© copyright 1997, the university of new mexico the university of new mexico a-1 rfi’s and rfq’s...

© Copyright 1997, The University of New Mexico

The University of New Mexico

A-1

RFI’s and RFQ’s

• Many organizations require that RFI’s (Request for Information) and/or RFP’s (Request for Proposal) are issued when acquiring services or equipment.

• Certain local, state and federal agencies require RFI’s or RFP’s when the acquisition costs exceed a certain amount.

• These mechanisms, if effectively used, allow organizations to acquire the best value for the goods and services desired.



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RFI’s

• A request for information is just that.• It is usually issued to acquire information on what is

available, from whom and what approximate cost before writing an RFP that is based on real information rather than wishful thinking.

• Typically, vendors will not respond to an RFI unless the effort to do so is not excessive and there is an expectation that an order or at least an RFP will follow.



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RFI’s (Cont.)

• RFI’s should therefore be brief and request information needed to write an improved and realistic RFP.



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Contents of RFI’s

• The type of information usually sought by RFI’s includes things such as:– The availability of equipment or needed services.

– The approximate one time and recurring costs.

– The differentiating factors between the goods or services proposed and similar offerings from other vendors.

• The latter is very useful in providing information to help determine mandatory and desirable characteristics to be included in an RFP.



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RFP’s and RFQ’s

• Requests for Proposals or Requests for Quotation are more formal than RFI’s in that they request formal proposals and cost information from vendors.

• These proposals are then evaluated to select one or more vendors from which the goods and/or services will be acquired.



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RFP’s and RFQ’s (Cont.)

• Some organizations require that the winning vendor be the vendor that provides the goods and services required for the minimum cost. In general that is not a good strategy.

• A better strategy is to select a vendor that provides the greatest value or the minimum cost for the value provided.

• In either case, appropriate strategies must be used to ensure the right goods are acquired within budget and on favourable terms.



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Essential Contents of RFP’s/RFQ’s

• An introduction describing the general setting is desirable.

• The most important sections include– RFP objectives.

– Mandatory requirements.

– Desirable requirements.

– Evaluation process.



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Essential Contents of RFP’s/RFQ’s (Cont.)

– Terms and conditions.

– Cost information.

– Vendor response format.

– References.



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Mandatory Requirements

• The mandatory requirements should specify what is absolutely essential and nothing more.

• Anything beyond essentials should be requested in the desirable characteristics section.

• The vendor should simply state whether he complies or does not comply with each and every mandatory requirement.



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Mandatory Requirements (Cont.)

• In general, any vendor not meeting all mandatory requirements should be disqualified and not evaluated further.

• This is similar to the mandatory requirement that a student get at least a “C” grade in a major subject before getting a degree in that major.



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Example of Mandatory Requirements

• An example of a set of mandatory requirements for a DS3 leased line may be as follows:– Must provide a DS3 leased line between location x and

location y.

– Vendor must be responsible for end to end services even if part of the circuit is subcontracted to a different vendor.

– The average availability of the circuit must be at least 99.5% calculated on a 24 hours/day and 7 days/week basis.



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Example of Mandatory Requirements (Cont.)

– The vendor must monitor the circuit on a 24 x 7 basis.

– The vendor must inform the customer of any planned service interruptions (eg. For scheduled maintenance) at least 7 days in advance. Customer must concur with the time of service interruption.

– Scheduled service interruptions must be no longer than 1 hour in duration.

– Vendor must notify customer of any unscheduled service interruptions as soon as they are detected by vendor’s monitoring systems and provide an estimated time by which service will be restored.



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Example of Mandatory Requirements (Cont.)

– If any unscheduled service interruption is likely to last more than 2 hours, the vendor shall immediately start provisioning an alternate circuit to restore service.

– If an unscheduled service interruption lasts more than 4 hours, the vendor shall be liable to pay the customer liquidated damages of $1,000 per hour of downtime in excess of 4 hours.

– The transmission error rate shall not exceed one bit in 109 bits

transmitted.

– The circuit must be available within 60 days after placement of order.



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Comments on Mandatory Requirements

• Mandatory requirements must be brief, specific and measurable.

• The vendor responses should be limited to “Complies” or “Does not comply”.

• Requirements over and above mandatories should be evaluated in the “Desirable Requirements” section.



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Comments on Mandatory Requirements (Cont.)

• Note: Mandatory requirements should be reasonable, else nobody may bid or the cost may be exorbitant.

Example - While an error rate of 1 bit in 109 or

better may be reasonable, an error rate of 1 bit in 1012

is not for most applications and may scare bidders away or may raise the cost by a factor of 10 or even 100 for the extra risk taken by the vendor.



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Comments on Mandatory Requirements (Cont.)

• Having stringent mandatory requirements is no different than insisting that all students get an A in all subjects required for graduation.



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Example of Desirable Requirements

• For the DS3 line described earlier, the desirable requirements may be:– List all other vendors, if any, that will be involved in

providing the circuit. A smaller number is more desirable since it helps avoid “finger pointing” problems.

– Provide a schematic of the proposed circuit routing stating

• The length of each circuit segment.



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Example of Desirable Requirements (Cont.)

• The transmission media used for each segment.

• The locations of the central offices through which the circuit will pass.

– Fiber segments, a small number of segments and central offices are desirable to help enhance circuit availability and smaller bit error rates.

– Describe the network monitoring and network management procedures used.



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– Since availability and low error rates are highly desirable, state the following characteristics expected for the proposed circuit :

– Availability.

– Mean time between failures.

– Mean time to repair.

– Error rate.

– Scalability. Can the vendor provide additional T1 or DS3 lines between locations x and y should additional bandwidth be needed ?



