Traditional RFPs:
Inefficient and Inequitable

It’s time for us to reconsider the traditional Request for Proposals (RFP) process in the nonprofit world. 

The current process was designed for the needs of giant nonprofits and large, traditional vendors. It doesn’t help organizations cast a broader net that includes smaller, women or BIPOC-owned firms, or scrappy but excellent ones that could do projects for less money. Tens of millions of dollars are spent across the sector solely on writing proposals, an invisible cost that’s embedded in the price tag of every project that’s awarded via RFP. 

So, that’s a bold claim. What’s so wrong with RFP’s, and what should we do instead? Read more… or you can just skip to the recommendation by downloading the Request for Information template I created in partnership with Prosal (free registration required).

What’s Wrong with RFPs?

Having been involved in both writing numerous RFPs and bidding for even more, I’ve invested hundreds of hours thinking about them. Certainly, far more hours than I (or most people) enjoy! But the problems with the process go well beyond the fact that it’s cumbersome: it’s deeply inefficient and inequitable. Why?

• Writing an effective RFP is hard. Creating a solid RFP takes time and familiarity with the type of project you need. Most organizations have neither extra time or the subject matter expertise to craft an RFP that’s detailed enough to provide a solid base for a project estimate. That means in many cases the organization needs to hire a consultant to write the RFP, or (more typically) the RFP doesn’t provide a solid foundation for the project.

• Writing a good proposal is time consuming.  Writing a solid proposal to respond to an RFP, including a suggested process and an estimate, takes a lot of time—from four to eight hours for a mid-sized project to way, way more. The less detailed the RFP is, the more clear the proposal needs to be, to ensure there’s solid documentation of what’s being proposed for how much money. 

• Great firms are busy, and may not respond to widely distributed RFPs. The best vendors are already really busy. They have many projects, and they usually get new work from their existing clients or word of mouth. There’s no reason to spend a lot of time on a proposal with a low likelihood of success.

• Smaller, lower-cost firms can’t afford to respond to many RFPs. Smaller firms that could do a great job at a lower cost don’t typically have staff to focus on getting new clients. They have less time to write proposals, especially when the RFPs are vague and it’s riskier to propose.

• Which means Women and BIPOC owned firms are less likely to respond. Women and BIPOC-led firms are disproportionately smaller than large traditional firms. Which, following from above, means they’re less likely to have staff dedicated to answering RFPs.

• Millions of dollars are wasted on fruitless RFPs. Let’s say that an average RFP draws 10 responses, and only five of those firms really had a shot at that project (this is generous). I’ll invent a plausible number of RFPs issues per year in the sector: let’s say  10,000 RFPs. That’s 5000 fruitless proposals written, at perhaps an average of 8 hours each. At even $60/hr, that’s $24 million dollars. All of which drives up the price of every single project in the sector.

• A significant portion of each project is spent on the RFPs process. Or slicing those numbers a different way, if you divide $24M by those 10,000 RFPs, that’s thousands of dollars per project that goes to supporting the infrastructure to write fruitless proposals. Nearly every firm would be overjoyed to not spend that money on proposals and instead do projects at a somewhat lower hourly rate. 

So putting a RFP out into the world—especially one that isn’t carefully honed by someone familiar with what it takes to do that project— is less likely to result in proposals from exactly the types of firms you likely want to work with: high quality, busy firms, with lean sales overhead, potentially women and BIPOC lead. You’re more likely to get proposals from large firms with proposal machines and high marketing overhead. These large firms may be dependable, or even great, but they’re certainly not the only option.

If you think of the process of hiring a consulting firm as you would hiring an employee, you can see how out-of-whack the expectations in a RFP are. We of course expect a job candidate to submit a resume and cover letter, and perhaps something a little more tailored to the organization. But if the application requirements are too much— for instance, if we ask them to do eight hours worth of work to even apply—we’ll dramatically limit the pool of applicants. 

What are We Trying to Achieve?

