How do you select a partner when making a value based decision?

When identifying vendors we want to work with the number one question we ask ourselves is “what is this going to cost?” often quickly followed by “are these people I want to work with?” and finally “do they understand what I really need?” These three questions form the cornerstone of the RFP/RFI/RFQ/Short-list Meeting process tradition. Together they can give people a comfort level about who they are bringing on board. The issue with these questions is that they don’t tell you how the relationship is really going to go.

In real estate I deal with a lot of 3 to 5 year agreements. We are going to be with clients for a long time and often the selection phase is not nearly robust enough to understand what they really need or what we can really do for them. The typically RFP almost disincentivizes organizations from being fully forthcoming. You want to be careful about oversharing how things really work within your own organization for fear of driving up the price when the vendors see the dirty laundry and similarly the vendors are careful to not put everything they think you are going to need on the table because they don’t want to overprice a solution.

Fear of price tags is an awful way to begin a relationship where both parties are investing, spending and earning a lot of money apiece. In fact the cornerstone of good CRE relations are about saving the client more money than they spend with us. That’s impossible to achieve on Day 1 if everyone is keeping the curtains closed.

Value. It’s a great word with a difficult definition. At the grocery store value is a good product on sale. On TV value is a top quality movie that comes on at a good time. In CRE value should be the total benefit a client receives from a relationship however that needs to be measured. With all the many clients I have worked with, every one of them has defined value differently with one definition as an exception: clients that define value as not needing to ever cut a check. A large number of clients will always seek the most services possible for $0 invested. They see the partnership as a trade.

I don’t believe that these relationships really turn out well for either party. In 3 years the client is incentivized to go out seeking more free stuff and the vendor has no reason to bring anything new to the table that could make their client’s business better because there is no money for it. Neither side grows in this relationship structure.

This isn’t to say that spending money is the definition of a good relationship – it’s not. But the mindset of get as much for free as possible is the error. I’ve dealt with many custom solutions that are included in the transaction services that don’t follow this definition of value. The goal is to get something of value and to define it as part of the relationship. In this direction does a partnership get made.

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