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A Procurement Nerd’s Thoughts on the Amazon HQ2 RFP

Posted by Peter Bonney on Dec 8, 2017 2:07:00 PM

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The Amazon HQ2 RFP has gathered quite a bit of buzz due to cities competing to become the new home for the tech giant. This will be the biggest individual sourcing project that the company will likely ever undertake, by a wide margin. The money involved is huge, the commitment massive, and the time scale extremely long... this project will span an entire career for some members of the Amazon sourcing team.

Video Killed the RFP Star

The HQ2 RFP itself is quite short, giving cities plenty of leeway in how they respond. While this has resulted in some pretty humorous responses, big bets, and creative videos, it will lead to a difficult scoring process. Anytime a company opens its RFPs up to creative interpretation, it solicits an absolute mess of responses from suppliers, vendors, and in this case cities. While the marketing buzz may be worth the hassle, here are some problems that Amazon’s sourcing team will have with multi-media responses:

  1. Apples to Oranges
    Some of these multi-media submissions show great enthusiasm and are fun to watch, but they aren’t necessarily responsive to the issues at hand. It’s hard to compare the videos to written responses, and they may be over-weighted when compared to the less flashy responses.

  2. Extracting meaningful content
    To the extent there IS responsive content in a video, it can be more difficult to pinpoint it for comparison than, say, a diagram or text.

  3. Hard Copies
    Amazon’s RFP specifically requests five “hard copies” of the response document. To the extent that the multimedia components of a given response add useful information content, something will necessarily be lost through the conversion to hard copy. This may lead to a sub-optimal outcome for both Amazon and the respondents.

The Sourcing Champion Finds A New Task

No doubt, Amazon is masterful when it comes to sourcing for their online retailing, but sourcing large numbers of vendors for a huge number of retail products is almost incomparably different to sourcing a single location for a massive investment in time, capital, human resources and opportunity cost. It would be the difference between being great at tracking grocery bargains with coupons, specials, etc. and being a skilled real estate investor, capable of identifying good bargains vs. comps, and having a grasp of what kinds of necessary repairs are easy and which are budget-breakers. They’re both valuable in life, but they are completely different skills with completely different uses.

The sheer size of this project is difficult to comprehend. For some context, the Empire State building has 2.7 million square feet of total floor space. Amazon’s minimum Phase I-III buildout will be 3.5 million square feet. If the campus is eventually expanded to the size of the Seattle headquarters (8 million square feet) as contemplated in the RFP document, it will represent the equivalent of three Empire State Buildings (spread over a larger ground area and built less densely of course). Amazon will have a huge impact on whatever locality it eventually chooses, and undoubtedly expects (correctly) to be able to influence the issues stated in the RFP rather than simply react to them. As such, these kinds of considerations are almost beside the point – communities are competing on these very parameters to make themselves more appealing.

Finding a location for the HQ is just the beginning. As the RFP itself makes clear, choosing a site is merely the kickoff of a massive process of capital investment on Amazon’s part. That spend will be at least $2-4 billion for 3.5-6 million square feet, with the possibility of further expansion down the road to 8+ million square feet. And it’s not like Amazon can just transport their current local Washington vendors. Each phase of construction will undoubtedly involve one or more RFPs to contract local vendors.

Tackling an Unprecedented Request

Amazon is undoubtedly using some sort of software to handle their mind-boggling RFP process. However, that software could range from spreadsheets to specialized RFP software and everything in between. People are spectacularly resourceful, and they’ll adapt with the tools they have to tackle the problems in front of them. But, we can all agree that a macgyvered solution to a serious problem can’t compete with a specialized tool. RFP management software can help break-down the obscurity of multimedia submissions into scorable questions. By making scoring criteria uniform and transparent across all involved stakeholders, and available at a glance with the application, companies can reduce the amount of redundant stakeholder communication and increase the impact of criteria scoring. Very simply, in a well-designed system there will be no way to bury non-compliant answers amid 237 other RFPs worth of details.

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Topics: RFP