Let’s rethink this process. As any good consultant would recommend, let’s start with our goals. What is an organization trying to achieve with a RFP process?

1. To make connections with firms that they may not have heard of

2. To understand how a range of firms think about the project

3. To find firms that have compelling background and expertise

4. To understand a price range for the project

5. To choose the best firm for the project

6. Minimizing their own time and risk while doing the above

The traditional RFP process fails at most of these goals. This is because a number of the most compelling firms won’t submit a process, as described above. They’re the firms too busy doing great work based on word of mouth to answer the RFP. Or the smaller ones, disproportionately women or minority owned, that can’t afford to gamble eight or more hours on a proposal. We are, as a sector, trying to do #6— minimize time and risk— so much we’re failing at pretty much every other goal. 

But by separating these goals into two sets of goals, we can start to get to a more compelling process. Let’s first find and get an introduction to a range of firms (#1-3), and then understand costs and ask for detailed information about the process vendors would use for the specific project.

A Request for Information Process

I recommend a Request for Information (RFI) process. This process exists in various forms, but I’ve tailored one to address inherent issues in the RFP process without introducing a lot of additional risk.

The goal of the RFI is to collect information from potential firms, most of which they already have written. The response to a RFI is a Letter of Interest (LOI), which serves the same function as a resume with a cover letter when you’re hiring for a job. Job seekers have resumes and know how to write cover letters; an hour or two of tailoring it to the job is all that’s needed. Similarly, a vendor has most of the information for an ROI, and they can answer a few specific questions and tailor their information to your needs in an hour or two. 

What should you include in your Request for Information document? Download a detailed template (free registration required)

• What you’ve defined about the project. Provide an overview, goals, timeframe, and what you’ve defined as important to you

• A budget range. Your budget is critical, even if it’s quite a large range. Vendors don’t know if you have $2K or $50K or $2M, and it’s frequently quite difficult to tell from a project description.

• A few straightforward questions.The goal is to understand their approach without them spending hours planning out your project or writing volumes of new text. For instance, you might ask them for details about a process they’ve used for a project like yours, or what they feel will be the trickiest aspects of your project. 

• Ask for case studies of their most relevant projects. Case studies provide a great summary of their experience, what they think is relevant and worth bragging about… and vendors typically have them already written.

It’s critical that you don't ask for a budget for your project. As soon as you add that in, you have a RFP in disguise. For most firms, a budget needs to be tied to a detailed scope and estimated specifically for your proposal, or there’s a lot of risk to the vendor. So you’re back to the old RFP process: many firms will decline to submit.

After you write the RFI, this RFI process starts to look a lot like a process for hiring a new employee, with your RFI as the job description and an LOI as the cover letter/ resume. That’s not a coincidence - they’re both reasonably equitable processes for forming a relationship.

• Post your RFI widely. Give firms about two weeks or more to see it and respond

• Scan the resulting Letters of Interest (LOIs). Yes, you’ll get more LOIs than you would get RFPs. But you’ll likely be able to quickly scan them to discard a number that aren’t a good fit— just like you would with resumes. From there, read more closely to find a set of vendors that you’re interested in talking to further. Take a look at their websites for more information.

• Potentially, schedule phone calls with candidate vendors. You could talk to a number of firms briefly and then do another round, or you could start with a shorter list and do more in-depth interviews. 

• Ask for a budget and schedule in writing. When you’ve narrowed down your list to a few firms … that’s when you ask two or three firms to send you a formal proposal with a budget and schedule. Vendors will now spend the time to carefully think through the right process and estimate a budget that will stick, because they know they have a substantial shot at the project.

Will this RFI process take nonprofits more time than a typical RFP? It’s possible, but with less time devoted to creating a detailed RFP, and less trouble with budgets down the road because the vendor estimated from an unclear RFP, it’s as likely it will take less time. 

Regardless, the RFP process isn’t achieving the goals that nonprofits want them to achieve. And it certainly isn’t effective or equitable. We need to move to a new process that makes wider outreach a priority and saves the whole sector money in the long run.