The Case for Including a Budget in Every RFP

When we discuss our approach to agency search with a prospective or newly engaged client, one of the questions inevitably asked of us is:  Why should we include a budget in our RFP?

 

To which we respond:  If you don't want to share your budget, you might re-consider whether you are really serious about issuing the RFP at all.

 

Publishing a budget as part of your RFP is not a magic bullet -- you certainly need to include a well-thought out scope of work as well -- but it is essential to ensuring a smooth-running, transparent agency search process, and it's critical to finding the very best agency for your organization. 

Why do we insist that clients share a budget with prospective agencies?  While there are a number of answers to this question, they can be summed up this way:  publishing an agency budget is one of the most important steps you can make to ensure you'll find the very best agency for your organization and your communications needs.

 

Some clients argue that leaving out a budget forces candidate agencies to be more creative and produce more strategically sound proposals. Others say, “I need agencies to tell me how much we should be spending.” 

 

But issuing an RFP shouldn’t be a game of “Gotcha,” or “Can You Top This?”  Its purpose should be to elicit the agency’s best thinking, given your stated scope of work and what you plan to invest.  And, has any company or association ever decided what to spend on PR by asking its PR agency?

 

Indeed, your budget (including expenses) should not only be front and center in your RFP – it needs to reflect, accurately and fairly, your stated scope of work.  If you plan to spend $100k, you do yourself and the candidate agencies a huge disservice by layering into the RFP a $250K scope of work!

 

Providing a sound budget enables responding agencies to eliminate the guesswork, deliver their best and most creative product, and compete on a level playing field.

 

Here are the other reasons to determine and be up front about what your organization intends to invest in an agency relationship:

  • You won't waste your time evaluating agencies for whom your budget is too small or (less often) too great -- RFP Associates has seen several instances in which a number of agencies that fully intended to respond to an RFP did not because they couldn't live with the budget as outlined.  Had those agencies played through, submitted a proposal, and been invited to present, imagine the resentment on both sides when the true budget would have been revealed.
  • You and your organization are taken more seriously by responding agencies -- Our research tells us that agencies that see no evidence of budget in the RFP are suspicious of the issuing organizations.  "They're probably just fishing for ideas, and either have no intention of hiring an agency -- or already know who they're hiring," one agency executive recently told us.
  • You'll know very quickly whether you are asking for too much in your scope of work -- Responding agencies will make it clear, in their questions, proposals and presentations, whether your budget is fair and reasonable, or requires trade-offs and cutbacks on services and programs.  

Responding to an RFP is serious work for agencies. When they decide to pursue your business they have to prove themselves on so many detailed levels that guessing on the budget should not be one of them. As you review your candidate agencies you’ll be glad in the long run when you can compare them on equal ground.

- Steve Drake

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Comments: 4
  • #1

    Jeff Ghannam (Thursday, 10 January 2013 17:36)

    Excellent, well-thought out post, but I'm of a different mindset. If you have a clear scope of work in the RFP (and I know that’s a big “if”) a capable agency knows the value of their services and will know exactly how much to charge in their proposal--whether you include a budget or not.


    I’ve sat on both sides of the RFP process and when on the client side, I’ve posted RFPs both with and without budgets. That’s not to say I didn’t have a budget when I did not include it. I just didn’t want to share it. And here’s why. When I shared the budget, all the proposals magically came in at the posted budget amount more or less. I felt I lost an opportunity to differentiate between bidders and, more importantly, possibly lost out on saving my organization some serious dollars.


    Simply put, by not including budgets, my RFPs forced agencies to be more disciplined in their cost estimates. I don’t think it necessarily “forces candidate agencies to be more creative and produce more strategically sound proposals.” If they need a budget to produce that kind of work, then as the client I got the wrong agency in the first place. That should be SOP.


    Yes, clients sometimes “need agencies to tell them how much they should be spending.” Now I’m on the agency side, I find that sometimes clients need a partner who will help them shape their budget and scope of work and tell them how they can get the biggest bang for the buck. A detailed proposal that outlines costs associated with specific tactics automatically does that. Certainly the consequent negotiation and contract can shape that scope even more.


    And no sane client would invite an agency to present without first reviewing their cost proposals and deciding that those proposals fit the budget. Reviewing proposals is serious business for clients, too, and they are not fond of wild goose chases.

  • #2

    Steve Drake (Friday, 11 January 2013 16:33)

    Jeff – Thanks for your response. We agree with you on one point: agencies should always be asked to share cost and fee information (hourly or day rates, estimated expenses, etc.) as part of their proposals and pitches. But we believe they should do that in the context of some overall budget guidance.

    Beyond the points we made in our blog, here are the reasons to always include budget guidance in your RFP:

    1) It’s about building a relationship, not looking for a “daily deal” – Groupon has been very successful matching customers with companies by focusing on price. But the retention of a public relations firm should be more than that; it should be based on the quality of the creativity, thinking and experience of the firm. Ironically, withholding budget information makes it all about price!
    2) The absence of a budget communicates a lack of seriousness (and generates skepticism) – People don’t (or shouldn’t) walk into a Mercedes dealership if they’re working with a CarMax budget; and if they do, they’re not likely to share their budget with the sales person. A company that issues a PR agency RFP without a budget is not likely to be taken seriously by the RFP recipients. At the very least, the company will be met with skepticism.
    3) Final programs and budgets rarely, if ever, precisely follow what’s outlined in the RFP – We challenge any agency reading this to show that the program it implemented for a client was the very same as that which it presented during the RFP process. Likewise, budget levels almost always change (upward or downward) once an agency is selected. The point? A company should ensure it is comparing “apples to apples” during the RFP process.

    Thanks again for your perspective.

  • #3

    Lucy Siegel (Friday, 11 January 2013 22:38)

    My firm, Bridge Global Strategies, doesn't respond to many RFPs these days. In addition to companies that refuse to provide budgets, most companies expecting a PR strategy and plan as part of the proposal. I see this as a way to elicit free consulting, and feel that 1) it's not fair to ask for that, and 2) most of the time the RFPs and briefings given are not sufficient information to develop on-target strategies and plans. Phase 1 of our programs is the stragegy/planning phase, and we charge for that service. Prospective clients can look at the work we've done, talk to our clients and past clients, and hire us if they like what they see. We usually provide a contract that distinguishes Phase 1 costs/services separately from the work that follows and allows clients to walk away after Phase 1 if they aren't happy. That gives them a way to test the waters and try us out without committing to a long contract.

  • #4

    Jeff Ghannan (Tuesday, 15 January 2013 17:04)

    I agree it's not all about price, Steve. But let's not kid ourselves. Cost is an important element of the RFP process.

    Assuming you have written a well-thought out scope of services *and* you score the firms on "quality of the creativity, thinking and experience of the firm" then the next scoring criteria is, you guessed it, price.

    And to pick up on you car shopping analogy, you would never go into care dealership and announce how much you are willing to spend, would you? That's would be violating one of the first rules of negotiation. And like it or not, the RFP is the beginning of a negotiation. Yes, you negotiate with the long-term relationship in mind, but you owe it to yourself as a client to get the best deal first!