In the purchasing world, the acronym RFP is as common as MVP is to the sports community. The acronym RFP stands for Request For Proposal. Most of you reading this would have been able to guess that, but why is it that so many healthcare organizations don’t utilize this practice for their operations?
The process of an RFP is very common in large multi chain operations that purchase millions of dollars in goods and services but is less common in smaller single unit operations or small chains of 2 to 3 locations. Why is that? It is also common knowledge that large multi chain operations pay less for the goods and services because they practice the RFP process as a part of their purchasing strategy. It is assumed that only large multi-unit operations benefit from the RFP process, but in reality – the RFP process has great advantages to single unit operations, as well.
How does an RFP work? What are the benefits?
There is no doubt that preparing an RFP can be a significant amount of upfront work, and many single unit operations feel they don’t have the time or staff to conduct the upfront work, but what is the cost to benefit ratio they are missing out on?
Here are a few of the benefits that implementing an RFP can have on your operation.
RFP’s create a playing field that encourages vendors and suppliers to put their best foot forward whether that is pricing or services. Vendors and suppliers want your business and often know how they stack up against the competition and often can get creative when they can bid on multiple services, lines of business, and knowing they usually have one shot at winning your business.
The RFP process creates the foundation for the contract of goods and services over a defined period. Usually, one to five years. The contract lays the groundwork for your budget, knowing what you are going to have to pay for your goods and services over that timeframe. By knowing the costs included in the bid, there are no surprises, and you can be confident in your spending over that same period.
By utilizing the RFP process, you are getting the best pricing in the market, and that pricing is usually significantly better than if you were not shopping your pricing around. This stands true even if you think you’re getting the best pricing by using a GPO. The best way to ensure the best pricing is to RFP with a vendor and distributor who will work with GPO partners to negotiate even better deals than the open market. It is also common that additional benefits and services are included as part of the RFP that bring additional value to your organization. These additional services like software programs and logistics/consulting services can make a huge difference during a contract.
The additional services discussed above, like software addons often bring greater visibility into the operation by giving the operation the data needed to make the most effective decisions for the organization. It is also common during the RFP process that the preparation of the RFP brings to light areas of opportunity within the organization for additional savings.
We can schedule a meeting with our purchasing and data specialists to provide details of how the largest healthcare operators get the best pricing and services available in the market. No cost, no obligation.