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– Schedule. List all major milestones for project design, implementation, testing and acceptance, and show the estimated start and completion dates for each activity. If the task will be completed in less than the mandatory 60 days after placement of order, this should be clearly indicated.

– State any other characteristics of the circuit proposed that the vendor feels is an important requirement. For each such characteristic, state why that characteristic is important and why it shoul be included in the evaluation.



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Evaluation Process

• The evaluation process must be clearly described so that it is clear to the vendor what is needed and what is important so as to allow them to be creative and present a responsive proposal.

• Some organizations may insist that the least expensive proposal meeting all mandatory requirements be the winner. This is seldom a good strategy.



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Evaluation Process (Cont.)

• A much better strategy is to select a vendor who meets all the mandatories and provides the “best value for the money”.



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Sample Evaluation Process

• The following process works well to select vendors that provide the “best value for the money” ot “the lowest cost for the value provided”.– 1. Eliminate all vendors not complying to each and every

mandatory requirement.– 2. Evaluate the desirable requirements for all vendors

meeting all mandatory requirements by giving points based on the degree they meet and exceed all requirements. This is a “measure of “value”.



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Sample Evaluation Process (Cont.)

– Ex. If availability is important, give a high weight to high mean time to failure and low mean time to repair figures, as well as to high average availability, remembering that there is a factor of 10 difference between 99% and 99.9% availability.

– 3. Evaluate the references provided and assign points based on satisfaction rating of vendor customers.

– 4. Eliminate any vendor with unsatisfactory performance references.



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– 5. Add the poitns from steps 2 and 3. This is a measure of the “risk adjusted value”.

– 6. Calculate the total one time and recurring costs for the life of the project - say 3 or 5 years.

– 7. Divide the cost calculated in step 6 by the risk adjusted value obtained in step 5. This is a measure of the “cost for the value received”.



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– 8. Declare the 2 or 3 vendors with the lowest cost for the value provided as “as apparent successful vendors” with whom you could negotiate a “best and final offer” if your organization(or state) rules permit this. If this is not allowed, pick the one vendor with the lowest cost for the value.



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Example

ExampleNo Met all

Mandatories

Evaluate desirables

EvaluateDesirables

CalculateCosts

Cost for valuec / (x + y)

Apparentwinner(s)

x

y

c

Best andFinal

Terms and Conditions

Not OK

OKWinner

Lowest Cost for unit value

Eliminate

Eliminate

Unsatisfactory

Reliability 15/20Scalability 20/20Error rate 15/20Manageability 15/20Subtotal 65/80References 16/20Total 81/1003 years cost $ 243,000Cost for unit value $ 3,000



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Variations of Evaluation Process

• There are many variations of the basic evaluation process previously described.

• One such variation that is popular is to request a “passing grade” in some of the desirable requirements.Ex: If the mandatory error rate is 1 error in 10

6 or

better and most vendors state in the desirables that theirs is 1 in 10

9 while one vendor says it is 5 in 107,

you have reason to suspect that their service is not state of the art.



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Variations of Evaluation Process (Cont.)

• The above should be used when evaluating references. If the references are consistently unsatisfactory, that vendor should be eliminated else your project is at risk.



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Terms and Conditions

• Most organizations have standard terms and conditions for RFP’s that must be used.

• Sometimes vendors, will not bid unless they can amend those standard terms. To get around this, the RFP should state that vendors may suggest changes to the terms and conditions, but the customer is free to accept them or reject the bid. The risk for changing the terms and conditions then becomes theirs.



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Terms and Conditions (Cont.)

• To make sure the vendor takes the RFP seriously, one of the terms and conditions should be that the vendor’s responses to the RFP will become part of the contract between vendor and customer.

• For certain projects, insist that the vendor post a performance bond with a bonding company to provide a recourse against non-performance.



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Cost Information

• Request all recurring and one time cost information. Examples include

One time Recurring- Purchase - Lease or rental- Installation - Maintenance- Transportation - Cost of

backup(insurance)- Documentation - Training ( can be

one - Cancellation time or recurring cost



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Cost Information (Cont.)

• When leasing communication lines, there may be termination costs.

• To protect against “hidden costs” the RFP should state that any costs not clearly identified in the RFP cost section will not be paid.



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Life-Time Cost Calculation

• All one time and recurring costs should be included in the life-time cost calculation.

• Do not forget to get the lowest cost by checking length of lease, cost of lease and termination penalty combinations.



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Life-Time Cost Calculation (Cont.)

• For example, the DS3 line between the MHPCC and the mainland was leased on a 7 year term but cancelled after 3 years (to be replaced by a DREN line).

Reason - The 7 year lease cost for 36 months plus the termination penalty was much less than a simple 3 year cost for 36 months. This saved the MHPCC several hundred thousand dollars.



A-36

Vendor Response Format

• The RFP should define the vendor response format.• This saves a lot of time and headaches during the

evaluation process.• Without this, every response will be in a different

format. The danger is missed valuable information that can lead to a protest.

• A protest can delay the project by months, or even years, especially for RFP’s issued by local, state or federal government organizations.



A-37

References

• Ask for at least 3 references for similar work done for similar organizations. Questions to ask:– Were you satisfied with vendor’s performance ?

– Would you do business with them again ?

– Do they provide timely support when needed ?

– Do you know other customers of the vendor ? Who ?

– Do you know other customers who had a bad experience with the vendor ? Who ?



A-38

References (Cont.)

• Remember that the vendor will provide references of what they think are satisfied customers. They will not provide references from dissatisfied customers. That is your job since you should adjust the evaluation for potential risk.

© copyright 1997, the university of new mexico the university of new mexico a-1 rfi’s and rfq’s...

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