To RFP, or Not to RFP, That is the Question

I put much of this discussion on the question of whether or not to go out for a bid under the title: "City, Know Thyself." (with apologies to the Greeks, where the phrase "Know Yourself" appeared on the Temple of Apollo at Delphi).

The first question to ask if you are pondering your options is "What does the city want?" - does it look more like a private sector infrastructure investment in the city or a package of services to be purchased from a private sector vendor? If it looks more like the former, then there is considerable flexibility for the city and good options for negotiating a win-win. If it is the latter, then the city should develop its needs list and see how well it can get its needs met in the marketplace.

The answer to the RFP question hinges on two other major issues: first, how attractive will the city offer be to draw in quality responses (demand)? second, how many quality vendors are likely to bid (supply)? Also at stake is the political attitude inside the city. While a city may be in the habit of bidding everything over a certain amount, to remain above political reproach, there is a cost attached to that mentality, making an RFP a more expensive proposition and a cumbersome way to engage in commerce, which may not produce the desired results.

I think that the framework used to look at a municpal wireless project matters as well. Does the city want a network for municipal applications, indicating that it will be a major consumer of broadband services? How large is the potential market demand in the city v. the potential cost of the network - i.e., will the project yield a good business case for the potential bidders in the RFP?

If the city wants a network primarily to have a network as an economic development badge of honor, on the other hand, it has less to offer, but can still put out feelers and engage in a discussion with potential partners to develop the project in the absence of an RFP. In this case, the municpal wireless project looks more like a hotel development, a factory relocation, or a headquarters relocation.

A private sector company may consider making an investment in a community and seek to find out what support it can get from the city to help it make its decision. We are all familiar with this model, and nobody would suggest that a city, approached by a company that indicates a desire to locate a factory in the city, should go out to RFP to consider other offers. In a similar vein, a private sector WISP may approach a city with an offer to install a network and wish to explore any commitments the city may make to help the WISP with its decision. But the comparison suffers somewhat, because it is unlikely that there will be a second network anytime soon, but a second factory could easily locate in the city.

So, I believe that the alternative of a sole-source, non-bid tender may have a lot to offer cities and should get more attention this year.

1. It can save money for the city if it avoids the time and expense of the RFP.
2. A project can be negotiated and launched in the same time it would take to prepare an RFP - a sole source can accelerate the timeline of a project.
3. A vendor should be willing to make significant concessions in a sole source arrangement, in exchange for avoiding the competitive risks and expenses of an RFP response. Just ask any vendor who has made a short list, but ended up second place in a bid. They are not often eager to go through that process again, and should be quite motivated to sole source a bid when the opportunity arises.

Who should consider a sole-source arrangement?

1. You are constrained from building the network yourself (i.e., lack access to capital, etc.)
2. Your city is smaller and less attractive to private sector WISPs. (slow growth, small size, hilly environment, etc.)
3. Your city government is not a large consumer of broadband services.
4. You currently have a relationship with a strong private partner that you trust.
5. You are under time or political pressure to get a project underway.

If many of these conditions describe your city, I would urge you to work with a consultant like MetroNetIQ to evaluate your options in the near term. Consultants are well connected and in a position to identify a private sector provider who may have interest - we can acti as a matchmaker of sorts. A little time and money spent in evaluating your options well ahead of actually engaging in an RFP may reveal that there are more options available than you originally thought. You may discover that there is a well-aligned partner who would be motivated to negotiate and make an investment in the community if a bid were to be avoided.

In the end, an RFP is only one way to go forward. Cities should examine their options and consider their needs in detail. An independent sounding board like a consultant makes sense. It may be that your project looks much more like an economic development opportunity, with a private company willing to bring good assets to the city - that would argue for a two-way negotiation without an RFP. If it looks from the start more like an IT procurement, however, the city should begin the requirements development process immediately, in advance of an RFP.

An RFP will remain an opportunity for the city, at wherever stage it is at in a project, but the costs of a formal procurement should be weighed against the benefits. Remember to give the sole-source provider option more attention in 2007, and your odds for success will improve.