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Article | Cloud native

Understanding requests for information, proposals and quotes

We focus primarily on the purchase of IT systems, for which the RFP is the most commonly used tool. The process is characterized by several phases, sometimes overlapping, which are led by the CSP’s procurement team.

Mark NewmanMark Newman
17 Jun 2019
Understanding requests for information, proposals and quotes

Understanding requests for information, proposals and quotes

Download the related report: Time to kill the RFP? Reinventing IT procurement for the 2020s: Volume 1 and 2

When procuring equipment, software and services from suppliers, communications service providers (CSPs) typically issue ‘requests for’ information (RFIs), proposals (RFPs) and/or quotes (RFQs). In many industries, each happens in sequence and as a distinct phase of a process, but in telecoms this isn’t always the case.

CSPs tend to use RFIs to find out about an emerging technology or a service that requires purchasing hardware or software. For example, if a CSP is considering launching a mobile payments business, an RFI would help the operator assess the types of solutions available and determine the viability of such a service. This is an information gathering exercise that may or may not lead to purchases. In some cases, an RFP or RFQ may be issued, but many RFIs fizzle out.

A closer look at RFPs


We focus primarily on the purchase of IT systems, for which the RFP is the most commonly used tool. The process is characterized by several phases, sometimes overlapping, which are led by the CSP’s procurement team.

The strategy document


Before an RFP can be issued, the CSP’s IT or network team must produce a document detailing the strategy for implementing a technology or delivering a service, which is a lengthy process because of the number of stakeholders involved and the need to describe requirements in a way that satisfies them all. A typical strategy document is 30 pages long. As the chief architect of a North American CSP explains:

Issuing an RFP


CSPs normally distribute RFPs to a group of three to eight suppliers. These are most likely existing suppliers, previous vendors or companies the CSP is aware of through its own technology scouting. Suppliers are likely to include systems integrators who rely on other vendors to fulfill elements of the contract, and CSPs tend to invite bidders offering a range of options. For example, they may invite a supplier that is likely to offer a good price, one that is a ‘safe’, low-risk option, and the incumbent supplier, which in many cases the CSP is looking to replace. The document itself is likely to be several hundred pages long, a large portion of it comprising details of technology requirements, with suppliers asked to specify whether they comply with each requirement.

Responding to the RFP


Suppliers use ‘bid teams’ to reply to RFPs. For large transformation projects this team often consists of 20 people or more and includes solution architects who assess which products, services and capabilities are required and decide whether it’s necessary to work with third-party suppliers.

The main goal of the RFP document is to get each vendor to commit to delivering as many capabilities as possible ‘out of the box’, meaning that no customization is required. As such, a large part of the RFP comprises lengthy lists of requirements where the vendor is asked to indicate their ability to deliver. If a product or solution complies with the requirement, it means that the vendor needs to include it in the overall contract price rather than charging additional fees for customization.

Bidders are normally given a month or so to submit their initial responses. During this period, they are allowed to lodge questions with responses going out to all bidders. The CSP then invites bidders for a ‘read-out’ at or close to the CSP’s offices. This is the first meeting, during which the supplier presents its bid and answers questions. Typically, three or four executives from the supplier company present to a large panel of CSP representatives drawn from technology and procurement teams.

After more clarifications, the CS draws up a shortlist of bidders (usually three companies) based on answers about several key criteria:

Commercial – who is offering the best terms, conditions and pricing?

Futureproof – the vendor typically agrees to supply a solution for at least five years, and the CSP wants to know that for the duration of the contract period the solution will not hinder the functioning of any other systems

Compliant – is the solution compliant with the requirements stipulated in the RFP?

Second-round responses


The CSP then asks the shortlisted bidders for even more detailed responses to questions about technology compliance focusing on the main differences among bids. At this stage, the operator tries to ‘normalize’ the competing bids, which means homogenizing them to ensure valid comparisons.

The process becomes iterative with bid teams often required to stay in a hotel close to the CSP so that they can be called in to clarify or amend specific items at short notice, and CSPs often conduct reverse auctions, during which they ask bidders for their lowest price. Says the marketing director of a large BSS supplier:
Eventually the CSP chooses a preferred bidder but keeps a second one in reserve in case contractual negotiations with the first one fail.

Building the contract


Once a CSP has selected the preferred bidder, the focus turns to ensuring that the operator is protected from any issues that may arise if the contract is not fulfilled as expected, for example if there is a service outage involving the system. CSPs employ outside legal firms to draw up a master service agreement (MSA) with the vendor which governs the terms of the agreement. A typical MSA includes 200 to 300 key business terms (KBTs), and the contract negotiations, which can take from three to six months, normally involve the CSP forcing the successful bidder to make further concessions. Increasingly, CSPs and suppliers are using online portals and tools to exchange information and to aggregate, assimilate and interpret details.