Why RFPs vs Tendering?Following is a quick review from our previous two blogs: Elevator Tendering – An Avenue of Abuse Part 1 – Construction Tendering; and Elevator Tendering – An Avenue of Abuse Part 2 – Maintenance & Modernization Tendering. The challenge with Request for Tenders (RFTs) is that the buy decision is 100% made based on “lowest initial price”. In theory all bidders bid to the same spec. and therefore the customer is receiving the same relative quality product/service in the end, so the lowest price is therefore chosen (assuming they do not qualify their bid). The problem is that it is almost impossible to specify every detail of a project or a desired product, and it is hugely time consuming afterwards to police whether you actually receive what you have specified. In the elevator world, you have the further complication that a number of the large elevator companies make it a regular habit of going the legal route, even if they are obviously in the wrong. As one customer recently told us, when they approached a multinational elevator company with the facts that they were in serious breach of contract and therefore being removed, and asked them: “do you want to take the hard way or the easy way?”. The response from the multinational elevator company was: “we always take the hard way”. While there are still risks associated with a Request for Proposal (RFP), at least you the client have the ability to factor in other decision-making criteria, beyond just price. Using an RFP rather than RFT is actually very intuitive. Think about any buying decision you ever make. How often do you make the decision based 100% on price? I pondered for a while and could not think of one. There are some purchases, such as gasoline, that would be primarily a price decision, but ultimately, I do factor in other things (i.e. value points at some stations; or low-quality gasoline that can guck up my tank, etc.). If I want to buy a new cordless drill I can find some really cheap knock off brands at discount stores, or I can buy a DeWalt, Ridgid or a Milwaukee. For every buying decision I make, I take more than price into consideration, so why are organizations making major purchase decisions like elevator new construction, modernization or maintenance, based on price only? Many organizations (public and private) have now moved to RFPs for Elevators. Below are some guidelines to assist you in setting up effective RFPs (lots based on what we have seen in the many RFPs that have passed by our desks, and also what we have learned ourselves).
Steps to Writing an Effective RFP1. Brainstorm with your team (this must include the stakeholders on the ground who deal with the elevators on a day-to-day basis), to find out the biggest issues you have had with your elevator contractors in the past, and also what is most important to them. Here are a handful that we regularly hear: Elevator Maintenance: Elevator contractor has not fulfilled the contractual obligations of maintenance intervals (i.e. if the contract says monthly, they are not coming all 12 months, or at least not signing off their Maintenance Control Program (MCP log) in the machine room, which the TSSA requires). Poor housekeeping and PM – pits are messy (often full of oil), machine rooms are messy; cartop of elevator car is full of dust with no footprints (code requires getting on cartop); rails not lubed, noisy doors and rollers etc. TSSA Issues – TSSA inspector writes up deficiencies and the contractor does not correct them, so owner gets fined. Lack of management response – cannot reach management when there are issues that need to be escalated and addressed; lack of sales response; excessive elevator breakdowns. Elevator New Construction or Modernization: Projects not completed on time. Unreasonable extras charged on the project well beyond the “initial price”. Proprietary equipment installed so that no, or a few, other elevator contractors can maintain the unit post installation. Inordinate amounts of time project managing the project due to non-cooperation of installing contractor. 2. Create an RFP which addresses each of the concerns. For example, the RFP should be weighted to effectively deal with the issues that you have had in the past. Here are some examples of how RFPs can be laid out:
Maintenance RFPsReferences (weighting 25%) – please provide 5 references of projects of similar size. Please provide details of type of elevating devices, contract start/end date, $value of contract, reference contact person, phone and email. (Note: when calling these references, it is important to ask if contractor is coming as prescribed in the contract, also whether they have frequent TSSA directions that are not being completed, do they have access to senior management when required etc.) Manpower & Management (weighting 15%) – please provide explanation of how you will maintain the elevators, listing the primary site technicians (please upload their TSSA licenses) for the portfolio, and the number of technicians available in the specific region of this contract, for on-call support and repairs. Please also provide a description of all office staff who will