Funding & Investing

How to ace an RFP

Published: May 2015
Baby wooden blocks on a window ledge

Whether you’re looking for new services and banking partners or updating current systems, a Request for Proposal (RFP) is a core stage in any tendering process. In this article, we look at the building blocks behind drafting, issuing and analysing a best-in-class RFP.

In the world of corporate treasury, there are few ‘one-size-fits-all’ solutions. When looking to implement or update a particular element of the treasury set-up, be it a multi-currency pooling structure or a Treasury Management System (TMS), a choice will need to be made concerning which solution is selected and from whom.

A well-managed request for proposal (RFP) can therefore be an invaluable tool available to the treasurer that – if used correctly – can ease the selection process, and highlight the often nuanced differences between the solutions. And while the RFP process can take time and consume resources, it can provide far better results than an unstructured approach.

In order to simplify the RFP process, it can broadly be broken down into four key stages:

  1. Understanding the requirements of the project.
  2. Drafting the RFP.
  3. Issuing the RFP.
  4. Evaluation and analysis of responses.

This article will look at what needs to be done during each of these four stages in order to construct a best-in-class RFP.

Building a clear picture

The first stage of the RFP process is arguably the most important and the work done here will have a significant impact on the success of the rest of the project. It is at this stage that the treasury will analyse and document its current processes and technology, in order to develop an intimate understanding of them and highlight the issues that need to be solved when implementing the new solution. This analysis will allow the treasury to build a list of key objectives for the project and an outline of how these can be achieved – this will provide a foundation for the rest of the project.

Of course, in many cases it will not just be the treasury that will be impacted by the new solution or service; it is essential to think carefully about which other functions will be affected, if they should be involved in the consultation processes and who could or should benefit. Completing this analysis will allow the treasury to understand who the key stakeholders are.

The first stage of the RFP process is arguably the most important and the work done here will have a significant impact on the success of the rest of the project.

At this stage, the treasury may also want to begin developing an understanding of the strengths and weaknesses of the banks/vendors that they are likely to send the RFP to. While there are many ways that this can be achieved, some of the most common include: attending industry conferences and events hosted by the banks, having informal conversations with other treasurers, using industry studies (such as Treasury Today’s Corporate Treasury Benchmarking Studies) that rank the banks in a number of different areas, and by reading industry publications.

The banks can be contacted directly in these initial stages. For example, it may be a useful exercise to submit a Request for Information (RFI) to some banks that you feel may have the required capabilities. Also, it may be possible for the treasury to have an informal conversation with its current relationship banks in order to understand if it can match the high-level requirements of the new project. During these discussions it is recommended that the treasury clearly states that it will be submitting an RFP to a number of banks and that this initial approach does not mean the bank will be able to secure the corporate’s business without submitting a full response to the document.

The time and effort that is required to complete the first stage of the RFP process appropriately – and in enough detail – should not be underestimated. And of course, if the solution spans multiple geographies and/or business units then the time and resources required will be greater. However, completing the first stage correctly will pay dividends further down the line. If the treasury is able to fully understand its current processes and what it hopes to achieve then it will be able to convey this to the banks in the RFP and ultimately help them to suggest their best solutions.

Drafting the RFP

How the RFP document is drafted will go a long way to ensuring that the banks are able to suggest the best solutions. It is vital from the treasurer’s point of view to ensure that the RFP conveys precisely and clearly what is required according to the circumstances underlying the project. The document should be frank and open but omit irrelevant information. For example, explanations of company structure and other background details should be included only if it helps the banks understand what is needed from the solution.

To clearly convey what is required the treasury will need to go beyond asking basic questions. The questions set out in the RFP have to be considered – and tested – carefully, to see if they are understandable, unambiguous, and likely to yield the type of answers that are sought after. In doing so, the treasury can avoid receiving ‘cut and paste’ answers and potentially irrelevant information. It is worth noting that unless the RFP conveys precisely what is required, the pricing is likely to be skewed; corporates should be aware that adding elements merely out of curiosity or as a demonstration of knowledge could push the cost up.

For some, the size of the RFP document is also a consideration. The logic is that a long RFP – over 50 pages – will potentially be overwhelming and off-putting to the banks. Because of this some argue that the bankers responding may not pay as much care and attention to every question as the treasury may wish them to. A document this length may also contain irrelevant information which, as stated earlier, should be omitted. Yet, there is another camp who argue that the size of the document is irrelevant: the belief being that the quality of (necessary) information contained in the RFP should not be compromised in order to keep the document concise.

Just as the questions need to be clear and precise, so does the layout – no matter the size of the document. It can be very useful if the RFP is broken down into manageable sections, both for the bank and the treasury team when analysing the responses. An introduction laying out the key requirements of the project (and perhaps a contents page for guidance) should be included to assist those responding. The banks should also be given sufficient space for their responses.

