U.K. Co's. Unusual Bid Process Yields Consolidation

When British Petroleum's business procurement manager put his global travel agency request for proposal together last year, colleagues told him he needed his head examined.

The reason they doubted the sanity of Allen Grimley was that he asked the four short-listed agencies to sit in the same room in Houston for two days and write the RFP together.

It was crazy, but it worked. After taking half a day to put aside their mutual distrust, Carlson Wagonlit Travel, American Express, Business Travel International and Rosenbluth International produced an RFP that asked all the right questions and avoided any unnecessary padding.

As a result, a tender process involving an estimated $340 to $350 million spend (plus another $200 million-plus of travel by consultants, engineering contractors and other suppliers) across virtually every country in the world was wrapped up in about four months. The contract was awarded to Carlson Wagonlit, which is scheduled to complete its consolidation of BP's agency requirements in the United States, the United Kingdom and South America by the end of the second quarter. It will take charge in continental Europe by the end of the year, followed by Australasia in first quarter 1998 and Asia, China and Africa in the second quarter.

Considering that BP had previously consolidated only in the United Kingdom and in parts of the United States, that is quite a tall order. When the global contract was awarded to Carlson Wagonlit, the oil giant was using more than 200 agencies around the world.

Grimley is convinced that the mutually written RFP was key to speeding up the tender process. "The purpose was to avoid having numerous clarification meetings; before you know it, you can spend three weeks answering everyone's questions,'' he said. "All but one of the agencies said that they found the process intriguing and of benefit. During the process, I was the umpire and stopped them all from sniping at each other-although I did have to get annoyed with them several times.''

Grimley helped to overcome mutual suspicion by building an appendix into the RFP where the bidders could give confidential details of any processes they considered to be best in class.

Although he might not be expected to say otherwise, Carlson Wagonlit U.K. director of sales Toby Joseph claims he was genuinely convinced of the merits of the mutual RFP plan.

"There was a consensus of agreement on what should go into the RFP,'' he said. "None of us wanted a 400-page tender document that required a 1,000-page response, and we were all keen to be measured on the issues that really mattered.''

Joseph admits that the unique situation did prompt some jockeying for position. "It was interesting to see the contenders trying to direct the questions toward their strengths rather than their weaknesses," he said. "But there was nothing commercially sensitive. We were sharing best practice on bids and trying to find the most efficient path through a complex process."

The agency consolidation is the cornerstone of BP's efforts to reduce its travel costs. BP has reduced its total third-party spending by $1 billion over the past two years, including other areas where Grimley is involved, such as IT and utilities.

The dominant BP purchasing strategy is to reduce costs through reengineering rather than spend, Grimley said. "The traditional approach is to keep the same processes but not pay so much to suppliers," he said. "Our view is to keep the relationship but to look at the processes."

Grimley used this guiding principle to attack costs on four fronts: consolidating suppliers, leveraging spend, sharing best practices and automating the travel process. All four are connected by the selection of a single worldwide travel management company. By consolidating with one agency, BP will be able to implement consistent best practices worldwide and pull together the information required to leverage spend with travel suppliers. BP also intends to use Carlson Wagonlit's Act suite of IT products, but will not be able to use them fully until all of its own computers switch to a common operating system at the end of the year.

"The vision is that I should be able to go into my computer and be able to book my travel and fill in my expenses seamlessly,'' Grimley said. "We are about 12 months away from that."

Grimley started the agency consolidation process about 18 months ago by forming a worldwide travel team. The team helped to achieve global buy-in to the process of change and to understand the cultural requirements of each region.

Grimley believes that BP's greatest problem is that its size hampered effective communications. "If I had a discussion of a global nature with airline X, it would only take a couple of months for the carrier to come back to me and say the deal was not working in France and Colombia,'' he said. "By the time our messages were getting through to Ho Chi Minh City, 'send reinforcements, we're going to advance' had changed to 'send three and fourpence, we're going to a dance.' "

Under the new deal, Carlson Wagonlit will handle all of BP's non-strategic (non-negotiated) deals with airlines and oversee its hotel spend. It also will integrate the $30 million annual conference and incentive spend into the main business travel budget. Important airline relationships will be handled directly by BP.

"The airlines are skeptical about whose side Carlson Wagonlit is on,'' Grimley said. "But I see travel agents ceasing to be selling agents for carriers and becoming our travel managers."

Remuneration is naturally shifting in line with this realignment. BP previously worked on the traditional commission and rebate system, but the deal with Carlson Wagonlit features a blend of management fee (for base in-plant salaries) plus profit sharing and performance-related elements.

Performance is measured by the same criteria on which Carlson Wagonlit was selected in the first place. For the bid process, BP constructed a matrix of scores for responses from the four candidates. Each category, such as IT and financials, was weighted, with the greatest weight given to service issues, such as ticketing, staffing volumes and ability to solve problems quickly. According to how Carlson Wagonlit meets all of these criteria, it can either earn a bonus or be financially penalized.

BP will use e-mail staff surveys to monitor Carlson Wagonlit's performance and how it responds to complaints. "They made one or two mistakes on my last trip, but it only shows we are all human,'' said Grimley. "We now have a complaints procedure. If the same mistakes are repeated too often, Carlson Wagonlit will lose money.''

With agency consolidation well in hand, Grimley is looking around to see where else he can apply his unusual RFP methods before he takes early retirement at the end of 1997. Following a similar joint effort by the car rental majors, BP already has appointed Europcar/National as its preferred global supplier.

"We have an RFP process that can be applied to any commodity, and the next one will be the corporate card,'' said Grimley. By the time that happens, there are unlikely to be more queries from concerned colleagues about the state of his mental health.