The other piece of good news is that Vendor B didn't get the business, and that hard-working, pencil-sharpening, low-maintenance Vendor A won the business fair and square. By the way, Vendor A's price hardly changed from the beginning of the negotiations to the end--but Vendor B's did. Apparently, Vendor A really read our RFI and RFP and paid heed to the statement in the RFP that said "Therefore, responses should be submitted initially on the most favorable terms available to [My Employer] from a price, contractual terms and conditions, and technical standpoint."
Kudos to my staff person and Vendor A!
We use an RFx template that can be tailored for use as an RFI or an RFP. The boilerplate language in the RFx template includes the following statement relating to the cost of responding to the RFx, "The issuance of this document and the receipt of information in response to this document shall not in any way cause [My Employer] to incur any liability or obligation to Respondent, financial or otherwise. [My Employer] assumes no obligation to reimburse or in any way compensate Respondent for expenses incurred in connection with Respondent’s response to this document."
Just to be really clear with the vendors, in another section of the RFx, it is stated that, "The entire cost for the preparation of a response, the attendance at any subsequent conferences or sessions (as further described below), or participation in negotiations (if conducted) shall be borne by Respondent."
In the section of the RFx describing the evaluation criteria, there's a section that states "[My Employer] reserves the right to make a contract award without any further discussion with the Respondents regarding the responses received. Therefore, responses should be submitted initially on the most favorable terms available to [My Employer] from a price, contractual terms and conditions, and technical standpoint. [My Employer], however, reserves the right to conduct discussions with Respondents who submit proposals that pass the initial screening process of this document. [My Employer] is not under any obligation to reveal to a Respondent how a response was assessed or to provide information relative to the decision-making process."
In summary, what that boilerplate means is that the vendor is taking on some expense in responding to an RFx that may ultimately be awarded to some other vendor for any reason whatsoever. I could be wrong, but my 15 years of professional experience in procurement tells me that this is pretty standard in the world of commercial competitive sourcing. If the vendors don't want to "place their bets," they can decline to respond to the RFx.
My staff person, being the professional that he is, conducted the pre- and post-proposal conferences in a fair and unbiased manner. To ensure continued competition, my staff person proceeded to negotiations with two finalists (Vendor A and Vendor B). Vendor B was not entirely compliant with the RFP instructions: we had asked for audited financial statements and redlines to our contract template (which we always include in our RFx templates that we send out). Despite this, my staff person elected not to eliminate Vendor B, although he did repeatedly ask for those two requirements to be fulfilled by Vendor B (to no avail).
During the negotiation process--at the "best and final offer" stage--my staff person repeatedly gave non-proprietary and non-confidential "guidance" to Vendors A and B as to how they could make their proposals more competitive. Vendor A listened up and Vendor B, uh, not so much. Consequently, my staff person spent even more time with Vendor B (than Vendor A) in helping them sharpen their proposal--one could argue that doing so was unfair to Vendor A...
As much as possible, I like to "processize" everything I and my staff do--including vendor correspondence during a competitive bidding project. Typically, when we notify a vendor that we have elected not to continue negotiations with them on a competitive bid, we send out a form e-mail that reads as follows:
Subject: Notice of Finalist Non-selection ~ [Name of RFP] RFP
Your company has not been selected as the finalist Respondent to [My Employer]’s [Name of RFP] Request for Proposal (RFP). [My Employer] appreciates the time and effort of your company in providing a response to the RFP. Please note that the communication protocol described in the RFP is still in-force. [My Employer] is unable to provide specific non-selection information until the contracting process with the final Respondent has been completed. Following such completion, [My Employer] will make a determination as to whether to provide non-selection information.
Basically, the e-mails says that "hey, we're busy right now, but at some point we may be willing to provide you with information as to why you lost the bid." I understand the pressure that sales people have on them, so the e-mail is also intended to help them out a little bit with their bosses.
Ultimately, Vendor B wasn't selected due to price, functionality / capability, and unwillingness to comply with the other RFP requirements (such as providing the financial statements). Unfortunately, when we ask for things like audited financial statements and redlines to our contract templates, we mean business. Or, when we give BAFO guidance, and vendors elect to ignore it, we also mean business.
Because this particular RFI / RFP process had been lengthy and required some interaction with the vendors that was a bit more than normal, my staff person decided against sending the form "notice of finalist non-selection" e-mail to Vendor B. Instead, he got with the internal customer and had a conference call with Vendor B rep to notify that the vendor had not won the business and why the vendor had not won the business.
Apparently, that wasn't good enough for the vendor. I really do feel for the vendor not winning the business (despite all of our efforts to guide the vendor) but that's not an excuse to go on an emotional tirade--which Vendor B proceeded to do with both my staff person and the internal customer. In the conversation, the vendor rep went through a broad range of emotions (expressed in words) from anger to indignation to pleading. At one point, the Vendor B rep repeatedly demanded "Where's my reward!?" for the work it had done on its RFP proposal. On the pleading part of the call, I guess the vendor was willing to offer a better deal when told of the bad news than its absolutely best and final offer given before. Oops.
No one likes to deliver bad news face-to-face, but my guy was professional enough to have a conversation instead of sending an e-mail--only to get blasted for it. The calls with Vendor B didn't end there, but I'll spare you the details...
The good news is that I have known of this type of tirade happening to me or my folks only a few times over my career. Most vendors are extremely professional (to our face; I'm sure they're cursing us behind our backs) when they get the bad news and many are very appreciative to learn why they weren't awarded the business.
The other piece of good news is that Vendor B didn't get the business, and that hard-working, pencil-sharpening, low-maintenance Vendor A won the business fair and square. By the way, Vendor A's price hardly changed from the beginning of the negotiations to the end--but Vendor B's did. Apparently, Vendor A really read our RFI and RFP and paid heed to the statement in the RFP that said "Therefore, responses should be submitted initially on the most favorable terms available to [My Employer] from a price, contractual terms and conditions, and technical standpoint."
Kudos to my staff person and Vendor A!
Do you insist on a vendor providing you with audited financials, even if the vendor is a public company, and the financials are freely available at www.sec.gov and other public websites? If so, why? In large contracts, I frequently see a provision requiring the vendor to submit quarterly unaudited financials (!!) within a certain number of days, in accordance with GAAP rules, to be followed by audited financials. To me, this is an unnecessary administrative burden, since if a customer ever has a reason for concern, the customer can simply check the public filings. Could you please comment?
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Elva,
Good catch! Yes, the audited financial statements are only required from companies that do not have public filings in the U.S. In either case (public or private financials), we use the handy-dandy Z-Score (covered in an earlier blog article of mine) to calculate the financial viability of the vendor. We're also interested in the funding of a vendor. For example, venture funding indicates that the vendor will be sold very, very soon--which may or may not be a concern of ours.
Thx!
Stephen
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