Concerning the responses, the RFP should instruct banks to what format they should reply in. This will give the best chance of the answers being in a consistent organisation from all the banks, making comparison easier at a later stage. Planning is required to do this efficiently – the instructions need to be prescriptive enough to allow comparisons, but not so restrictive as to stifle banks’ creativity and style. In particular, it may be possible that a bank offers solutions which were not anticipated; space and flexibility may be required in order for them to express this. Moreover, banks pricing structures may vary, so if a corporate is too prescriptive in its demands a comparison may actually be made more difficult.

Issuing the RFP

The response to an RFP will be lengthy – a minimum of 40 pages but maybe as many as 200. It is unsurprising, then, that when issuing an RFP it is often recommended to limit the number of banks invited to provide responses. Of course, the more invited to provide responses the more difficult it is to make a comparison but the bigger the list, the greater opportunity to find the most appropriate partner. This is a common conundrum for treasurers engaged in the RFP process.

It is however possible to build in mechanisms that do not limit the amount of RFPs that can be sent out, but does limit the amount of responses that are sent back. For example, the method described by Horan in the case study: including a list of key criteria at the start of the document that has to be matched, in order for the bank to be considered, is one such technique.

When issuing an RFP, the treasury should also include a timeframe for the banks to adhere to. This should be a realistic timeframe for the vendor to respond and with enough detail – this will vary depending on what the RFP is for and how many locations or business entities it covers.

Making sense of the responses

Once the document has been drafted, issued and the responses have been collected, the next stage of the process is transforming the collected data into business intelligence. To do this each individual RFP should be reviewed in detail, hopefully giving a clear demonstration of each vendor’s capacity to add value and differentiate itself and, in some cases, address issues that may not have been raised in the RFP.

The information that is provided by each bank will be different and will need to be placed on an even footing. Ideally, and depending on the size of the project, a well-crafted set of questions should enable the project team to consolidate answers on a single spreadsheet, allowing a quick view of scores for each aspect. To adequately score the responses, it is common practice to ‘weight’ each section according to its relative importance. This ensures that the overall score reflects those values, and that the outcome is not unduly influenced by an aspect that is of lesser importance. There are various methods of reaching a final score, but in any case the chosen model should be agreed upon before starting to assess responses, to avoid any confusion or disagreement.

In the end, the decision may come down to which vendor the treasury team feels most in tune with or even price, but the RFP will have provided most of the technical information needed to be able to make the decision with confidence.

Beyond the RFP

Once all the information has been collected and analysed, it is recommended that the treasury meets with its preferred choices to iron out any remaining creases. It is then up to the treasury to make its final decision. But even after this has been made, the usefulness of the RFP doesn’t end. It can be retained as the basis upon which the implementation of the solution is measured and monitored. It can also be referred to should the bank fail to live up to its original promises.

At the end of the process, those involved will also want feedback – regardless of whether they won or lost the contract. Here, the RFP plays an important role in ensuring that the treasury communicates how it came to its conclusions. This review process is not just important for the banks, but also the treasury who can analyse what was done well (and what can be improved on), making for a smoother RFP process in future and one that is more likely to obtain the best services available.

Case study

The RFP as a relationship tool

Trevor Horan

Treasurer, Global Cash & Liquidity

While some treasurers may simply see the RFP as a functional tool that allows the treasury to understand its different options and make an informed decision when implementing a new solution, Trevor Horan, Treasurer, Global Cash & Liquidity at Kerry Group, believes it can be more than this – and, in fact, that it can be an effective relationship management tool.

For Horan, the key to achieving this is to make the RFP process open and transparent. The openness derives from ensuring that the tendering process is open to all banks (something which some may argue is ill-advised given the additional workload this creates for the treasury). For Horan, this is misguided. “I believe that all banks that the company has a strong relationship with should be offered the opportunity to win the business. By doing so, we demonstrate that we value their support and the relationship we have. We are also not limiting our options.”

Of course, like all treasurers, Horan does not want to have to sift through endless RFPs. So instead of not inviting banks to take part in the RFP process, Horan has built in a mechanism that reduces the amount of responses the treasury gets to its RFP. “At the start of the RFP document, just after the index, we include a list of key criteria that has to be matched,” he says. “If this criteria cannot be matched then we suggest that the rest of the document is not completed. This is where being transparent about the process prevents the banks from wasting time filling out the document and also reduces our workload when it comes to analysing the responses.”

We also make sure that those involved in the tendering process know who else has been invited, who has made the shortlist and who we are moving the process forward with,” he adds. “By doing this there are no secrets between us and our key counterparties, something that is appreciated by all involved.”

After the RFP process has been carried out each respondent is also given the opportunity of a full de-brief of their proposed solution in due course. “The feedback from banks to this de-brief has been extremely positive, it helps them understand why their solution was not selected and maintains strong relationships, something that is very important to Kerry Group,” says Horan.

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