Are RFP Templates a Viable Tool for Ensuring Optimal Purchasing Decisions?

We recently came by an interesting article on the best practices for creating an RFP template.

Ultimately, when done properly, an RFP template can save buying organizations a tremendous amount of time on several fronts while improving the quality of supplier responses. At least, that is the belief.

However, is the true measurement of a good RFP limited to the above?

In this article, we take an in-depth look at RFP response rates and wins and their potential impact on your making an optimal purchasing decision. Or, to put it another way, we scrutinize an “if you build it (RFP template), they (suppliers) will come (respond)” approach through the eyes of your suppliers.

RFP Templates and Your Supply Base – Know Your Base

Based on the March 2021 article “43 RFP Statistics That Will Help You Win More Bids” by Katie Flood, looking at your RFP process from the vendors’ perspective is critical for success. A good place to start is knowing the response rates to your RFPs.

According to Flood, “organizations respond to 150 RFPs per year.” Twenty percent submit “51-100 RFP responses, 18% submit 101-250 a year, and 30% submit 11-50.”

Larger enterprise companies respond to 266 RFP requests annually; however, they are more selective in choosing which ones warrant their time and resources. In this regard, larger organizations will only respond to “35%–50% of the RFPs they receive—which is low in comparison to the average company’s response rate of 65%.”

This means that knowing the makeup of your supply base, e.g., smaller versus larger companies, and your objectives for engaging them should influence your RFP creation and execution process. For example, if your organization is focusing on building and working with a diverse supply base, you will likely be dealing with smaller businesses with potentially limited resources. In this context, an RFP template that streamlines the process for yourself and your suppliers will increase overall participation levels.

Of course, we are not suggesting that you do not need to develop a good template for enterprise suppliers. While the bigger players tend to have more resources, including a dedicated RFP response team, the fact that they are more discerning means that the structure of your template will influence their decision to participate.

RFP Win Rates

While RFP response rates are an important statistic for your suppliers and, therefore, your organization, win rates are equally important.

For example, in selecting which bids to pursue, many large suppliers “use a strategic framework called a ‘go/no-go process’ that helps predict their likelihood of winning.” When structuring your RFP template, factors such as project insights, team availability, competition, and opportunity value should be considered.

You also need to know the win distribution percentage in your supply base. In this regard, having your winners concentrated to a small percentage of companies can be a deterrent to potential suppliers and erode competition for your business.

Once again, the article referenced in the opening paragraph is helpful as it provides many great tips. However, the ultimate measurement of your RFP template’s effectiveness is if you consistently offer the best opportunity to achieve the desired outcome for your company and your suppliers.