Sometimes Requests for Proposal (RFPs) or tenders are clear, detailed and provide the right scope of information to attract great vendors. Others are more challenging. Writing an RFP or tender can be a daunting task. You need to ensure that bidders have the capability to complete the job properly, on time and at a competitive cost.
Here are 12 tips to writing an effective RFP or tender to ensure you get a fair and accurate price from qualified bidders.
1. Ensure Your Scope of Work Is Detailed
The more detailed the scope of work, the more complete and accurate the bids will be from submitting contractors. It’s important to identify all aspects of the project — what’s included and what’s not included in the scope of work — and list them categorically in your RFP or tender to avoid misunderstandings at a later stage. Ensure that bid form line item descriptions exactly match the specification descriptions in a paid item. Read through and adjust statements to avoid contradictions or vagueness between the bid form and the specifications.
Detail accurate field conditions. Often there is no mapping available to show where the infrastructure resides and whether there is access (e.g. are the sewers in fields, river valleys or covered with sheds, etc.?). Municipalities should have a general plan, but good mapping should be included with the scope of work. Identify and list all aspects of the project, like site preparation, access and any other possible pitfalls that might affect the job.
2. Risk Sharing Should Be Fair and Reasonable
If you decide to download all risk into the RFP or tender, then you must expect prices to be higher, because bidders must make provisions to cover that risk. If your RFP or tender includes reasonable risk limits or caveats, then you can expect bids to be adjusted accordingly.
Whoever has the most control over the risk should take the lead on managing that risk. If all the risk falls on the bidder, then you should expect a smaller number of bids or bids that are inflated — sometimes by orders of magnitude — to cover the risk. There is also the possibility of some contractors just throwing the dice. For example, if part of the work is within an easement and inaccessible without special measures, the bidder that prices higher in order to include a road, loses the job; while the bidder that assumes a road is out of scope will tilt on job day and say a road is not part of the bid. If your bid allows for rolling of the dice, either the owner or the contractor ends up losing.
3. Review Historical Bid Results
Does your RFP or tender have a history of a large variation in pricing? If so, it’s likely that different contractors are interpreting different levels of risk in your specifications, or are simply not understanding what you want done. Have a hard look at your specifications and/or ask for feedback from the contractors to get a better understanding.
You should also review similar past projects and get a debrief from the project manager to identify what worked well and what didn’t. With a clear understanding of the bid prices from similar jobs in the past, work within these parameters to determine pricing for certain bid items and establish which areas of the RFP or tender need to be revised.
When there is a large spread in bid prices, awarding the contract to the lowest bidder is risky and often means someone is going to lose out — a sure sign that the specifications need work.
4. Align Insurance Coverage with the Project Risk
Sometimes insurance needs aren’t clearly stated in an RFP or tender. Environmental insurance is a good example; there are environmental impairment, pollution, and more coverage types to consider. You must be clear on which insurance you need and what type of coverage is required to match the risk of the project. Add insurance as a detailed line item in the RFP or tender, then contractors will be able to plan for that upfront cost. Don’t over ask for insurance — it can become very expensive, and in the end, factored into your costs.
5. Specify Reasonable Maintenance and Warranty Timelines
Some RFP documents have a holdback requirement for an extended period of time. You must accept that the infrastructure will get older, dirtier and it will be harder to confirm that the work done is still in order after the holdback period. If the maintenance and warranty inspections are one or two years after the work is done, they should be separate line items and everything included should be itemized. For example, if the contractor needs to clean the pipe for inspection, it will cost you. A clearly defined warranty and maintenance scope of work is needed. Get specific.
6. Create Accurate Specifications for Accurate Bids
Verify the technical specifications. It’s important to review the entire RFP document for inconsistencies and make sure the specifications are accurate. Some municipalities cut and paste sections of RFPs from other sources, resulting in discrepancies on technical issues. In order to ensure accuracy, more progressive cities send out draft specifications to contractors for their input. The more transparency there is, the better and more accurate the final document will be.
7. Differentiate Between Product vs Performance Specifications
Often an RFP or tender will have very specific requirements that are unique to a product or process, and that will limit the competition, resulting in very few bids. You must differentiate between a product vs a performance specification. Request a technical submission as well as a performance specification sheet as part of your document.
Just like larger municipalities, the smaller ones have started looking at technical submissions that accompany bid documents, and depending on the complexity of the work, this might become part of the evaluation criteria. Every company has their own products and processes which have different attributes and lifespans associated with them. For this reason, requesting a performance specification document along with a technical submission is very important.
8. Reference Industry Specifications Whenever Possible
Product manufacturers spend a lot of time and effort meeting industry specifications such as OPS, ASTM, NSF and ANSI to name a few. Contractors choose products for their services based on ability to meet these criteria, knowing that engineers design and specify to these standards. Consider the scope of work and determine which applicable standards you would like to see followed, and be sure to specify these in the document.
If you include the wording, “or approved equal,” specify who and when the approval will be granted by, or state that any “approved equal” must be approved prior to bid closing. Industry specifications are extensively scrutinized and peer reviewed before publication and require years to get approval from the relevant industry organization, use this pre-approval to your advantage.
9. Look to Provide Multi-Year Contracts
Avoid short contracts. You must understand that longer contracts with performance extensions are better for all parties concerned. Go for multi-year RFPs or tenders that extend the period of a contract based on performance, not for just one year but a longer term. The contractor will be able to amortize equipment costs over a longer period of time and be able to offer better pricing.
10. Include a Minimum Bar to Qualify
Be sure the contractor can deliver. An RFP or tender should include a minimum bar to qualify to bid, which can include technical experience, equipment age and suitability, size and experience of the workforce, investment in technology and more. This helps weed out those who should not otherwise submit a tender. Go with a two envelope system — one for technical information and experience and a second for pricing. More and more cities are opening pricing envelopes only from qualified contractors.
Look towards industry organizations such as NASSCO and NASTT to point you in the right direction and help you identify companies that can really do the job. If a contractor doesn’t meet certain minimum criteria, their bid shouldn’t even be disclosed to the decision makers.
11. Don’t over Complicate Payment Terms
Specify the payment structure in the RFP or tender and how many days it’s going to take to pay. On complicated projects, payment terms are often tied to another contractor’s work being completed, which can result in payment delays due to circumstances beyond the bidder’s control. Overly complicated payment terms can result in fewer bids. This is an important part of the RFP to your bidders. Keep payment terms as clean as possible.
12. Be Transparent and Keep the Lines of Communication Open
After you have closed the bidding, keep communication channels open. The bidders have spent a great deal of time and effort putting their document together, and delays will not guarantee they will have assets standing idle while you make your decision. By communicating with bidders, you can give feedback on whether they are still being considered, and perhaps even give them a deadline, so when selected they can get to work on your project in the timeframe you need.
Compiling an effective and accurate RFP or tender is an intensive exercise. Follow these 12 tips and you can expect a fair and accurate price from qualified bidders.