Not all the time. I never respond to public RFPs, and neither does the OP. Apparently in our (separate) niches, you can get by just fine.
Agree with your point about supply and demand, but good hackers are (nearly) always in demand, and so can nearly always find work. It's the strange outsourced companies that spend all their time searching for work that end up responding to RFPs, and that's dangerous even to clients.
Look at it this way: if you have a pool of proposals sitting on your desk, 90% of which are from firms that are simply incapable of doing the job, and you are a business/nontechnical chap, it's going to be difficult to find the 10% who are capable, let alone competent.
Meanwhile, technical guys who are good hackers but don't understand this see lots of firms sending out and responding to RFPs and think this is how it works, so I guess we have to do it too.
We absolutely do respond to RFPs, when they're for projects we want to work on or clients we really want a relationship with. And we always spend serious otherwise-billable time on proposals, even though that's the same speculative work that this article argues against.
It's important to us to be easy to work with, because we want good projects. We don't want to confine ourselves to whatever lands in the margins of "unusually liberal clients"; those clients don't necessarily have the best projects.
I read the other post referenced on this thread, and so I'll add that being able to smoke out the bogus RFPs you shouldn't waste time responding to (because they indicate inept purchasers, or, for instance, because they probably mean the client is in the tank for another vendor) is just one of those things you need to be able to do to succeed as a consultant.
I would imagine that good clients in security/pentesting fields probably have well-written RFPs, so an RFP in a market like this would be a positive indicator for a client.
In contrast, for web and iPhone projects (what I've been doing lately), RFPs are a very strong negative indicator. I have yet to find a well-written iPhone RFP.
I am new to this RFP business.
On "real" RFPs, especially if you have a good shot, you'll find the purchaser you talk to is accomodating; they'll set aside time for calls to answer questions, and they'll do a good job with your Q&A submission (as a general rule, real RFPs have Q&A phases, though note that you never know whether your Q's are going to other vendors too).
There is an old negotiating trick a bizdev guy taught me once, which is, if you want to figure out whether a deal is real or whether the other side is just wanking, figure out a reason to schedule a meeting on a Saturday. If the deal is big and the other side is serious, they'll do it. Similar idea here, although less aggressive.
If your firm's way of handling the RFP process is to simply pick up the forms off some website, mail them in, and hope, then yes, I can see how the RFP process would upset you.
Personally, the only reason I'd ever recommend responding to [a public-sector] RFP is if it's a hoop you need to jump through in order to formalize a deal that's already been effectively struck.