RFP (Request for Proposal) is a request for proposal that is sent to potential suppliers of goods or service providers in the purchasing process. What should a buyer remember when creating an RFP? Check what a request for proposal should contain and how RFP differs from RFI and RFQ.
What is RFP (Request for Proposal)?
RFP (Request for Proposal) is a document used in purchasing procedures – both in the public and private sectors. An organization that intends to buy a product or order a service, prepares an RFP for potential suppliers of goods or service providers. The buyer asks the recipients of the request to present solutions to the business problem described in the document and to provide a preliminary estimate of the time and cost of implementing the project.
Definition and meaning of RFP
According to the definition, RFP (Request for Proposal) is a request for a proposal to fulfill a business need of a public or private sector company. This business document defines the need for products or services that are to ensure the organization achieves any goal. RFP in IT can describe the desired functions of personalized software for managing employees or serving the company’s customers.
Thanks to RFP, the buyer gains insight into unique solutions with indicative cost estimates – including strategies that were not previously considered. Importantly, the request for proposal facilitates the selection of entities that will receive a request to prepare a final offer in the next stage.
Differences between RFI, RFP and RFQ
RFI, RFP and RFQ are types of RFx (Request for x – inquiry about …) inquiries that make up the purchasing path, which leads from collecting information about potential contractors, through obtaining a solution proposal with a preliminary cost estimate, to selecting an offer and establishing cooperation.
RFI (Request for Information) is a request for information that focuses on the contractor, e.g. experience in a given industry, completed projects, technologies used or customer service standards.
RFQ (Request for Quotation) is a request for quotation. The buyer sends selected entities a request for quotation, which includes a detailed specification of the project, rules of cooperation and criteria for selecting the contractor. Each criterion should be assigned a weight (point or percentage) to rank them from least important to most important. While RFP allows bidders to stand out thanks to original proposals for performing the order, RFQ imposes conditions from above. The main task of the contractor is to present a quote for the elements indicated by the buyer.
Components of RFP
The scope of the request for quotation depends on, among other things, the needs of the organization and the course of the purchasing process. RFP describes the business need of the buyer and the desired results. The recipients of the document should receive information that will allow them to present at least one solution to the problem with an approximate cost estimate and work schedule. The more detailed the RFP, the greater the chances of selecting the contractor for the tender.
An organization can use a template to write an RFP, although the template does not necessarily have to fit the needs of the contracting authority. Mandatory elements in an RFP include:
- information about the purchasing entity,
- an introduction presenting the purpose of the request and emphasizing that bidders will provide all necessary information,
- documentation required by the purchasing entity, e.g. references from previous contractor clients or case studies in the absence of an RFI,
- a description of the current problem in the organization and the related business need,
- the main goal and secondary goals of the project,
- the preferred period for completing the project,
- sdetailed requirements, e.g. technical aspects,
- maximum budget,
- potential difficulties in implementing the project that the supplier should consider,
- terms and deadline for submitting proposals by contractors,
- contact details of the person responsible for managing the purchasing process.
The scope of the RFP depends on the use of RFI and RFQ by the organization. Sometimes, the request for proposal also contains elements characteristic of these two documents, e.g. open-ended questions about similar projects implemented by suppliers and criteria for evaluating offers with weighting.
The role of RFP in the purchasing process
RFP enables the discovery of suppliers who stand out with an ambitious, individual, creative approach to the customer’s problem, who is looking for a personalized solution and the best price-quality ratio of a product or service.
How does RFP enable companies to find suppliers?
As a rule, basic information about suppliers is obtained at an earlier stage, i.e. market research, which serves to build or expand the database of potential suppliers. Selected entities receive an RFI (Request for Information). This document allows for obtaining answers to open and closed questions about, for example, contractors’ previous projects, technologies used or procedures in cooperation with customers. If the organization skips sending RFI in the purchasing process, it should include questions regarding, among others, the contractors’ product and service portfolio in the first part of the RFP.
The process of preparing and managing the RFP document
While the management of the offer process rests primarily with the sales department of the organization, creating an RFP requires the involvement of other specialists than buyers. Depending on the project, the process of preparing and managing the RFP should include, among others, the HR (Human Resources), marketing and IT departments. In addition, the request must reflect the needs of end users, e.g. the organization’s employees in the case of a need for internal software.
Who is involved in the RFP process?
Although the RFP document is part of the purchasing process, the preparation of the request for proposal and analysis of applications should be carried out not only by salespeople, but also by stakeholders from other departments. It is worth considering which people have the appropriate knowledge, e.g. analytical, marketing and technical, and skills, e.g. change management in the organization. Cooperation of specialists from different areas helps to avoid a situation in which the company enters into a contract, e.g. to deliver software without functionalities important to end users.
The importance of signing an RFP with suppliers
The RFP process allows you to familiarize yourself with problem-solving strategies that were not considered by the ordering party for various reasons – including lack of specialist knowledge.
Suppliers who receive an RFP should enter into a confidentiality agreement with a potential customer. On the one hand, the buyer provides external entities with information that may reflect the company’s strategic plans in order to increase its competitive advantage on the market and attract new customers. On the other hand, contractors share their know-how in order to stand out from other suppliers and propose the most effective solution.
Useful resources and platforms related to RFP
Purchasing platforms, such as openNexus or RFX+, simplify the conduct of tenders in the public sector (covered by the Public Procurement Act) and the private sector (based on internal company regulations).
Thanks to this solution, the buyer does not have to search for potential contractors on their own. All they have to do is publish a request on the platform, and registered suppliers who meet the requirements will send offers. What’s more, purchasing platforms organize the proceedings, ensuring that all information is stored in one place. The RFP process is also facilitated by templates available in project management software, such as Jira.
