RFP’s: Just a Waste of Time?
If you are like supply chain and purchasing professionals, the addition of new or used equipment begins with a telephone call to the usual suppliers. Whenever there is a plan to buy equipment, the process begins with a request for price quotes. The quotes arrive and you shove on your negotiation hard hat and prepare for the battle of wills. Who wins? Usually the victor is the one with the most patience and perseverance.
Why waste time writing out equipment specs and financing options for the next equipment addition? Everyone knows that writing a Request for Proposal (“RFP”) is something the billion dollar companies do when spending several million dollars. Why take the time to write a complicated RFP when a phone call will get you what you want? The price is all that you don’t know.
Procurement professionals begin the buying process full of optimism and then find themselves stuck in the beginning phases of negotiations far too long. How can you avoid the getting stuck?
When current equipment is broken or has become undependable, an immediate replacement seems like the best solution. However using the RFP process can save your operation money and time if you have the basic steps established.
Large and Small Companies: All Save Big Money with the Lease RFP
Kevin, a North Carolina Printer Tries It
Big and small manufacturers, accounting and law firms, distribution organizations and most county, state and local governments use the RFP method for acquiring goods and services. Using a modified RFP or Term Sheet is sufficient when buying equipment less than $100,000.
The owner of a small commercial printing company in North Carolina used, a Lease RFP when purchasing a $100,000 digital copier for his business. The owner, we’ll call Kevin, used the services of a lease review expert who helped him draft the RFP. When Kevin initially began to acquire the new equipment, he had one lease proposal from the equipment supplier’s primary resource. Kevin decided to invite four additional lease companies to present finance proposals in response to his RFP Term Sheet. He was surprised to find that the best pricing came from his bank’s leasing company. He reduced spending by 14% using the lease RFP process.
Do Law firms Ask for HELP?
One Midwestern based law firm in the top 100 law firms in the United States, used the Lease RFP process when they prepared to move into their new corporate headquarters. They chose to lease $25 million dollars of high-tech telephones, office furniture, computers including laptops, desktops, servers and technology infrastructure their video conferencing equipment.
The firm’s Chief Operating Officer, we’ll call Audrey, knew what managers and business owner everywhere know; leasing equipment makes good business sense. According to the U.S. Department of Commerce, 80% of U.S businesses, large and small, lease rather than pay cash when adding or upgrading equipment and needed assets.
Both Kevin, the business owner and Audrey, the chief operating officer, agreed that the best leasing deal does not always come from the equipment dealer. Thirteen leasing companies and financial institutions responded to the law firm RFP. After a full review of all proposals and lease contracts, four leasing companies were invited to advance to the next phase.
Leverage: Simultaneous Negotiations
The firm conducted negotiations with all four leasing companies simultaneously. During the negotiations, one leasing company resisted making changes that Audrey required. Because she had three other leasing companies to meet her terms, Audrey could shift lease volume to any one of the other three leasing companies up until final equipment funding was required.
Using the RFP process leveled the playing field. It was easier for Audrey and her operations team to spot the differences in various financial solutions and the equipment benefits. Dealer presentations changed from glitzy sales sizzle into firm offers and contracts. Once the selling price and lease terms are on paper in a proposal, negotiation can begin.
Could You Save a Million Dollars?
The result of following the process shaved more than a million off the total lease cost for the law firm. For big or small companies, the process worked for both. In times of financial restraint, consider investing time in creating and managing a lease RFP.