Spending is estimated to advance another 7.1% in 2018 and will expand to $1.7 trillion total by 2022.
LAS VEGAS, Nev. — Landing a big service contract with a corporation takes more work than ever before, as the RFP process involves more details and rules, according to a panel at the International LCT Show in February.
Chauffeured transportation operators of all sizes must take the time to know and follow the protocols of the companies they seek to supply, the panelists told attendees.
The Business Travel Manager’s Super Panel, held Feb. 17, provided the latest information on the corporate request-for-proposal (RFP) process among companies and organizations that procure bulk business travel services. For limousine operators, such contracts can net steady revenues for years to come if handled correctly. The presentation gave operators insights from executives who make multi-million dollar purchasing decisions.
The panel brought together two procurement experts on business travel who have extensive experience dealing with chauffeured transportation services, and moderator Scott Solombrino, Dav El CEO-turned-BostonCoach CEO. All three are also closely tied to the Global Business Travel Association:
Process Heavy: How, Not Why
One of the biggest challenges for chauffeured transportation operators is how to master the RFP process in the big league of major corporations and organizations that expect extensive documentation when evaluating bids from vendors. Procurement officers prefer specifics, Banikowski said. “RFPs are here to stay. We are required at Amgen to get specific forms completed, making sure every piece of business is monitored and managed.”
Vendors should try to be as succinct, cogent and clear as possible in RFPs, and avoid any vagueness. “How do they meet the needs in terms of insurance, maintenance, driver qualifications, and drug testing?” Banikowski asked. Instead of submitting an essay on “why you are the best supplier,” vendors should stick to answering specifics, he said.
When his company reviews bids and RFPs, the process extends beyond just travel service. It also looks at audit, compliance, legal, safety and security. “We are entrusting some of our most expensive individuals to your car service,” Banikowski said. “It’s critical that insurance programs meet the needs of the organization. Litigation is expensive to our bottom line.”
Drug testing and documentation is a key requirement of a RFP, given that it only takes one incident to cause major liability issues and internal questioning of the contract. Under no circumstances can CEOs be put into vehicles driven by chauffeurs who have taken drugs, Banikowski said. “There is a lot of rigor in what we do. You have to make sure it’s accountable. Let us know what your processes are and that they are understandable. Client companies need to be comfortable with a prospective vendor’s processes, and how they are underwritten and audited.”
Despite the need for quality ground transportation, the service is not as high a priority in travel procurement because it ranks below airlines and hotels in spending, Banikowski said. “When you look at the biggest components such as meetings and events, hotel and airlines, there are only so many hours in so many days to get bids done and manage a category, especially when you have three major ones for companies trying to expand globally. The amount of work expands.”
Sports and athletic-related travel procurement officers, likewise, see chauffeured transportation as important but not as big of a “silo” as other travel services, Maguire said. But, “colleges and pro-sports are recognizing chauffeured car as a better solution than rental and private cars. If you are a major university and recruiting someone, do you want to show up in a rental car or a chauffeured car?” That can factor into recruits’ decisions, since a chauffeured car presents a better image, he added.
With chauffeured service lower on the procurement totem, the experts urged bidders NEVER to try to circumvent or short-circuit the RFP process by currying favor with a particular decision maker or leveraging an “in” connection.
“You have senior leaders coming in who take your input,” Banikowski said. “We have a standardized process and policy in place for everyone in the organization. It goes through the food chain. If the President calls me and says we need X in that bid, at that point I bring in everyone into the RFP process.
For example, a thorough procurement officer must read the insurance policies of vendors bidding on contracts, he said. “Is it valid? What are the terms? What is the length of the contract? Do they change insurance often? I am the final step of all these people in my corporation. I’m the one signing off and making recommendations to senior leadership.”
Maguire added, “It causes resentment if you call an executive or someone you know to influence the process and put them into a position of overstepping bounds and out of policy.”
Operators looking for RFP opportunities should visit supplier pages on company websites, where contact information and registration procedures often are listed. Banikowski said he reviews all the registrants interested in Amgen and puts together the bid lists. His company focuses on supplier diversity, which allows room for small regional vendors in most managed travel programs.
Maguire said his organization has more than one supplier for various services and that they must be approved to get on the list. His university evaluates and adds vendors as needed, depending on demand at the various locations where they do business. Some suppliers are used only in specific local areas.
