How Do You Get Capacity Without Opportunity?
When it comes to winning RFPs, small and medium-sized businesses are caught in a Catch-22.
Let’s assume that our scrappy company happens to figure out that a buyer is in the marketplace for a solution that we offer. Let’s assume that our crack sales team gets a hold of the RFP, either by getting onto the buyer’s shortlist or by noticing that the buyer is a government agency that has posted the RFP to a public website soliciting bids. Let’s assume even further that our intrepid team has managed to get thread the needle to become acknowledged as a vendor of record, eligible to respond.
One can think of an RFP as an examination in which the test booklet describes how it will be graded, including the relative weights on different parts of the assessment. Sometimes the test is in the form of short questions of prescribed length like a quiz. Or, it could be an invitation to a longer, more idiosyncratic prose answer.
But, in practically every instance, the supplier must provide several examples of previous jobs that were similar (and preferably identical to) the job the RFP requests them to perform if they are successful in obtaining the contract. In addition, typically, the respondent vendor must provide the names and contact information for these three (or more) existing clients.
All of this is predicated on several further assumptions. (You can see that the assumptions are beginning to build.) This process is focused on mitigating the buyer’s risk of selecting a vendor that turns out to have neither the capacity nor the capabilities to execute within a reasonable tolerance of performance. There is the assumption that the buyer knows how to interview the existing customer base to get the relevant information and to make the relevant judgments. (Typically, they do not.) And there is the implicit belief that the previous buyers can and should dictate what constitutes a reasonable level of work.
The buyer’s process risk with the RFP is that they select an ostensibly safe company with the flashiest proposal, but not one with the best solution or the ability to be most responsive, all while failing to diversify their supplier base by number, skillset, and social attributes.
Capacity refers to the scale that you can deliver. Bigger is better.
Capabilities refer to the depth and sophistication of the features in your solution.
Here’s the rub.
You can’t demonstrate capacity and capabilities without getting opportunity in the first place. You might have been able to build it, let’s say with some new technology or way of doing things. But, you aren’t going to get the shot without social proof.
So, small and medium-sized businesses are forced into becoming sub-contractors on projects large enough to merit an RFP.
But, how do you develop relationships with prime contractors if you have a tough time demonstrating either capacity or capability? Catch-22.
It is even worse for companies that may lack the social networks to develop these contacts, such as minority or women-owned firms. That is why it is vital for prime contractors to go out of their way to identify these sub-contractors and to develop them, with the offsetting benefit of helping to diversify and de-risk their own supplier base.
This is a difficult search problem, nonetheless. How does a large prime contractor find these sub-contractors? How do they get to know them, at low cost? How can they develop them without putting too much in jeopardy, at least initially? Prime contractors complain routinely that they cannot find enough qualified sub-contractors, particularly disadvantaged companies necessary to help meet the requirements of many government and commercial RFPs. Primes will argue that buyers need to suspend their set-aside requirements for specific projects, claiming that they cannot find suitable sub-contractors. Or, they just show up with the same limited set of sub-contractors to every RFP.
EdgeworthBox is a platform that is suited for this purpose. Suppliers join for free. Our social networking features help them showcase their capacity and capabilities to buyers and other suppliers on the platform. Prime contractors can research these profiles and can then initiate contact with them using the EdgeworthBox messaging platform. Would-be subcontractors can use the EdgeworthBox database to find out which relevant prime contractors have won contracts in the public sphere, as well. We call it network-based sourcing™.