Collections Outsourcing RFP

Originally published: May-22-2007

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Selecting a third party collection agency used to be pretty simple. You would get a referral from a trusted source, contact the agency, negotiate a rate, and then submit your first claims. No tedious proposals to wade through; no contracts.

Today, possibly due to the evolution of collection agencies into full-fledged, credit-to-cash receivable management outsourcing firms, the process has become much more complex. As recently as five years ago, ABC-Amega received no more than a handful of formal Requests for Proposal (RFPs) or Requests for Information (RFIs) for the whole year. Already, through the end of March this year, we've been invited to participate in a whopping 15 RFPs! And it isn't just the megabillion dollar firms that are requiring them.

For those of you that have been, or will soon be, required to develop an RFP seeking 1st or 3rd party collection services, we have pulled together an outline of what we would consider a good RFP. One that will result in giving you the information you need to select the right collection outsourcing provider; and one that will help the prospective A/R firms understand your requirements, allowing them to provide a realistic and fair price quotation. [On a professional note: E-auctions are generally the wrong forum for price quotations on commercial collections. Sure, the adrenalin of the competition will result in your company getting a great, low price. But, once the thrill of the competition is over, what corners will the agency have to cut to keep themselves in the black?]

Please feel free to utilize our sample outline in whole, or in part, as you develop your own Collection Outsourcing RFP.

Sample Outline for Collection Outsourcing RFP

Introduction -- Response Requirements

1. Response Information
   • To whom should documents be sent?
   • What format do you require for the proposal response?
     • same numbering system and same order as in RFP?
     • specific software, like Word, Excel etc.?
     • questions answered on a form provided by you?
   • How should the proposal be sent back to you (email, hard copy)?
   • Number of copies required
2. Critical Dates:
   • Supplier to return Intention to Submit Proposal
   • Supplier to return Signed Non-Disclosure Agreement
   • Supplier to Submit Questions re RFP
   • When and how answers to Questions will be provided - on what date; will answers be emailed back to suppliers or will you hold a conference call for suppliers to ask questions?
   • Supplier to return Final Proposal
   • Any requirements re Expiration Period for Proposal
3. Selection Process
   • Rationale for selection (is it simply lowest price, or will there be other considerations?)
   • Anticipated date that finalists will be notified
   • Requirements of finalists - in-person presentations, etc.

Non-Disclosure Agreement

This is generally a separate document that needs to be signed by the prospective vendor and returned by a specific date.

General Information

1. Profile of Company Sending RFP - This is just a couple of paragraphs about the company seeking the collection services. Include a description of the company and the division/department seeking the services. What products or services are sold that result in the receivables to be outsourced? Etc.
2. Reasons for RFP - A general statement of the reasons you are seeking outside assistance. Not all RFPs include this information.
3. Disclaimer - Statement to the effect that the costs for responding to the RFP must be carried by the prospective supplier; the issuance of the RFP does not obligate your company to enter into a contract with any of the suppliers.
4. Procurement Policies - if any (for instance, policy regarding Minority & Woman Owned Businesses (M/WBE); or policies re subcontractors)

Scope of Project

1. Details of receivable portfolio (approximately number of accounts to be handled; age of accounts; average size of accounts; etc. - as much detail as you are willing/able to provide)
2. Anticipated Results (improved DSO; cost-savings; increased recovery rate, etc.)
3. Requirements of Treatment, if any (number of touches; letters vs. calls; etc.)
4. Technical Requirements (if supplier will be working in your systems, what are those systems - again, as much information as you feel is necessary for the supplier to provide an adequate response)
5. Pricing Requirements (contingent, monthly fee, FTE, per transaction etc.)
6. Payment Terms - when and how will you pay/be paid?
   • 1st-party collections - upon receipt, net 30, net 45 etc.
   • 3rd-party collections - remit gross or net; how often (weekly/monthly)
7. Length of project/contract; policies re renewals
8. Sample Agreement (if you have a standard agreement that the supplier will need to sign, include it)

Proposal Contents

Most RFPs include an outline of the sections required in the proposal and/or the actual questions to be answered. For instance,

1. Corporate Information
   1. Ownership (persons, parent company)
   2. Legal status (corporation, partnership, etc.)
   3. Bios of key executives and managers
   4. Subsidiaries
   5. Locations
   6. Primary point of contact
   7. Years in business
   8. Other services
   9. Insurance coverages
   10. Credentials/Memberships
   11. Client References (usually three)
2. Collection Services
   1. General
      1. Experience in your industry (years, other clients, etc.)
      2. Results (recovery percentages, in industry or in general)
      3. Single points of contact?
      4. Physical location; hours of operation
      5. CLLA certified (3rd-party commercial collections)
      6. FDCPA compliant (consumer collections)
      7. Bonding and licenses
      8. What sets your company apart from others providing similar services
   2. Collection Process
      1. Description of supplier's collection process and why it works
      2. Work flow automation?
      3. How do you define and measure success?
   3. Collection Staff
      1. Number of collectors; experience level; education level; retention %
      2. Hiring, training, monitoring
      3. Number of accounts handled per collector
3. Quality Control
   1. Management Process
      1. Quality Assurance program?
      2. Operational certifications?
      3. Sarbanes Oxley compliance
   2. Client Satisfaction
      1. Do clients have the ability to participate in collector training and review?
      2. How do you measure and maintain client satisfaction?
4. Reporting Capabilities
   1. Is online reporting available? Is it secure?
   2. What kind of standard reports are available?
   3. Is there the ability to develop customized reports?
   4. How will reports be provided (paper, email, etc.)?
   5. How often?
   6. Provide sample reports
5. Technological Capabilities
   1. Procedures for submitting and updating accounts
   2. In-house IT department?
   3. Interfacing/integrating with client's systems
6. Pricing

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Information provided by ABC-Amega Inc., a leader in commercial collections and receivable management services.