Five mistakes nonprofits should avoid in their next RFP

Many nonprofits follow the request for proposals (RFP) process when choosing their service providers. Some nonprofits must send out RFPs because of their grants or federal funding. Others have boards of directors who see the RFP process as the best scenario for doing due diligence.

“Whatever the case, if your organization uses RFPs, you need to make sure you’re not defeating the purpose of the system, which is to reduce risk by finding the right advisers in an efficient and effective manner,” says Ryan Brandt, area vice president, Gallagher.

Smart Business spoke with Brandt about common errors in the RFP process.

Where do you see nonprofits go wrong with their RFPs?

They can cast either too narrow or too wide of a net. For example, you may already have an idea which service provider you want. However, the organization requires at least three bids. So, instead of drawing up a fair RFP, you reach out to Firm ABC and say, ‘I want you to write up this RFP for me; put it in any wording that you want.’ When the RFP goes out, other service providers see through the wording and realize there’s no point putting effort into it. If you don’t keep an open mind, and give your advisers a fair chance, it can snowball into complacency, poor service or a missed opportunity.

On the other end of the spectrum, a nonprofit might email the RFP to every service provider it can or post it directly on its website. Reputable, qualified firms won’t respond because they know their odds aren’t great. It can send a message that the organization is fishing for ideas and doesn’t really know what it wants. Also, nonprofits that try to get as many responses as possible every year could be price shopping. Again, some service providers won’t put in the time because no matter what they do, the lower price is going to win. You’ll end up with the service as a commodity, not a relationship.

As much as firms research the nonprofit going into the RFP; nonprofits should also be researching the service providers before they release the RFP.

What are some other mistakes?

Another misstep is assuming that you must accept a proposal as is. Obviously, in an RFP, service providers put their best foot forward. But sometimes, a firm could get dropped out of the RFP process or not win an account because of one thing. That’s why it’s important to include goals in an RFP, which allows them to better understand how to approach the solution. If a service provider isn’t aware of the underlying issues or goals the nonprofit wants to obtain or correct, it could misrepresent itself. If you agree to give someone your business after an RFP, the negotiation doesn’t stop. If your nonprofit’s first choice checks all but two boxes, for example, see what can be done to tick those two boxes.

Sometimes, nonprofits are afraid to release their budget. Say your nonprofit has $100,000 to get X, Y and Z insured. Rather than let the insurance agents go through the RFP process knowing about the $100,000; let’s see what they come up with. However, realistically, what you’re trying to do may not even be possible. Being direct saves everyone time. You get a better understanding of the adviser. You can see if they’ll give you a variety of options. Service providers also can let you know if they cannot help you. They’re already aware there is competition, so your organization is more likely to get a better rate. There is no reason to keep the budget a secret.

Finally, allow enough time for a well-thought-out proposal. The rule of thumb is a minimum of two weeks, and more if possible. An RFP shouldn’t be rushed. If an RFP says to respond in three to five days, that’s a turn off.

How would an ideal RFP process go?

In a perfect RFP process, you would pick an adequate number that the board feels comfortable with. Then, do your research on the service providers you want to invite in to make sure they have the background and success in your industry. Be very precise and exact when writing the RFP regarding your goals and your budget, and then give them about four weeks to respond. When the RFP presentations are done, don’t hesitate to ask if you have further questions. Don’t assume what they put in front of you is all that they can do. Reach out and, if need be, have the firms come back out and talk to you.

Insights Insurance/Risk Management is brought to you by Gallagher