A Winnipeg-based management consultant says it’s time to rethink the way we award contracts for professional services.
Speaking at TEDxWinnipeg at the Tom Hendry Warehouse Theatre on June 4, Cal Harrison argued in favour of scrapping the Request for Proposals (RFP) system. Instead he favours a Qualifications Based Selection (QBS) when it comes to awarding contracts to experts, including architects, engineers, lawyers, accountants, management consultants, advertising agencies and market research firms, among others.
“We hire our experts based on low price,” Harrison says. “What we should be doing is hiring experts based on the most-qualified person or firm available.”
Harrison says the RFP system does not guarantee the best quality job and routinely ends up in spiralling final costs.
“Everyone writing a proposal in response to an RFP is going to be focused on the only critical defining factor that will determine the award of that contract, which is low price,” Harrison says. “Innovation goes away and value goes away because you have to interpret the project as the least viable, smallest, cheapest project.”
Harrison notes that as a country we’re over 40 years behind our southern neighbour in basing publicly contracted work for architects and engineers on qualifications, not low price.
“Since 1972, QBS has been required by law in the United States when hiring architects or engineers for federal government projects,” Harrison says.
He recommends we go about selecting an expert for a project the same way we’d look to hire one as an employee.
“Define the requirements for the job and the qualifications required by the best candidate,” Harrison says.
Harrison even recommends sharing budget information and then shortlisting the top candidates, interviewing them and then negotiating with the company you want to hire.
“That’s why you get really good value and innovation, because you can have that conversation, not someone blindly forwarding a written proposal and trying to guess at the lowest price,” Harrison says.
“You get more accurate pricing, you get fewer surprises and that’s a good thing.”
Harrison says billions are wasted annually in the amount companies spend to create RFP proposals and on what it costs to process the bids. He says professional firms can routinely spend $20,000 to prepare a proposal, even for jobs worth less than $100,000 if the firm was to win the bid. Considering that dozens of firms may bid on one job, hundreds of thousands of dollars are routinely spent on a single RFP, he says.
“You have to remember that you are paying for this inefficiency,” Harrison says.
“We need to change our philosophy around how we hire these very important people and get them doing important things instead of writing proposals that go in the recycling bin.”
MTS is a Silver sponsor of TEDxWinnipeg.
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