Important Steps for Managing Risk Using Your RFP

November 27, 2019

Whether a project is worth $10,000 or $10,000,000, your company probably is issuing some form of a request for proposal or RFP. Far too often risk management begins once a winning bid is selected, but in our opinion, this is too late. RFPs offer an excellent avenue for establishing risk mitigation as a project priority and excluding any bidders not operating under the same philosophy. RFPs represent a critical first step in any comprehensive loss prevention strategy. Before selecting a winner on your next RFP, add these steps to the process.   

Phase I: Pre-RFP

Avoid problems and project delays by investing time planning for each RFP. Good preparation ensures company needs are met, RFP criteria aligns with project goals, and that bidders clearly understand project expectations. 

1. Gather stakeholder feedback

Meet with all stakeholders impacted by the proposal. Gather the needs of each team based on the project, errors or omissions from previous RFPs, and successes or challenges of formerly selected contractors.

2. Identify Needs and Deal Breakers

Based on stakeholder feedback, compile a comprehensive list of project needs requiring responses in the RFP. Designate which needs represent deal breakers. These should result in a disqualified proposal should a bidder’s answers not comply with the requirements of these key items. 

3. Establish Risk Management as a Selection Criterion

When issuing RFP instructions to potential bidders, identify risk management as a key factor in selecting project finalists and winners. This establishes the expectation up front. Companies without sound risk mitigation strategies can avoid wasting time on the proposal while companies that understand risk can emphasize their proficiency throughout the RFP. 

Phase II: The RFP

Understanding a bidder’s risk management beliefs and practices can come from many different questions and directives throughout the RFP. Consider adding the following items to your request and look for red-flag answers that could heighten risk on the project. 

1. Discuss your company’s work performance

    • Provide at least 3 profiles of past projects like this one
    • Provide start and completion dates for your last 5 projects including those currently in process
    • Provide at least 3 references from current projects or those completed within the last 3 years

These RFP directives speak to risk by assessing quality of work and a contractor’s experience alignment with the current project. 

2. Provide documentation of the following as they relate to this project: 

  • Legal documents
  • Certifications
  • Permits
  • Licenses
  • Credentials
  • Insurance
  • Bonds

Look for the minimum legal requirements. Check dates on documents to ensure they are active and establish ample tenure. Identify any additional certifications or licenses held by the bidder beneficial to the project that serve as a competitive differentiator, especially as they relate to quality and risk.  

3. Will you be hiring subcontractors to complete this project? 

  • If yes, list frequently hired subcontractors with contact information
  • If yes, describe the process of vetting and hiring subcontractors

Depending on the project, the use of subcontractors may be a deal breaker. In the world of construction and property management, they are commonplace. This question addresses risk by examining a bidder’s process for hiring and retaining high-quality subcontractors.

4. Provide relevant qualifications for project leadership. 

Project leads should have extensive experience with similar projects, a record of success, project management skills, and show engagement in continual job training.

5. Detail your company’s risk mitigation strategy. 

This is straightforward and should show that the company prioritizes risk management and loss prevention. Answers should reference items like insurance coverage and endorsements, job safety, risk management staff, training, and compensation practices around non-compliance.

6. What is your process for quality control on projects? 

This question essentially asks how the bidder self-polices the quality of its own and/or its subcontractor’s work. Claims often happen months or years after a contractor completes a job. Understand what quality checks the bidder uses to ensure errors and issues do not occur during or after a project. 

7. What criteria or metrics are used to measure project success? 

Common answers to this question include staying on budget, avoiding safety issues, and completing projects on time, which are all good. However, since the RFP establishes risk as an important selection consideration, also watch for answers around loss prevention and contract compliance. 

8. Provide a 5-year loss history.

Identify if the company has experienced a concerning volume of paid claims, which could indicate risk is not a priority. Note upward or downward trends in the number of claims and their value. 

Phase III: Post-RFP

Based on the proposals received, review the answers, and toss out any submissions with deal breakers. Narrow the field and ask follow-up questions as necessary. If risk management truly is a priority, do not make lowest bid the most important criteria. Low-cost providers without good risk management practices often end up carrying high price tags when it comes to claims and litigation. 

More Questions? Have a risk management question in your RFP not included in our list? Send it our way! We’d love to hear how you’re managing risk and discuss the additional support our technology can provide.

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