Requests for Quotes (RFQs)
Since the advent of major procurement reform, the federal government and selected state and local governments are now using requests for quotes (RFQs) to buy commercial products and services. The RFQ procedure is a simpler, more streamlined way of making a buy. Specifications are based on standard commercial definitions, rather than lengthy government-written specifications.
Awards following RFQs usually go to the low bidder — but not always. In most jurisdictions, buyers are allowed to conduct a “best value analysis” and issue an award on the basis of that analysis. Some factors that a buyer will typically consider:
- Special features of the supply or service required for effective program performance
- Trade-in considerations
- Probable life of the item selected as compared with that of a comparable item
- Warranty considerations
- Maintenance availability
- Past performance
- Environmental and energy efficiency considerations
As you can probably surmise, use of best value analysis has a major impact on the sales process.
Some government procurement regulations allow the use of brand name in the RFQ, but, more and more, the use of brand name is being discouraged. Even when brand name is mentioned in the specifications, the regulations usually require a general description of the physical, functional, or performance characteristics of the brand name, along with a statement that an “equal” item that meets the description will be acceptable for award.
At the state or local levels, consult the purchasing regulations of the jurisdiction posting the RFQ to determine if the government uses best value analysis and, if so, what non-price factors are considered in conducting the analysis.
At the federal level, FAR §§ 8.404 (b)(2) (best value direct ordering factors under Federal Supply Schedules), 13.106-2(b), and Subpart 15.1 (Source Selection Processes and Techniques) are worth reviewing to get a better understanding of buyer best value guidelines. (ARNET is a good place to read the FAR: http://www.arnet.gov/far/loadmainre.html.)
Selling in the RFQ Market
What’s your strategy when best value analysis is applied to the price?
Obviously, find out what factors the buyer is allowed to consider and emphasize the features in which you’re strongest — warranty terms or maintenance availability, for example. Don’t hesitate to ask the buyer what factors she’ll be considering. The answer can help you determine what to stress in the bid and, equally important, not to bid at all if you don’t quite measure up in those critical factors and features that are important to the buyer.
A “no bid” is a strategic decision that can save sales dollars, not to mention disappointment. Successful government sales units consider making the intelligent no bid decision a critical part of what they do.
Although simplistic, the saying “Only sell to people who are ready to buy your product” rings true in making no bid decisions.
Frequently, you’ll have to sell an end-user aggressively to overcome “brand preference.” For example, assume that you sell a product that is not a nationally known brand. Just like you and me, buyers are often subject to brand preferences.
Branding is accomplished with big money, national advertising, and large aggressive sales forces. When going up against all that, make sure that you stress local accountability (you’re there at a moment’s notice, etc.), customer service, replacement product availability, and warranty terms.
Selling Services Specified in an RFQ
Prior to procurement reform, services that could be purchased using a fixed price procedure were bought using invitations for bids (IFBs). Services are often purchased now using RFQs, at least in cases where the services performed can be expressed in units — e.g., dumpsters emptied, hours of work, etc.
In large fixed price service procurements, you should sell the quality and effectiveness of your service, along with your ability to manage the delivery of the service. You’ll need to focus heavily on your past successes, mainly because service pricing is so subjective and difficult for the government to evaluate. For example, how does a buyer decide whether a computer programmer is worth $150 per hour without first hiring the programmer and evaluating his work? Is a researcher with a master’s degree worth $50 per hour more than one with a bachelor’s degree? Who knows?
In the end, the most important factor is trust. Generally, end-users want to know about the company (its work, its reputation, its personnel) before deciding to hire.
Selling Ahead of the Procurement Announcement
Throughout this installment series we’ve stressed the importance of selling ahead of the procurement announcement. In the case of current government customers, keep them happy and ask them what’s coming down the road. Perform well, in other words, and work hard to find new business with those same customers. Keep the flow of business coming. There are few customers better than a happy government customer.
How do you “pre-sell” buyers and end-users with whom you’ve never done business? For some ideas, you might go back and read the “Finding Agencies and End-users” and “Finding Official Buyers” articles.
Also, FedBuying Intelligence (FBI), http://fbi.bidengine.com, and Bidengine, http://www.bidengine.com, are both powerful research tools that can help you get it done. (Remember, oftentimes the first step is to locate buyers. Finding end-users can be difficult, but it can be a lot easier if you first ask the easier-to-find buyers which end-users in their organizations require your product or service.)
Pricing fixed priced bids is risky because the amount of your profit (or loss) will depend on the precision of your bid price. Know all you can about your competitors’ prices and find out the previous prices paid by the government for the product or service being purchased.
Unlike the commercial sector, government must divulge what it has paid for the same product or service in the past. Unlike IFB awards, RFQ awards do not involve a public opening of all the bids. Prices are available upon request but usually only for the winning bid.
Increasingly, pricing data are available on the Internet. For example, the Defense Logistics Agency publishes on the Web price history data by National Stock Number (NSN). DLA price histories show past purchases of an NSN item and the price paid for each purchase. Similar data is sometimes shown at state and local purchasing sites. If you can’t find it on the Internet, ask the buyer.
(c) Copyright 2001, Wood River Technologies, Inc.