September 27, 2011

Contracts and RFPs – Transforming Your Vision

OK, let’s go out and address the grass issue by getting a “riding  mower.”  The problem is that whatever you describe is what you will get if you use the request-for-proposal (RFP) approach.  The RFP needs to be pretty specific if you want the end product to match your vision.  If you have ever seen a government procurement RFP for services, you know what this means.  These RFPs are specific to a level of detail that few of us could achieve — but nothing is left to chance and the contract process that follows the RFP is also pretty daunting.

Obviously, the picture does not represent what would be conventionally thought of as a “riding mower,” but the point is that this is a cobbled up representation of what might result if a person that never mowed lawns responded to your lawncare RFP.  Vendors look at the RFP process not as program definition, but as the start of a negotiation.   The vendor channels its own idea of what it can provide back to the employer, and the process generally is engaged with price being a major factor in the decision-making.  When it is not based on price, it is a decision based upon some kind of spurious ROI that has little or no basis in traditional financial science.  The RFP and the response are then handed to lawyers who have no grounding whatsoever in the original project vision, and a contract results that is supposed to define the relationship and program performance.  All this is accomplished in a timeline that is limiting and under a set of pressures that is generally defined by the vendor.

Employers need to be more careful and more studious.  There needs to be a major rethinking of the entire RFI/RFP process and some standard contract terms that can be applied across the board.  We need a taxonomy that is standard for the industry.  Employers need a careful and thoughtful process that begins with an idea and progresses through implementation with central core values always in sight.

How can an employer maintain the vision and achieve a partnership with a vendor that is timely and which reflects the philosophy of the programming and care that they want to achieve?  I would offer some ideas and suggestions.  (Some have been lifted from my book on the subject, AML)

1.  Start with a written set of principles and a complete scope of work that can be revisited throughout the contracting process.

2.  During the RFP, ask the vendor to submit a standard contract for review.  If it does not look workable, avoid that particular vendor.

3.  Ask others in the on-site health community about their impression of the vendor and their contracting process.  If you get word that the process has been a challenge, move on to another vendor.

4.  Contract with a vendor that can demonstrate that they have developed a program that is very similar to the one that your firm envisions.  You can then keep the vendor focused on the programming that they have already demonstrated that they can provide.

5.  Early on, get all of the principals in a room and hammer it out face-to-face.  The circuitous e-mail approach to contract development takes months in some cases and most of that time is involved with contracts pending in a lawyer’s inbox.

6.  Use a lawyer that has done this type of a contract before and knows the particular issues of transactional law in your state.  This is not the time to have your labor counsel learn about health care.

7.  Have a back-up plan and a way to escape from the table.  Keep the second RFP candidate viable for a couple of weeks while you try to gain some traction with the contracting process of your primary vendor.

8.  Simplify the process by having a standard set of agreed-upon issues put into an LOI (letter of intent) that is a pre-contract document.  The LOI can even be used in the RFP process to further qualify prospective vendors, and it can be a document that is transitional from the RFP to the contract.  We have been involved in some arrangements where the LOI is issued with a high level of definition (by the employer) and the primary vendor has to sign the LOI in order to move to the next step.

9.  Up-selling is commonplace in contract negotiations and should be addressed directly.  The concept of change at a table with the vendor is not a problem unless the only change is price.  At that point, the employer should re-examine the discussions and make sure that the result of any negotiation is defined by the budget that accompanied the RFP.  The issue is simple — if the price has to change, then something within the process must have changed.  What was it?  Is there really a new service that the employer has tacked onto the final deliverable or is this something that the vendor should have rolled into the original bid process?

10.  Set a contracting timeline and stick to it.  If it is missed – step away from the table.  This is a bold step, but the difficulty level that you find at the bargaining table for a contract where you have gone through an RFP process is probably indicative of the level of difficulty that you will also have in the ongoing program management.

Back to the riding mower. . . . you get what you want only if you can describe it.  You get a contract that you want only if you force the issue.  We note a dramatic change in the negotiation dynamic when the RFP process changes from selection to contracting.  At that point, the vendor seems to take over and instruct the client on what they want, changing from a process applicant to a project manager.  The employer is often in a situation that includes a deadline for clinic opening approved and anticipated by management.  They are now dealing with a single provider, and the leverage that they had in the selection process is greatly diminished.  Result – you wanted a power mower, and you get a pedal-powered rider mower that has been fashioned by a vendor that only can deliver a program using the basic parts that they have in their store room.

If you want to have a good relationship with a vendor, it all starts with the RFP and contracting process.  Your employees deserve to have the vision that you held out when your team originally decided to implement an on-site clinic.  Don’t let the contracting process take that away from them (and you!).

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