How to use different processes for sensible purchasing
 
How to use different processes for sensible purchasing
11 DECEMBER 2019 1:07 PM

When buying systems for a hotel, the request for proposal and its cousins, the request for information and request for quotation, can help ensure the investment is right.

A proper RFP (request for proposal) is the reference standard for a disciplined, documented, traceable and unbiased system selection effort. Formal RFPs are generally required by law for substantial expenditures of public monies, and most public corporations have a policy requiring an RFP process with at least three bidders for acquisitions over some dollar threshold.

This third installment of a four-part article series looking at the basics of system selection will focus on the RFP and its cousins, the request for information (RFI) and request for quotation (RFQ), in plain English and actionable terminology.

This series of informational articles on the basics of system selection serve to provide a baseline understanding of the principles and fundamental strategies involved in making an informed purchase decision. Although couched in terms of IT purchases, especially the selection of an IT system for a hotel company or a hotel, these principles, strategies and practices apply to purchasing anything for your hotel enterprise, especially high-value, high-impact purchases.

For more, read part one and part two of this series.

At a minimum, an RFP will include:

  • background on the purchasing entity and what problems are to be solved with this purchase;
  • rules for the process, including deadlines, contact information, how to submit questions about RFP requirements and how they will be answered and numerous disclaimers; and
  • a precise definition of the products and services to be purchased;

This definition will often include specific features the buyer is looking for, such as a central reservations system able to book multiple rooms under one name or under multiple names in a single transaction. It also will include quantitative information, such as the number of properties and rooms to be serviced, and number of employees to train by category.

The required services will also include service-level agreements detailing response times for responding to and resolving defects, delineation of one-time costs (training and installation services, for example) and recurring costs (monthly SaaS fees for license, hosting and support).

Also listed should be which incumbent systems the new system will be required to interface with (for example, key, credit card and point-of-sale).

A sophisticated RFP for a major system purchased at the enterprise level will be a large and complex document. Buyers should recognize that responding to a RFP is a time-consuming and costly effort for the vendors. Therefore, the scale and difficulty of responding to the RFP should be commensurate with the size of the opportunity for the bidders in respect of their time and opportunity costs.

An RFP for a brand-level CRS will be and should be lengthy, detailed and complex. Someone buying a F&B point-of-sale system for a single hotel with three outlets might still use an RFP, but the scale and complexity should be dialed down to match the sales value to the vendors. Keeping the length and difficulty of the RFP to scale benefits the buyer as well: Once you get the proposals in, you have to evaluate and score them.

We favor a mix of quantitative and qualitative evaluation techniques. On the qualitative side, point values and weights can be assigned to requirements in the RFP to calculate a numerical score that will offer a basis to compare the proposals. Qualitative evaluations might include:

  • Did they adhere to the stated process?
  • Was the proposal clearly written, with basics of careful writing shown?
  • Were images and screenshots clear, legible and fit for purpose?

Of course, price is also a factor. We generally counsel our clients to consider price “a” factor and not “the” factor.

A well-constructed RFP will include a worksheet with sufficient detail to estimate all costs of the acquisition, noting that a system purchase with significant custom software development will at best yield a cost-range at this point. However, different vendors, different business models and different applications will often yield different responses in a pricing worksheet. It is the evaluator’s challenge to produce a pricing analysis that truly compares apples to apples instead of okra to apricots. Adjustments, interpolations and calculating the time-value of money are all tools that enable that fair comparison.

The RFP has some close relatives, the RFI and RFQ. An RFI typically will not deal with price and not contain as much detail about the requirements. The RFI is a good tool to use to understand what is in the marketplace before crafting the full RFP. Another appropriate use of the RFI is to pre-qualify vendors to receive the RFP. A short and simple RFI can ensure that only qualified bidders receive the actual RFP.

The RFQ is appropriate for situations where the requirements are well-known and documentable and the focus is on the price quote. A bulk keycard purchase for a brand would be a good use for an RFQ.

The hotelier has a number of tools at hand to help them make the right purchase decision. Crafting the right RFP for the purchase at hand goes a long way to making the right decision in a fair and traceable manner. It is a strong tool and a powerful process when well-executed. Given that most system purchases are high-cost, high-impact and long-term, investing in the RFP process appropriately is the right investment.

Mark Haley and Mark Hoare are Partners at Prism Hospitality Consulting, a boutique firm serving the global hospitality industry in technology and marketing. Managing system selection efforts is a core practice area. For more information, please visit https://prismhospitalityconsulting.com

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

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