Increasingly hospitals are turning to Request for Proposals (RFPs) to procure their goods and services. RFPs give hospitals one voice and one process thus streamlining the purchase process for goods that they deem to be highly price competitive.
There are twelve reasons why hospitals and healthcare systems use RFPs:
1. Policy Requirement or Law: RFPs are often required by policy or law (government). For example, in Canada acute care hospitals are required to use RFP’s for any purchase over a certain dollar value. This can vary by province but it is law versus a choice. In the USA it’s often required by Sarbanes Oxley rules and regulations.
2. The Silver Bullet Solution: As budgets tighten the need to invest in the right solution intensifies. RFPs provide a means for information gathering that ensures all viable products are given consideration. This is often the case when a hospital is looking for a first time solution.
3. Levels the Playing Field: RFPs provide a level playing field by facilitating comparisons against only qualified bidders.
4. Provides equal supplier access: RFPs allow large or small suppliers to bid equally and provide everyone with an equal chance to earn the business.
5. Commoditizes Products: RFPs allow hospitals to view products and services as commodities whether they are or not. If it’s a commodity there is no perceived value and price, terms, conditions and delivery become paramount. RFPs are often used to replace an existing solution.
6. Ensures Focused Responses: RFPs allow for comparisons to a standard set of questions. This ensures that the hospital receives very focused responses to specific questions and it eliminates ambiguity and confusion. It also makes it easy for the hospital to compare and contrast each product in an equal way.
7. Sets the Stage: RFP set the guideline for the professional relationship and negotiation through the formal process and interaction. It states unequivocally to the bidders that the stakes are high.
8. Pricing Leverage: RFPs Increase the pricing pressure for all parties submitting a bid especially for the incumbents. An RFP implies that the current pricing must be lower to keep the hospitals business.
9. Management Justification: RFPs help a manager to justify the cost of a product, service or solution to procurement and others in the decision making process in an unbiased way.
10. Management Tactic: Some hospital stake-holders won’t tell you “No” so they hide behind the statement that we must use an RFP process. We have no choice because it’s now policy. Oftentimes this is simply a management tactic. Be suspicious if the incumbent wins the RFP.
11. Safety Net: RFPs are often used as a safety net when multiple people are involved. In this situation there is no one person to blame because the purchase decision is made by a number of people with specific criteria and a weighting scale. Since numerous people submit their scoring no one person can be blamed or credited.
12. Free Consulting: It provides free consulting work and best practices because all of the vendors do their best to educate the hospital on why their product, service or solution is the best choice.
If you don’t have a sound strategy for handling RFPs develop one. They are here to stay and our prediction is they will increase in number and complexity as hospitals consolidate and look for ways to cut costs as they deal with the new reimbursement normal.