Having designed, managed and worked with hundreds of requests for proposals over the years, I have some ideas, based on painful experiences, that suggest more efficiencies are within reach. [more]
Common Data
Most supplier RFPs, especially those for travel management services and airlines, request common, nonconfidential information that can be answered with a couple of keystrokes by each bidder. Examples include the number of operational locations, employees, management by categories, global distribution systems used, back-office systems, aircraft per route and airline Quality of Service Indices. This information is readily available but costly and time-consuming to develop prior to issuing the RFP.
While the concept is not a new one, a common website containing all this data and updated regularly would enhance efficiencies for everyone. I would volunteer to develop and manage such a site. The costs would be minimal compared to those currently incurred by all parties dealing separately with those issues. It is possible that suppliers already are maintaining the beginnings of such a database when keeping tabs on their competitors. Now would be an excellent time to make it readily available.
Organizational Structure
With the aforementioned common data available at a website, prequalification specifications could be used early to rule out questionable or unqualified suppliers. Other location-specific or confidential information, including sales volumes, bank references and available employees for an on-site or off-site service structure, can be addressed in the RFP. Procurement departments usually have a set of minimum specifications that apply across the board for suppliers, and these are useful.
Bids should be required to follow a set sequence, including:
1. A summary of the buyer's business and travel needs, recent volumes, current trends and overall objectives. Buyers cannot assume bidders have much knowledge of those topics, especially the buyer's travel profile and technologies in place. Information on upcoming corporate mergers or sell-offs is particularly important to avoid later surprises.
2. The configuration desired or required. Suppliers should have leeway to innovate if they have a better idea.
3. A standard set of questions that will help evaluate the aspects most important to the buyer. As brevity is key, many questions should require only "yes" or "no" responses.
4. Financial proposals that follow a specific format, using templates included in the RFP appendices. This will allow an apples-to-apples comparison.
5. Mandatory minimum contractual clauses, also included as an appendix. Attaching a full contract can be useful but not really critical, since both sides need some flexibility in negotiations.
Nothing to reviewers is more frustrating than a lack of clear organization. Failure to include page numbers is an unnecessary irritant.
Benchmarking And Confidentiality
RFPs strictly state that confidentiality of company data is required, and bids do too. Does that extend to non-employees or consultants accessing bid pricing? Suppliers usually accept that but may want separate nondisclosure agreements. Actual compliance is difficult to achieve or prove. Also, prohibit use of agreed pricing in your contract for any other bidding. This can fall inside a carefully constructed confidentiality clause in the contract itself.
Aggregating pricing seems to be outside specific NDA language, but this needs to be addressed.
Using Consultants
Third-party consultants, if not conflicted by working directly or indirectly for suppliers, can be valuable due to their exposure to a multitude of bids and analytical techniques. They also can help validate the process with senior management. Cost always is an issue, but to an extent you get what you pay for, so bottom-fishing consultants may be a problem.
Service-Level Agreements
Service-level agreements are critical for agency relationships as well as technology and card programs. Airlines feel they are too hard to manage, but I disagree. Air service and on-time performance can be measured and rewarded or penalized just like agency satisfaction levels and other factors. The weights and dollar impact should be left for negotiation, but bidders can be required to offer their view of what is a fair scale, metrics and suggestions on when to evaluate. During implementation and possibly for the first year, SLAs may not be worth the trouble, although a successful implementation itself can be a year-one factor for reward or penalty.
One initial SLA issue is whether to include positive and negative clauses, or only negative. Some buyers believe only in negative scales, since they are paying for excellence in the basic fees. Others believe positive clauses motivate better results especially for travel management companies that set aside part of dedicated counselors' bonuses. People work harder for more money; it's that simple. SLAs need to be recalibrated in most cases yearly or biannually. Fast changes in the industry require flexibility.
SLAs designed by nuclear physicists don't belong in RFPs or contracts. Best practice is to limit metrics to five or six with some subparts. The most important criteria are satisfaction, complaint rates and account management. Low-fare achievement may be difficult to administer and can be picked up by survey questions and also by periodic audits.
Contracting
The first rule is not to allow non-lawyers to draft the contract. Content can be designed and provisions suggested, but this is a legally enforceable document and deserves legal scrutiny and preparation by licensed professionals.
It's a good idea to include non-negotiable provisions with the RFP and ask suppliers to commit early. Requiring the supplier's lawyers to approve these clauses avoids latter hassles, such as: "I never saw this until it crossed my desk a few weeks before the effective date."
Standardized clauses for buyers can form the early part of the agreement, but the final document needs to contain sufficient detail to be a working arrangement for delivery of service and financial payments.
Suppliers also may have clauses they expect in any relationship, and the earlier these are disclosed and reviewed the better. Do not wait until the last minute (like a week before startup) to close on the contract provisions, pricing, configuration and the SLA. Beginning service without the contract signed costs both sides leverage and risks disruption and wrangling during rollout. There is a vacuum if a dispute arises post-closure and the only evidence of intent is the memory of the parties.
Global contracting also takes more time and involves local input. Data ownership and privacy regulations are especially sensitive and need to be worked out well before the date of service.
This post was first published in the Sept. 12, 2011, edition of Business Travel News.