Ensuring A Good RFP Outcome

Ensuring A Good RFP Outcome Is Worth The Effort

The decision to embark on a Request for Proposal (RFP) for banking or other services for your municipality can be a time-consuming endeavor. While the intent of an RFP is clear – “to engage in a solicitation of bids for a particular service or project” – the process can be a daunting one, especially given other daily responsibilities and competing priorities. Yet, many will say completing the process in a timely and efficient manner is worth the effort.

As a financial institution, the majority of RFPs we receive are for municipalities that are either satisfying their fiduciary responsibility to pursue competitive pricing on the products and services they use or they have fallen out of favor with their existing financial institution and have begun the search for a new provider. The RFP process levels the playing field for all who respond and is designed to allow the receiver to compare responses in an apples-to-apples fashion. This is done by mandating every response be equal in terms of questions as well as format. Those who do not follow the specific format established by the municipality may find themselves disqualified from the process.

However, as someone responsible for replying to RFPs, I always find myself struggling to fully understand the nature of the information and questions included in the requests. In my opinion, some of the information I would find to be most beneficial to the RFP writer isn’t requested, and instead, I’m left wondering about the relevance of other questions. Therefore, I’ve shared some questions below, which from the bank’s perspective, I believe would provide the receiver with the most accurate and useful response.

Who Are You Selecting?
Not all banks are created equal and you should want to know who you will potentially be doing business with. Be sure to ask for background and history on financial institutions you have no previous history with. What’s their story? Some banks cater to large corporate business while others consider themselves to be more community-focused. Just because a bank has an office in your community doesn’t ensure the dollars you have on deposit there stay there. If you placed your deposit relationship with a particular institution, would your dollars be used to support growth within your community or are you supporting growth in someone else’s community? 

It would not be uncommon, given the significance of a municipal relationship, to have a team of individuals assigned to managing that relationship. The bank’s response should provide detail on those individuals including their background, experience, and contact information. Are those bankers accessible to you? Are they open to meeting with you face to face on a regular basis? Will they reach out to make you aware of issues or trends that may affect you, or will they only respond to your inquiries? Developing a solid relationship with the bankers involved is paramount to the long-term happiness and success of your relationship with that institution.

Apart from the individuals you will be working with, does the institution itself have a history of doing business with municipalities? Do they understand the special nuances of your relationship? Will they provide any value-added service to your municipality? This may be as simple as helping to collect tax payments or allowing you to use conference rooms for meeting space. You may want to include a section in your RFP for “future considerations” or “value-added services” to better understand how that institution will work for you. Also, don’t be afraid to ask for references and be sure to contact them to get a sense for how that financial institution does business.

What Are You Selecting?
An RFP should center around your current banking situation and account structure, yet often I see municipalities omit those details. Let’s face it, banks are relationship driven. Without knowing the details of the entire relationship which could eventually be placed at the institution, it is impossible for the bank to provide a true and accurate response. I understand many municipalities feel that by providing this information you are “showing your hand” or providing an unfair advantage so to speak. But not giving the financial institution the detail it needs to properly commit to you is the equivalent of asking a mechanic to tell you what is wrong with the engine of your car without being able to open the hood. 

Providing information regarding the number and type of bank accounts, average annual collected balances in those accounts and the associated interest rates allows the financial institution to customize a proposal specific for your municipality. Volume of activity such as number of deposits, checks, and checks deposited on a monthly basis as well as the volume of electronic transactions – both incoming and outgoing – are also important as most banks have various accounts in their offering with requirements based on transaction volume. Having the best information available to recommend the appropriate account type is a key first step in the structure of a deposit relationship. And while some RFPs I’ve seen provide this information in generality, the most efficient and useful method of providing this information to those invited to respond is by including copies of bank and/or analysis statements with your request. This gives the truest picture of the balance and activity over the course of a year and allows the financial institution to annualize any interest earnings and/or fees. 

Also, it’s important to include detail regarding the products and services required. Does your municipality originate ACH transactions? Wire transfers? Do you utilize positive pay? Do you deposit checks remotely using remote deposit or mobile deposit? Outside of an RFP process, the financial institution’s cash management staff would have previously met with you to discuss how you receive money, how you send money, etc. This discussion affords the financial institution an opportunity to better understand your processes and the technology you are using today. However, with an RFP, the bank is expected to provide this level of information without the ability to first have a discussion with the municipality. This is a little bit of the cart before the horse, in my opinion. Therefore, providing this information only eliminates confusion and misunderstanding, and increases your opportunity for receiving valuable information from their response.

When, Where, and How
Your RFP should also be clear on any specific conditions of qualification to be considered for your RFP as well as the timing and process for your decision. Professional and accurate RFP responses take time to complete. Therefore, it is customary to allow at least 30 days to elapse between the mailing of the RFP and the date the responses are due from the financial institution. It is also acceptable to include an earlier sub-deadline to clarify questions.

Equally important is the need for the financial institution to understand the criteria you are basing your decision upon. I’d shy away from indicating you are looking for the lowest cost provider. While it is certainly important for the financial institution to be price competitive, they may be reluctant to respond if they feel this is the only factor in your decision. Which financial institution will provide the best overall value to your municipality? You should want to evaluate your responses based on who has the best products and capabilities for your municipality delivered in the best fashion and at a reasonable and competitive cost. 

Finally, and maybe most important, allow a selection of finalists to meet with you to present their proposal. Be sure the correct internal staff attends those presentations as well. Banking is an acronym-riddled business and each bank may refer to a similar service by a different name. Use this process to get to know your potential bankers and to better understand their commitment to you. Ask questions and evaluate providers on their knowledge. The dialogue developed between you and your bankers during the RFP process is key to setting the table for a long-term, beneficial banking relationship for your municipality.

Author: Lisa Woerpel
Vice President, Business Services
Phone: (608)-203-9818