CORPORATE LEADERSHIP COUNCIL

OCTOBER 2006
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LITERATURE KEY FINDINGS

Risks in the RFP Stage of the Vendor Selection Process

Research and interviews with Council members illustrate the following key risks during the request for proposal (RFP) stage of the vendor selection process. Ignoring these key risks may have substantial negative impact on the implementation process and vendor relationship. Therefore, members should carefully assess each risk by examining the key questions below before making the final vendor selection.

KEY RISK: FAILING TO ADDRESS INTANGIBLES

Key Strategy: The vendor selection team should identify all the intangibles of the vendor selection process. Common intangibles include work and communication styles, as well as vendor approach to the customer relationship. Key Questions: Does the vendor culture match the organizations culture? Will vendor characteristics challenge the implementation and long-term vendor relationship?

KEY RISK: VENDOR UPGRADE PATH

Key Strategy: Vendor selection teams should ensure that they understand both the current and long-term strategy of the vendor and their own organization. While the vendors current offering may match the organizations needs, this may not be the case in the future. Key Questions: Does the RFP address a time horizon for upgrades? What are the key elements of long-term vendor strategy? What are the purchasing organizations future needs?

KEY RISK: UNCLEAR SERVICE LEVEL AGREEMENT

Key Strategy: Organizations should have pre- and post- implementation service level agreements (SLAs) that include easily measured performance metrics. Key Questions: How will the organization evaluate the vendor preand post-implementation? Are there effective rewards and punishments for failing to meet the SLAs?

KEY RISK: INADEQUATE CUSTOMER SUPPORT PROCESSES

Key Strategy: Organizations should ensure that the vendor clearly defines the standard escalation process and estimated resolution time for customer challenges. Key Questions: What problems are defined as critical and will be escalated? What is the average response time for standard customer problems?

KEY RISK: VENDOR USES UNKNOWN RESOURCES

Key Strategy: Organizations should inquire if the vendor utilizes third-party resources for any components of service. If the vendor does use a third-party, organizations should consider performing due diligence on the third-party and creating a service level agreement. Key Questions: Does the vendor utilize third party resources? Are the third-party organizations viable? Is there a SLA for contract resources?

KEY RISK: SCOPE CREEP INCREASES COST

Key Strategy: The vendor selection team should define the scope of the project before requesting the RFP and soliciting cost estimates. A clearly defined scope decreases the likelihood of unexpected costs. In addition, all stakeholders should agree upon the business case for including and excluding services to minimize the likelihood of post-selection scope creep. Key Questions: Is the business case for the scope of the project clearly defined? Do all the stakeholders understand and agree upon the scope of the vendor relationship?

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