Developing An Electrical RFP—A Case History

Abstract

ABSTRACT In early 2000, an international food warehousing company (“company”) received an unsolicited proposal from an alternative energy supplier in one of the midwestern states in which they were located. Prior to receiving this proposal, the company had developed a supply contract in the California market as a result of another unsolicited proposal. The receipt of this second proposal began the evaluation of the potential opportunities that electrical deregulation presented for their business locations throughout the United States. Initially, the search concentrated on finding one provider to handle their energy requirements throughout the United States. Continued work on their program and contact with numerous potential vendors resulted in the movement from a national program to a regional program. This article discusses how the company developed a procurement strategy for one of their regions, developed an electrical service RFP, evaluated the market and savings potential, evaluated the RFP responses, and negotiated a contract for service. The work completed during the midwest regional procurement project became a template for their other regions to approach procurement programs and benefit from deregulation opportunities. In addition, several of the facilities entering into a multi-year procurement contract had projected total savings of almost $500,000, or approximately 14 percent savings compared to their previous electrical rate. The first part of the document discusses the preliminary evaluations that the company completed to allow them to determine that deregulation could help them improve their bottom line. The second part discusses some of the evaluations that were made to put current and potential bid prices into perspective. The third part of the document discusses the process that the company used to develop the RFP, contact potential vendors, develop a short-list, interview vendors, analyze the offers and market conditions, select a negotiating partner, and finalize a contract. The contents include: •OVERVIEW•PART ONE—Evaluating Deregulation—Looking at the Opportunities•PART TWO—Evaluating Electrical Costs—Focusing the Crystal Ball•PART THREE—Developing the Electrical RFP•SUMMARY