Why RFPs Fail Hospitals

 

Some hospitals rely on the Request for Proposal (RFP) and its kin, the Request for Quote (RFQ) and the Request for Information (RFI), to evaluate potential management consulting firms. Although these purchasing tools may seem a fair way to compare the companies' capabilities, it is difficult to imagine how their selection criteria could possibly provide the kind of insight needed to choose the right management consultant.

Here's why:

1. The single biggest factor in a successful relationship between a hospital and a consulting firm is the cultural fit among the people who actually do the work. This fit can only be ascertained in live meetings.
2. In the complex purchase of consulting services, it is nearly impossible to provide enough detail in responding to the RFP to get beyond generalities. The best consulting firms provide products designed specifically for their clients in response to clearly articulated requirements. Using the RFP process simply increases the likelihood that a hospital will exclude the one firm that might do the best work for it.
3. Prices delivered by RFP are ballpark figures at best. Any firm worth its fee will dive into the specifics of an engagement – the hospital's strategy, culture, technology, organization, processes, patient mix, physician mix, etc. – before presenting a fixed price. This is an opportunity not generally offered in the RFP process.
4. Beware of comparing your fees to those charged other hospitals. Your hospital is different, your needs are different, and your fee should be different.
5. References don't tell the whole story. Calling references doesn't protect hospitals from making a bad decision. At the RFP level, hospitals aren't really equipped to drill down into a vendor's references to reap the information that truly would be useful in the selection process.
6. Management consulting is a highly fragmented business. The typical company is a private firm with ten employees or less. These firms are rich sources of innovation, but the typical RFP excludes them in favor of the bigger, more financially stable, and more expensive firms that tend to recycle the same methodologies for every client.

Here are some alternatives to consider.

1. Re-direct the consultant's time to your benefit. It takes considerable time and effort for consulting firms to identify business opportunities, respond to an RFP, follow up, and win the business. Instead of the RFP, offer the potential consulting firms a chance to deliver something of value to the hospital. Ask them to conduct a study or provide some specific insight. This gives you the opportunity to meet the people, get a sense of their culture, and get something of value no matter your ultimate decision. And it's a far better use of everyone's time.
2. The only question to ask a consulting firm's references is "Would you hire them again?" References should be used only to validate what a consultant has told you.
3. Look at your team needs instead of the consulting firm's client list. Hospitals are full of very smart people, so most hospitals have about 75% of the solution to their problem in-house. Management consultants should be used to round out your team, not duplicate it.
4. Be very specific about the help you need. Is it technology? Clinical insight? Process? Strategy? Just because a consulting firm helped some other hospital, it doesn't mean it can help you. Every hospital is different.
5. Agree on an outcome, not a price. The potential ROI for operational improvement in a hospital is enormous. Make your consultant present a plan for achieving an ROI of 5:1 or better and hold him to it. A definitive scorecard is good for both sides.