If you are like most construction company owners, the addition of new or used equipment begins with a telephone call to the usual suppliers. Whenever there is a plan to buy equipment, the process begins with a request for price quotes. The quotes arrive and you shove on your negotiation hard hat and prepare for the battle of wills. Who wins? Usually the victor is the one with the most patience and perseverance.
Why waste time writing out equipment specs and financing options for the next equipment addition? Everyone knows that writing a Request for Proposal ("RFP") is something the big contractors do when spending $500,000 or more. Why take the time to write a complicated RFP when a phone call will get you what you want? The price is all that you don't know.
While owners might begin the buying process full of optimism, they often find themselves stuck in the beginning phases of negotiations far too long and this can negatively affect you and your customers. A new backhoe or excavator to replace the undependable unit will help finish the work faster and make you more money. Using the RFP process can save your operation money and time.
Whether Large or Small, Big Money can be Saved with the RFP
Big and small contractors, accounting and law firms, insurance agencies, and most county, state and local governments use the RFP method for acquiring goods and services. Using a modified RFP or Term Sheet is sufficient when buying equipment less than $100,000.
Kevin Carlisle, owner of Perfect Image Inc. a small commercial printer located in Charlotte, N.C. used an RFP when purchasing a new digital copier for his business. Carlisle used the services of a lease review expert who helped him draft the RFP. When he began to purchase the new equipment, he had one proposal from the equipment supplier's leasing resource. He decided to invite four additional lease companies to present financing proposals in response to his RFP Term Sheet. He was surprised to find that the best pricing came from his bank's leasing company. He saved $7,200 (14% of his total investment).
Shook Hardy and Bacon LLP, a large law firm in Kansas City used the RFP process when they were preparing to move into their new corporate headquarters. They chose to lease telephones, furniture, computers and video conferencing equipment. Dale Chaffin the Chief Operating Office of Shook, Hardy and Bacon LLP (now retired) knew what managers and business owners everywhere know; leasing equipment makes good business sense. According to the U.S. Department of Commerce, 80% of U.S businesses, large and small, lease rather than buy when adding or upgrading equipment and needed assets.
Chaffin, like Kevin Carlisle of Perfect Image, agreed that the best leasing deal does not always come from the equipment dealer. Thirteen leasing companies and financial institutions responded to the RFP. After a full review of all proposals and lease contracts, four leasing companies were invited to continue the process. The firm conducted negotiations with all four leasing companies simultaneously. During the negotiations, one leasing company resisted making changes that Chaffin required. Because he had three other leasing companies to meet his terms, Chaffin could shift lease business at any time before the contract signing.
Using the RFP process leveled the playing field. It was easier for the Shook Hardy and Bacon RFP team to spot the differences in various financial solutions and the equipment benefits. Dealer presentations changed from glitzy sales sizzle into firm offers and contracts. Once the selling price and lease terms are on paper in a proposal, negotiation can begin.