The landscape of procurement for pension funds continues to evolve, driven by tighter vendor RFP response timelines, increasingly complex requirements, and the need for more collaborative relationships between funds and vendors. My experience and peer conversations, along with observations from practitioners, highlight several procurement practices that could improve for both pension funds and vendors to be successful in today's environment.
One of the most significant challenges faced by vendors today is the reduced time to respond to large Requests for Proposals (RFPs), compared to five years ago. This shortened window, often compounded by the need to partner with local entities or fulfill specific conditions, leaves vendors with minimal opportunity to clarify requirements or ask and respond to critical questions.
Pension funds should consider extending response windows and facilitating more open communication during the RFP process to ensure thoughtful, high-quality proposals.
Increasingly, large funds are demanding references and qualifications that closely mirror their own size and scope. In practice, finding comparable examples is often impossible, especially for unique or exceptionally large funds, given the small size of the market. The introduction of pre-surveys to gauge vendor qualifications is a step forward, but exceptions to criteria often lack objectivity and can dilute the selection process.
Pension funds should focus on clearly defined, objective minimum requirements and avoid arbitrary exceptions that undermine the process.
Minimum staff qualifications and the requirement to name specific project resources have become problematic. Frequently, named resources are already committed elsewhere. Given the alternative between having a bid disqualified and offering staff alternatives after a contract is awarded, vendors will pick the first option. It doesn't serve either the buyer or the bidder well to do this.
A more effective approach would be for funds to outline desired criteria and evaluate vendors based on the quality of the teams they can assemble. That is, don’t make these requirements mandatory, but rather score the proposed teams based on how closely they meet the desired characteristics.
Many RFPs feature an overwhelming number of discrete requirements—sometimes numbering in the thousands. Yet, funds often expect vendors to identify missing requirements or absorb additional costs due to incomplete documentation, especially in fixed-price contracts.
For fixed-price arrangements to work, requirements must be comprehensive and stable. Funds should prioritize developing clear, fixed requirements and resist the urge to recycle legacy lists provided by consultants that may no longer be relevant.
Recent examples show that some funds are beginning to introduce AI requirements, but technology is evolving so quickly that it may be prudent to phase in such requirements over time. As one participant noted, "it will be better in a couple of years, so why invest in it now?"
Funds should remain flexible and open to updating requirements as technology matures. And vendors must keep working on their solutions to see how they can become more flexible in adopting new technologies.
Vendors bring significant value to pension funds, but this partnership is not always recognized. The outcome is that modernization takes a backseat, risk aversion increases, and projects suffer.
Private sector contracts often include shared risk models between clients and vendors; public sector/state contracts could benefit from similar structures. By sharing risks and rewards, both parties are incentivized to invest in successful outcomes.
For pension funds and vendors to excel, procurement practices must become more flexible, objective, and partnership oriented. By updating timelines, clarifying requirements, and adopting a more collaborative approach to risk and innovation, both funds and vendors can achieve greater success. - Collaboration and partnership between funds, oversight entities, and technology vendors are critical. Each party should advocate for their needs while remaining open to partnership and innovation.
The time for change is now—so that the next generation of procurement truly supports excellence on all sides.