The Pros and Cons of Going Out to Bid for a Relocation Supplier
Read the updated version of this article here.
So, you have made the decision to outsource your employee relocations to a Relocation Management Company, or RMC. If only that was where the work ended!
Now, you must choose the one RMC that best fits your workplace culture, employee needs, company budget, and any other criteria that you require in a supplier. With so many RMCs to choose from, the question becomes how do you find the right one?
The Procurement Process
When selecting a relocation supplier, it really comes down to two options: Going out to bid (competitive procurement), or selecting a supplier on your own (non-competitive procurement).
Procurement Option 1
Going out to bid, also known as competitive procurement or open tendering, occurs when you send out a bid request, typically in the form of a request for proposals (RFP). RMCs can choose to respond to your request and submit a proposal explaining their company, capabilities, and pricing. Once you receive the proposals, you will compare each against your most important evaluation criteria. This process can include multiple rounds of meetings or bidding.
Procurement Option 2
If you’ve already decided which RMC you want to pursue based on your research and previous communications, then you don’t need to open your search to other suppliers. This non-competitive procurement process, also known as sole sourcing, occurs when you choose an RMC without a bidding process. However, in some instances, a company will choose two or three RMCs to reach out to, resulting in a smaller, more intimate bidding process.
Each procurement process has its own pros and cons, so it’s essential that you choose the path that best suits your company’s and relocating employees’ needs.
Advantages of Going Out to Bid
- It encourages competition: Typically, when you go out to bid, you will have a greater pool of RMCs to choose from, and those responding are likely to offer you their best pricing right away. Another consideration is you may learn about other benefits or service offerings that you didn’t think to ask for initially.
- Advocates transparency: The idea behind the bidding process is each RMC will essentially lay all their cards on the table: They show you their pricing, services, and value-adds, and you choose a supplier based on those responses. This results in a fair selection process while offering you a clear vision of what is most important to your company.
- Easily compare different RMCs: Having RMCs follow a certain format, and each answering the same questions, allows you to easily compare answers and rule out any RMCs that don’t meet your immediate requirements.
- Fully vet your options: Creating an RFP lets you choose what you want to learn about the responding suppliers. This helps you fully understand what each RMC has to offer and allows you to ultimately choose the company that best fits your needs.
Disadvantages of Going Out to Bid
- It can be time-consuming: The bidding process can take anywhere from 2 – 6 months, or even longer, depending on your internal decision-making process. It also involves several intricate steps from RFP development to initial bids and follow-up questions to final presentations and on-site visits to help you make your decision.
- Associated costs: It will undoubtedly cost more to go through the RFP process than to simply choose an RMC to work with. The cost of developing the RFP, screening suppliers, reviewing responses, and follow-ups can take a toll on your company’s time and budget. Typically, a company’s relocation program accounts for 90-95% of the relocation “spend”, with only 5-10% being paid out to the RMC.
- Eliminating the wrong suppliers: There are many viable RMCs that simply don’t participate in competitive bidding opportunities. The reasons vary from high associated costs to having a different pricing structure that does not compare easily
in an “apples to apples” review process. You could be missing out on an RMC that would be your ideal fit.
- Promises of unattainable pricing: For some RMCs, winning new business is more important than upholding your needs throughout a long-term partnership. These RMCs will solely bid for your business to undermine competitors, even if their proposed pricing is unattainable for their own bottom line. This can cause a headache during the implementation process, or result in a requested fee increase in the first or second year.
Choosing Non-competitive Procurement
If going out to bid doesn’t sound like the best option for your company, the other option is the non-competitive procurement process.
You can select a supplier you know will best service your relocation requirements based on your research and prior communications. This process really works best if you know one or two RMCs that already fit your needs and company culture.
This option also works best if you are working within a small window of time. You won’t have to review multiple in-depth proposals—just the pricing proposals from the RMCs of your choosing.
Next Steps
So, ask yourself, what is in the best interest
Selecting an RMC is an important business decision for your company. You want to find an RMC that best meets your company’s needs, whether that be high-quality support for your relocating employees, lowest cost, the most advanced technology, or a combination of all three.