Know And Don’t Show
Maguire also emphasized: Don’t just show up, do your research. “We get so many calls from people who don’t know the company. People talk about all types of things that are not important, that you don’t understand or know about it. If you can speak with intelligence about clients, volume, and patterns, then that makes a tremendous difference. You are ahead of 90% of suppliers who come in and talk with us. Do not go to coaches or administrators. Start at the top. Don’t start at the middle. Don’t bring administrators gifts. Go to the CEO, the President and then the VP.”
Gifts are strongly verboten in the new era of strategic sourcing versus the old way of familiarity procurement, Banikowsi said. “We can’t take a gift bag, a pen, a T-shirt. We sign our lives away when we join the organization. We will uphold standards. Bids have to be bullet proof and auditable. We have to prove why decisions were made. Gifting is very much frowned upon and could lead to favoritism. Those were the good old days.
“I wish I could meet with every supplier,” he added. “Unfortunately, I already have a 70-hour work week. I have to base it on 80/20: Who are the most critical suppliers?”
With the strict rules of the 2009 Dodd-Frank legislation that governs financial services, companies are reluctant to entertain and socialize to avoid conflicts of interest, Solombrino added. “The world has changed in the last five years. You’re not getting face time like you used to.”
He advised: “You can’t be all things to all people. Identify your customers. And then be the best.”
SIDEBAR: Discernment Defines Informed Bids
Business Travel Panel moderator Scott Solombrino posed two comparisons in the session that are crucial for operators to understand when bidding for transportation service contracts. 1) How do operators deploy the right balance of price versus service value? 2) How do companies handle managed travel versus open booking?
Price & Value: Price must be an obvious factor, especially when a CEO, for example, orders $1 billion taken out of a company’s expenses, panelist Craig Banikowski said. “We look at value, price and procurement versus strategic sourcing, which includes overall value.”
From a procurement standpoint, an RFP should not disclose previous relationships with “incumbent” vendors, he added. The RFP “makes clear what the expectations are, and what is included should be in the contract, so things expected are done.”
While pricing matters, UT Austin looks at it from a service standpoint, panelist Kevin Maguire said. “We are concerned about safety and security issues that most people don’t look at. We need to know the newness and maintenance of the fleet, and can it handle situations unique to a sport? Price is secondary. We put other things at a higher level. If we have breakdowns and no-shows, we have problems. Everyone is entitled to make a profit and do what is necessary, and we have to look at all aspects of it.”
Banikowski and Maguire emphasized a preference for ground transportation companies with actual metal on the ground, and not virtual suppliers that simply arrange and coordinate vehicles from other sources. Not dealing with a fleet-based vendor is too risky, they said.
Managing Travel: Solombrino, who disputed a supposed trend toward more open and flexible booking patterns among corporate employees, asked the panelists how they manage travel, and how chauffeured transportation fits in.
Banikowski explained that managed travel means his company has a process for travelers who are booking all components of travel. The company oversees that process closely to make sure it pays for the best value in services as the company globalizes and adds nations, and that the services are safe and secure everywhere.
Maguire added that good value includes not just safety and security, but service level satisfaction and cost control. “Open booking destroys all of those silos,” he said. “You don’t have control or good risk management.” Almost nine in 10 travel managers don’t think open booking is the right direction. “We have gone from enforced compliance to mandated compliance.”
Open book is synonymous with the free-for-all approach of Uber and Transportation Network Companies, Solombrino said. It means a company tells its employees, “’Use who you want.’ But we as an industry with years of compliance understand why it’s a bad idea. Does the driver have drug testing and insurance? That’s why I dispute the open booking concept. [Companies] are not going to open booking; they are fighting it. They want the right things provided to the company at the right price under the best rates.”
Companies also need policies that crack down on rogue users who book outside of the official travel management program, Banikowski said. “Everyone out of policy is getting notifications. We as a corporation need to ensure worldwide where our dollars are being spent. We’re trying to make sure we are capturing that spend and managing to the best of our ability to the procurement organization and also provide guidance. We’re trying to educate the traveler. People are more aware of safety and security aspects, where to stay and where to go out at night. It’s a risky world out there.”
Maguire added that his organization has a policy that requires employees to pay the bills for any services out of policy and unapproved.
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