be involved in the project, their responsibility, and describe escalation paths for issues. Internal & External metrics of performance (weighting 20%) – please provide a detailed description of how you track the performance of your technicians, the performance of your portfolio of elevators, and as a contractor as a whole. Please identify all internal and external metrics you use, and provide any actual statistics you have. Please upload any pertinent documents. (Note: the contractor can provide past TSSA statistics, their own internal metrics such as trouble call numbers, and also WSIB reports). Company Strength & Stability (10%) – Please attach a letter from your financial institution establishing the financial strength of your company (years as a customer, credit arrangements, lines of credit, NSF activity if any, etc). Please describe the structure of your organization (private, public, % Canadian owned). Provide an organizational chart, including total number of employees. Price (weighting 30%) – please refer to section X which describes the pricing being requested, and then fill in the pricing information in appendix Y (monthly maintenance price, and labour rates)
New Construction/Modernization RFPsReferences (weighting 15%) – please provide 5 references of projects of similar size and scope. Please provide details of type of elevating devices, contract start/end date, $value of contract, contact person, phone and email. (Note: when calling these references, it is important to ask if they completed the project on time, were there many extras charged to the contract, was the end product satisfactory, have the elevators been dependable since, was it easy to work with the project managers, site managers and site technicians?) Schedule (weighting 15%) – please list the New Construction/Modernization (choose one) projects that you have in the pipeline between now the specified end date or this contract (i.e. November 1, 2019), showing the assigned crews, including where this project would fit into the schedule. Describe your strategy to complete this project on time. (please upload any pertinent documents, such as Gannt charts). Manpower & Management (weighting 10%) – please identify the site staff who will be involved in this project, including their respective roles (please upload TSSA licenses for any site technicians). Please also provide a description of all office staff who will be involved in the project, their responsibility, and describe escalation paths for issues. Internal & External metrics of performance (weighting 10%) – please provide a detailed description of how you track the performance of your technicians, and as a contractor as a whole. Please identify all internal and external metrics you use and provide any actual statistics you have. Please upload any pertinent documents. (Note: the contractor can provide their TSSA statistics which were given to each contractor until the end of 2015, their own internal metrics such as % of clean sheets (deficiency free inspection reports) at inspection, and also WSIB reports). Company Strength & Stability (10%) – Please attach a letter from your financial institution establishing the financial strength of your company (years as a customer, credit arrangements, lines of credit, NSF activity if any, etc). Please describe the structure of your organization (private, public, % Canadian owned). Provide an organizational chart, including total number of employees. Non-proprietary Equipment (10%) – Please provide a satisfactory explanation, describing why the equipment you are installing is not proprietary. Please go into detail explaining what controller equipment you will be providing which ensures that any certified elevator mechanic in Ontario can adjust all parameters and read all faults to properly maintain the elevator. Please also confirm that there are no proprietary physical equipment pieces, or if there are, describe what they are (i.e. special belts instead of hoisting ropes, custom motors rather than off-the-shelf). Please also explain the post installation process and cost of obtaining elevator parts in the future. Price (weighting 30%) – please refer to section X which describes the pricing being requested, and then fill in the pricing information in appendix Y (monthly maintenance price, and labour rates) If you take an honest look at the contractors who service your organization, would you say that, by in large, you are receiving good service (an 8/10 or higher)? If the answer is no, then you need to set up a system which works for you, not against you, and one which allows you to hire the highest value contractor, not just the “lowest initial price” contractor. RFTs provide you with little, to no, latitude in choosing a contractor based on anything beyond price. In contrast, a well formulated RFP will allow you to hire the highest value contractors, and ultimately provide your stakeholders with the greatest value.
Rolly has been in the elevator industry for nearly 20 years in both a sales role and running an Operations Department. He works hard to help implement methods to provide superior service to Elevator One clients.