Let’s talk about the way companies ought to pick their TMCs – and why it seldom works that way
I’ve been running Global TMC RFPs for two decades now, and prior to that I was a buyer and before then on the TMC side, so I’ve seen all three angles. The RFP will usually result in the incumbent “retaining” the client unless any number of RFP disciplines are included in the RFP process. Among them are Planning, Communication, Distribution, Analysis, and Validation.1. Planning
The RFP process begins with a business case to justify the RFP itself, and identify the intended strategy, goals and return on investment. If the purpose of the RFP is to lower your travel management company fees, you will be sorely disappointed in both the number of TMC’s that participate and the results of that futile goal.
The TMC fees are barely 5 percent of total T&E, and if you are looking for an ROI on reducing managed travel costs, I recommend you change your definition of ROI (a topic I’ve already covered in a prior issue of BTE). Solutions should Reduce the cost of travel, Optimize your supplier base and their discounts, Improve the traveler’s productivity and travel experience.
The biggest problem I’ve seen with the RFP process (including those in which we didn’t participate) is a rush to get the TMCs to respond with insufficient time, limited data, and little-to-no interaction with the Company prior to the RFP issuance and due-date; which has sometimes left the bidders with as little as two weeks to respond.
The TMC has to be allowed sufficient time. And if it’s a global RFP, four weeks is reasonable and will produce a better outcome.2. Communication
If you launch the RFP within days of securing a non-disclosure agreement from the TMC bidders, your response quality will be low, as will the number of respondents. Our recommended process starts with a review of the qualified TMC bidders, then the issuance of an NDA which is the required document in order to receive the RFP data. At the same time the NDA is issued, the bidding TMCs should be invited to a “Pre-Bid Webinar,” which can only be attended once the NDA is signed.
The purpose of the webinar is to begin to level the playing field, so that each of the bidding TMCs has an understanding of the company, the travel spend profile (critical), travel policy preferred suppliers, top destinations, percent online and unattached hotels, to name a few of the factors. They can’t build a staffing model without that data.
The communication of data must be identical across all bidders. In addition, all questions should be assembled, and the answers to those questions sent to all bidders without attribution. Simply answering each individual TMC’s questions only benefits that one TMC.3. Distribution
Over the years, we’ve seen a variety of methods used to distribute the RFP, from hardcopy to sending via AOLmail and everything in between. The problem with using antiquated processes is they are just that, and there are limitations with access and the ability to analyze the data.
The optimum model is to use an online RFP tool, either owned by the client (i.e., Ariba, Scout) or ideally via a consultant that has their own secure RFP portal. The advantage of using an online RFP portal is transparency (all client participants can access the system 24/7), mandatory inputs, and managed timelines and deliverables.
It also has great value in reviewing historical bid responses which have come in handy many times over the years.4. Analysis
In many cases, the analysis of the TMC RFP responses starts with their financial models. My position is that finance is the last place you should look:
• Their initial financial offering is typically not their best
• The initial offer is probably incorrect (see Validation)
• As indicated previously the TMC fees are 5 percent of the travel spend
The TMC RFP responses should be reviewed first; without any reference to their financial offer. You want to pick the best Travel Management Partner for your company, and the fees will work themselves out during negotiations. Ultimately your analysis most definitely will include the financials, but as an example, in our RFP process, we have three scorecards and none of them are tied to financial models:
a) RFP Response Card (scored by client and Consultant)
b) TMC in-person presentation scorecard
c) Technology scorecard (only for those TMC’s that scored well on the two above)5. Validation
Before you start to winnow down the list of TMCs, it should be standard practice to send back to each TMC your calculation of their total cost of ownership over five years. You would be amazed how many times the TMC made an error in filling out the financial model. If we don’t validate the numbers, we might exclude a finalist based on faulty pricing.
My suggested best practice is to not share the TMC financials internally until they have been validated with each TMC for each of the three to five years in the offering. We recommend five years with two (2) successive one-year extensions.Summary
The RFP documents and tools are just a part of the overall process. It’s really a systemized approach to improving a travel program by selecting the best TMC and technologies (some may not be from the TMC).
If you do end up remaining with the incumbent, you will have a comfort level that you made the right choice and will also see dramatic improvement from them. The outcome will justify the process.Andrew W. Menkes, CTC, is the Founder and CEO of Partnership Travel Consulting, a global corporate travel sourcing and strategy company. A business travel pioneer, Andrew has led technology innovation in the industry, including the first internet-based electronic ticket purchase. He was the first travel manager to be accredited by ARC to operate a Corporate Travel Department. He has been named Travel Manager of the Year, listed twice in the Top 25 Most Influential Business Travel Executives, and was the first travel buyer to be inducted into the Business Travel Hall of Fame.