Software Acquisition Methods: Best and Final Offer Request

BAFO - The Easiest Way to Save Money...with Certainty!

It is widely accepted that the Request for Proposal (RFP) process works pretty well overall for acquiring a new software system. There are many reasons for this fact. RFPs have been widely used for many decades, and the traditional RFP process is very easy to understand and implement, summarized below.

An organization (the user) identifies its requirements, which are put into an RFP sent to vendors. The vendors send back RFP responses, i.e., their proposals, which the user evaluates to determine a vendor "short list". Short listed vendors are invited to present a demonstration of their proposed system. A winning vendor is selected, and a contract is negotiated and signed. It is a competitive process that makes the user feel they got the best deal.

But most users do NOT get the best deal! The user in most cases is leaving a very substantial amount of money and vendor concessions on the table. Why? Because of a very serious problem in the traditional RFP process, described in the next two paragraphs.

The traditional RFP process calls for vendor proposals and demonstrations to be first evaluated, and a winning vendor to be selected, before the final contract negotiations regarding deliverables, final price, and payment schedule are even started. This is very bad for the user's negotiating position.

The problem is that the vendor already knows it is the winner, and now has absolutely no incentive to negotiate anything at all. This is expecially true if the vendor was notified by letter or email since the assumption is made that the loosing vendors were also notified by letter or email. The vendor now feels all the competition has been eliminated. The result is most users miss out on large amounts of monetary savings and vendor concessions.

Starting Early is the Solution

The best way to eliminate this problem, and actually get the best deal, is to use a correctly formatted RFP in conjunction with a change in the RFP process itself. If your RFP has the proper formatting, you can enjoy substantial savings by simply changing the starting point of the negotiation process. This can be done quite easily.

First, your RFP should follow a "one-in-one" format that dictates each specific RFP question be about just one criteria to ensure easy, accurate comparison of vendor proposals and precise vendor communication. Please note that all Infotivity RFP templates follow this formatting rule.

Second, you should begin preparing for this new negotiation process once vendor RFP responses (proposals) start arriving. Each should be reviewed to find high-value solutions, i.e., those solutions that solve very important problems at the departement or procedural level. Since this review should be conducted when preparing a vendor "short list" it will not add time to your project. All Infotivity RFP templates provide an independent Importance Level column to facilitate the communication of criteria importance to vendors and staff.

Once a vendor "short list" has been determined, and all high-value solutions identified, you are ready to prepare the BAFO request needed to begin the negotiation process, usually prior to inviting any vendor in for a detailed demonstration.

Third, create the BAFO request by combining the best of all the features found in all RFP responses, along with any concessions you want the vendors to make. It is, in fact, a new RFP combining the best features, functions, and methodologies found in all the vendor proposals. Each Infotivity RFP template provides a seperate column for combining these features into the final BAFO Request.

Fourth, start the negotiations by sending all the shortlisted vendors a "Best and Final Offer" (BAFO) request prior to inviting any vendor to present a demonstration.

Improve Your Negotiating Position

There are many advantages and benefits in using the above BAFO technique. Receiving a "Request for BAFO" implies to a vendor that they have made the first cut, but they have competition and perhaps an offer better than theirs is being considered. Since the vendor now knows they have not yet been eliminated, and things are getting close, they have every incentive to make a few more concessions to win the contract.

If the BAFOs received are still not yet as competitive as needed, you can easily comminicate to each vendor just where their proposal needs to be improved, all without disclosing proprietary or confidential vendor information. This almost guarantees their proposal will become more competitive, or they will refuse to provide a BAFO. If a vendor is not able or is unwilling to provide a BAFO you have the upper hand since you can eliminate the vendor at that point or elect to wait until no other, better proposals are submitted. Note that this step could be taken instead of creating the combination BAFO RFP described above.

For best results, I always recommend that a copy of the contract you would like to use be sent to vendors along with the RFP, and the vendors must be required to review the contract and include all contract issues and problems in their RFP response (proposal). The customer can then explain to vendors why their contractual issues are .not acceptable and how to improve them. Note: All Infotivity RFP Masters already have facilities to gather this contractual information.

Summary

The BAFO process will help you save a significant amount of money over the life of a new system, and it also reduces the amount of time and resources needed to select the winning vendor and proposal. The chances of unforeseen problems have been dramatically reduced, since BOTH the winning proposal and it's associated contract have both been "tailored" to address unique issues at each step of the selection provess to fit your organization's specific needs. This is much more efficient than using a standard RFP to first selecting the winning system, then trying to fit it into a standard contract, and crossing your fingers hoping everythig "works out all right".

Infotivity RFP templates provide ALL the criteria needed, in the right format, to select the BEST system for your needed at the Lowest Total Cost of Ownership (TCO).

Acquire the BEST System at the Lowest Total Cost of Ownership (TCO) with a Best and Final Offer (BAFO) Request

Best and Final Offer (BAFO)

BAFO - The Easiest Way to Save Money...with Certainty!

Starting Early is the Solution

Improve Your Negotiating Position

Summary