Business Analysis Guidebook/Procurement, Including RFPs, RFIs and IFBs

Types of Procurements (RFx)

One role typically facilitated by business analysts within an organization is that of defining business and system requirements used in procurement.

There are a number of different types of procurements, and they each have unique features. Procurement guidelines vary from state to state (and country to country), so it is generally best to consult your finance and legal offices for specific dos and don’ts. The material covered here is generic in nature to ensure applicability across all organizations.

The type of purchase methodology generally depends on the types of goods and services being procured. Below are the most common forms:

Type of Procurement	Description
Invitation for Bid (IFB)	Typically the goods or services being tendered are commercially available from more than one vendor. In this type of procurement, specifications are provided and the responsible bidder with the best price is awarded a contract. A company must be able to clearly define specifics, including terms and conditions, in the solicitation.
Request for Information (RFI)	When companies or governments are considering procurement, they may start with a request for information from various vendors in order to better frame their procurement. The RFI is typically not binding, and result in specific information, versus a quotation. Generally when done, this step occurs before a formal IFB/RFQ or RFP.
Request for Quotation (RFQ)	This is the same as an IFB.
Request for Proposal (RFP)	When a custom solution is desired, often involving hardware, software and/or system development and ongoing maintenance, a request for proposal is issued. This results in a proposal outlining how the bidder firm will meet the requirements. Generally these take the longest to complete, but are very helpful when introducing new technologies or systems that a firm wishes to outsource.

Some entities opt to try demonstration projects or proofs of concept on some technologies before making significant investments. These types of “try before you buy” techniques can also be incorporated into the procurement.

All but the RFI typically results in some sort of procurement to the winning bidder(s), whether it be a purchased order (PO), in the case of a IFB/RFQ, or a contract, in the case of an RFP. Depending upon the request, the award of a PO or contract can be to one or more vendors.

Make vs. Buy

Business and governmental agencies face the decision whether to “make or buy” on a regular basis, and typically the analysis is conducted by a business analyst. Many factors go into these decisions, namely:

• Is this part of our current (or desired) core competence
• Do we have the necessary skills, time and capacity to build in house
• Can we develop more cost effectively than buying
• Number and reliability of suppliers in the marketplace
• Ongoing maintenance costs if we build versus likely inflation costs of suppliers in the future
• Ability to easily scale (up or down) as demand occurs in the future
• Ability to reuse or recycle components/parts into other products and services
• Authority to contract out the products/services
• Opportunity costs of the decision (e.g. if resources diverted to build, what do we no longer have the capacity to do)

While not an exhaustive list—the one above does cover some of the more important ones to consider. In recent years, the decision whether to make or buy has turned gray! There is often a middle of the road option, called a hybrid, which has a little bit of both as a third alternative. Below is a hypothetical example which outlines the three alternatives:

Make	Hybrid	Buy
Large custom software build using internal resources	Purchase of configurable software; tweaking by internal resources	Outsource development and ongoing maintenance to a 3rd party
Integrate functionality into current systems	Use of external experts in the software to facilitate knowledge transfer for maintenance	Use of 3rd parties to assits with change management (staff training & materials)
Approx 24-36 months to do	Approx 12-24 months to do	Approx 9-12 months to do

Hybrid solutions can be partnering and collaboration with other parties—whether it be purchase cooperative, private-public partnership, or any variation that leverages external parties to achieve the organizational mission.

Procurement Guidelines

While these will vary by the entity letting the procurement, elements of contract law, procuring the best value for the organization, and ability to withstand scrutiny are common across all jurisdictions. Generally, these include items such as:

• Posting the offering so that the opportunity is known to potential bidders (in NYS this entails posting in the NYS Contract Reporter)
• Shielding those doing the procurement from influence by potential bidders (in NYS an active procurement goes into a quiet period, bidders must avoid discussing the current offering except where allowed by law, and all contact must be noted and reported where required)
• Allowing sufficient time for bidders to put together a quote or a proposal (in NYS, these timeframes are detailed in procurement guidelines)
• Security on the part of the bidders in the form of bid bonds, letters of credit, and assurances from the corporate executives that the company will meet requirements if awarded the bid
• Development of the evaluation methodology in advance of the bids. In NYS the categories, where applicable, are published with the values assigned, e.g. cost = 25%, technical proposal = 50%, references = 10%, etc.)
• Acknowledgement that submission of the bid creates a binding price/offer for a specified duration.

The terms and conditions specific to the procurement are generally detailed as part of the RFP/RFQ issued.

Best Practices and Timelines

The role of the business analyst is critical to a successful outcome. It is generally not possible to add additional items during negotiations and contracting, so carefully detailing the specifications into a statement of work is the key to a successful contract down the road. Below are some techniques that have helped to facilitate successful procurements:

• Clearly understand the industry from which you are soliciting from. Are there industry standards to consider,