Outfitting a commercial real estate space with smart technology can be a significant cost. While the long-term benefits and strategic improvements we’ve discussed previously can make that investment worthwhile, the evaluation period is critical to ensure an impactful ROI. Property developers, owners, and managers should undertake a rigorous evaluation process to ensure the technology procurement aligns with the project’s overall financial plan. And this is not just about getting the cost right. If the technology does not meet the needs of the space, then all the smart technology in the world will not prevent the project from being a sunk cost.
Do the Research so You Know …
The Technology. While the RFP is a key step of the procurement process, a more informal research phase should be undertaken first. Smart technology is a rapidly evolving field, and before reaching out to vendors, the business should ensure that it understands what is available—both in terms of the kinds of technology that can be implemented, and the various companies that offer solutions. Gathering this information early will yield results that align more closely with a particular building’s needs.
The Metrics. Cost is a significant factor in any transaction, but a company should not lose sight of other vital considerations that will determine whether a smart technology strategy is successful. Given the array of smart technologies, these additional considerations may vary from project to project. Consider what aspects of a given technology are most important for a successful implementation (e.g., security, interoperability, etc.), and ensure the internal stakeholders are taking these factors into account when preparing for the RFP process.
RFP and Vendor Selection
Competition. It is intuitive that vendor competition is a key tool for negotiating favorable terms in a transaction. What may not be intuitive is that starting contract negotiations with a few vendors may ultimately lead to quicker resolution with the eventual down-selected vendor. A competing vendor is more likely to make concessions, and do so quickly, because it is still trying to “make the sale.” A vendor that knows it has won the business is much more likely to become entrenched in its positions and less likely to provide accommodations favorable to the customer. We always advise clients not to end a competitive environment too early!
Strategic communication at this stage is also key. It is perfectly acceptable to “guide” the competing vendors as to whether their positions, prices and solutions are competitive in the RFP. That said, the customer must be careful to not reveal a competing vendor’s confidential information. Customers must be mindful of confidentiality and non-disclosure requirements when deciding how to use the information that is gathered.
Timeline. Installation and setup of smart technology takes time. Work backwards from an estimate of when the technology needs to be in production and fully operational (is there an upcoming marketing push or open house, where the technology should already be on display?), to give the internal stakeholders enough time to develop an RFP, elicit responses and evaluate the options. A compressed timeline creates pressure to choose a vendor prematurely, undercutting many of the benefits that come with competition.
Keep in mind that negotiating the contract requires time, especially after vendor down selection. Factor contract negotiations into the timeline. While there is an understandable urge to “get smart” as soon as possible, rushing the process will only increase the leverage vendors have. Once vendors know the clock is ticking, they may use the clock against the customer, and their best offers may not materialize if they think an eagerness to agree is trumping the dedication to finding the highest quality offering.
The RFP process is the time to ask questions, seek clarifications, and learn what kind of partner the vendor will be. Deploying sound negotiation strategies at this stage will result in a more successful procurement process.
When Metrics Meet Commitments—Be Wary of Buzzwords
In analyzing RFP responses, it can be easy to lose sight of the “why.” The metrics that were researched during the evaluation period and highlighted during the RFP process should not be lost. The glossy, polished RFP responses may be filled with buzzwords and irrelevant optional services, conjuring exciting visions of a digitization overhaul. But remember that the vendor is trying to make a sale, and buzzwords do not always align with reality.
The buzzword trap aside, there may be vendors that offer an impressive service, but the fit may not be right. The technology may have compatibility or aesthetic issues, despite the promise of excellent performance.
Mapping the metrics driving the project to the offerings described by the vendors is the most important step to take. Cost is certainly one metric, but do not forget about other factors (such as security, interoperability, range of use, etc.) that will determine whether the smart technology strategy is a success.
Once the RFP process is complete and a vendor is selected, the contracting process begins. Consider stakeholder continuity, where at least a few members of the team involved with the RFP carry over and are consulted during the contracting process. Insight into earlier business discussions will make for a more successful negotiation. Stay tuned for in depth advice on the contracting process.