Releasing current costs or budgetary guidance to potential proposers has been common in IT services RFPs/procurements for decades, yet it’s always a matter of great debate.
Many questions are raised when the topic of sharing financials is mentioned, all of which are fair and relevant. Is it necessary? What value can it bring? Won’t it hurt my negotiating position? Won’t proposers just meet my number? Are there any risks in sharing one?
A financial projection of the current environment (a “Base Case”), simply put, is the current-state scenario. It’s a view of the current environment’s finances which are in scope for the RFP – comprised of labor, hardware, software, and 3rd party expenses, modified for both growth and economic factors over the program timeline. This article addresses the questions above and other reasons to include a Base Case in an RFP.
In our experience across decades of transactions in private and public sectors, comprising billions of dollars in successful managed services procurements, the benefits of communicating a Base Case to potential proposers in an RFP process far outweighs any concerns.
- Establishes a Common Benchmark
The financial Base Case provides a clear reference point for the current costs of IT services, including personnel, infrastructure, software, maintenance, and other operational expenses. This allows potential contractors to understand the state’s existing financial landscape and propose solutions that are cost-competitive or offer clear value improvements.
- Enhances Evaluation Consistency
With a common Base Case provided to all bidders, the playing field is leveled. All proposals can be evaluated against the same set of current conditions and desired improvements, making the evaluation process more objective, transparent, and defensible. This is particularly important for public sector procurements, which are subject to rigorous scrutiny.
- Encourages Realistic and Competitive Bidding
Buyers, particularly when procuring IT services, are often mandated to seek “best value,” which isn’t always the lowest price. A Base Case allows the evaluation team to assess how well a proposed solution, considering its cost and capabilities, improves upon the current situation. Contractors can highlight the value they add beyond just cost reduction, such as improved reliability, enhanced security, or greater scalability.
- Supports Budget Planning and Risk Management
For the Buyer: A well-defined Base Case helps the buyer articulate its needs precisely. It forces internal teams to analyze their current operations, costs, and desired outcomes, which is a crucial step in successful outsourcing. It also helps to prevent “hidden costs” or scope creep later in the project by providing a clear reference point. For the Seller: Sellers gain a more complete picture of the engagement. They can more accurately price their services and define their scope of work, reducing the risk of underbidding or encountering unforeseen complexities after contract award. This transparency fosters more realistic and sustainable proposals.
- Promotes Transparency and Accountability
A financial Base Case demonstrates willingness of the buyer to be transparent in the procurement to the seller. In addition, it provides a clear audit trail for how financial decisions were made in the evaluation and negotiation processes. Lastly, the Base Case helps substantiate the contract award if scope uncertainty arises.
Bonus Reason – for Public Sector
All of the previous reasons are applicable across both private and public sectors. But for public sector, there’s an additional reason. Information about the environment is inherently “leaky”. That is, no matter how much confidentiality is maintained in the procurement process, there are 1.) incumbent vendors who know the details; 2.) focused vendors who have been correctly studying public budgets; 3.) vendors who think they have been correctly studying public budgets; and 4.) excellent vendors who have not been paying attention. In effort to put all potential vendors on an equal footing and to encourage competition, public sector buyers should communicate financial expectations transparently via their RFPs.
In Summary
Including a financial Base Case in an RFP ensures clarity and fairness to proposers through a common understanding of current spending. The Base Case supports informed decision-making, cost-effective proposals, and risk mitigation to the buyer. These elements provide for a better result for all parties involved.
Kevin Schultz, August 2025 – [bio]
