Request for proposal
A Request for Proposal is a type of document that organization creates to search for potential suppliers. Just like RFQ, it is a bidding process. A company that is interested in a commodity, a service or a valuable asset sends out the request to suppliers to submit business proposals. The RFP can be used by project managers and engineers to involve suppliers in the innovation process for the company and inquire more information about specific products or services. Besides that, RFP is being used when a business requires additional expertise, research or development of a particular product.
Companies use RFP for presenting the requirements for going with the specific supplier and providing insight for vendors to offer competitive products. It informs them about organizations that are looking for partners, provides a common ground between companies and suppliers by specifying purchasing requirements, enables a healthy supplier competition and fair selection process, ensures the factual response to the needs and gives a structural evaluation of each and every supplier in the selection procedure.
While the request for quotation and request for proposal may be seen as similar documents, they have some significant differences.
First one, in particular, is the type of information that is requested in each of them. For RFQ the criteria for bidding and selection processes are already set on paper and the only thing you inquire is the price of the products or services provided to you. RFP, on the other hand, is used to investigate additional information about the specific product or services. RFP can be incorporated into your business encouraging suppliers to create a broader range of solutions and ideas about the costs that can be associated with any particular project.
Projects can become complicated very fast. Issuing a formal request for proposal makes it easier to break down and optimize a complex project. When seeking a solution, you can significantly benefit from inviting multiple bidders and examining various perspectives offered by different suppliers. It can also be quite beneficial for your company in terms of budgeting, as it can spark competition between bidders and therefore reduce costs of implementing new integrations.
Having a thorough and precise request for proposal is crucial as it may be the deciding factor for successful execution of a particular product. Do not be vague in your requirements as it may confuse the bidder and strip you of the benefits of this kind of documentation. Be specific about what you want from your suppliers - it will ease the process of designing the solution.
However, don’t be too focused on creating various requirements either as it can limit creativity and innovation.
Here are the main steps that will help you create a request for proposal:
Explore and determine your needs, requirements and possible ways of achieving them. This will give a solid foundation for your RFP.
Distinguish between needs and wants. Know the necessities and know the commodities. Ask questions like: “Is it going to aid me?”, “Is there an alternative?”
For the specific items that are required, use words like “will,” “must,” “shall.” That way your suppliers will be able to know that those are required items. Optional items can be identified by words like “want,” “may,” “can,” and “optional.”
Decide what you want from the winner. Different bidders will deliver various proposals. Every one of them will have its advantages and disadvantages. While some focus on providing the lowest price, others will try to win you by providing the best quality or offer a broader feature set.
Look at your company. Decide what you are looking for. Put some effort into designing and organizing your document. It serves as a face for your business, and you should give a great deal of thought to writing an RFP.
Make sure to include an introduction, requirements, selection criteria, decision timelines and how the entire selection process is going to be conducted. Be clear and professional in your request for proposal.
It helps to explain the purpose of an RFP to your bidders and suppliers. You can also elaborate on what exactly you hope to achieve by writing it. Include a summary of the key points from the other sections and the due date for submitting the bid.
This is one of the most important parts and the one you should be paying a lot of attention to when writing up your document. Take your time and think it through thoroughly. Specify the products or services you need and clarify how they should be delivered. Be specific about WHAT you need, not HOW it should be provided. Feel free to subdivide this section into subsections to thoroughly explain every aspect of the project.
This is the section where you would want to tell all the bidders about how the winning bid will be selected. Elaborate on it however you want. Try to mention that your company will be the deciding party in the selection of the winner. A good idea would be to create a point system which will help you evaluate different sides of each bid and determine the winning one.
In this section, you would describe the timeframe during which you want the bidders on your RFP to submit their bids. State how long the process is expected to be. Don’t forget to be reasonable when you set the deadlines.
If you have a complex project to manage, don’t expect the bidders to respond within a few days. If your request for proposal is broad, the desired purchase is complicated, or the response must be very detailed, give them a more substantial time to prepare. Don’t forget to inform the bidders about how long the evaluation process will take and how much time you require for choosing the winner. After that talk to the winner about the delivery timelines.
In “Process” section describe all the stages, starting from sending the request for proposal to awarding the contract and delivering the product or service. Elaborate on the requirements and responsiveness, scoring system and evaluation criteria, review process and selection team, negotiations and the closing of the deal. Also, talk about the general terms and conditions that will be followed in the contract and do not forget to attach them.
Decide on the way RFP should be delivered. Most of them come through the mail, but it is not the only way. You can also send it via email or post it on your website. Make sure you specify the names of bidders and identify the RFP they are responding to.
You may have already selected the suppliers for a specific product and invited them to the bidding process. If not, turn to the help of professional networks to compile a list of acceptable vendors. Search online for recommendations. Look at all of the suppliers - never neglect smaller companies as they may try to win the bid by offering nice deals and will have a better motivation for winning the bid. Send the RFP – there is no risk in this.
While creating an RFP, keep in mind the reasons why you are doing it. Remember that any project, even an IT one may require you to write a formal request for proposal. They serve as a great middle-ground for negotiations between organizations and suppliers. Provide an integrated solution and enable competition among vendors.
RFP also gives an opportunity for companies to rapidly change their technology base. A company moving away from the paper-based system to a computer-based system will get its hardware, software and staff training at a much faster rate and lower price if it would file a formal RFP request. At the same time, a simple hardware update request will also be sped up by filing an RFP.
Governmental agencies and entities may be in the situation where they will have to issue an RFP in order to provide for clear competition between vendors. RFP can be used as a powerful cost reducing tool for the companies, as the process itself entails more competition.
However, you should also keep in mind that it is a must for you to set specific requirements for the proposal, as the cheapest proposal may not be the one that satisfies all of them.
Always approach the writing of an RFP in a professional manner - it can dictate the success of your future deals! If you set broad and vague requirements, it can make the bidders confused and you - dissatisfied with the provided solution. On the other hand, if the requirements are too strict, it leaves the supplier with less freedom to invent the right solution that fits your business.
Make sure you start your RFP process with a draft of the RFP. Then allow the bidders to review your draft and provide their suggestions on how to improve it. After you have reflected all of their feedback in your final RFP, it is now time to issue the document and allow bidders to submit their proposals.
After the submission process, the issuer selects the bidders that seem to present the most quality-value proposals and responds to their bids in a timely manner. It is always a good idea to not rush it with announcing the one and only supplier. If you do that, the selected supplier might feel his strength in the negotiation process and push for his terms. Always make sure you keep all of your bidders at an arm’s length and don’t reject them until you have signed the contract.
The RFP process is great for reducing the time of attracting suppliers to your business. However, it can be seen as a system that undermines competition by inviting only a certain number of bidders. The bidders cannot enter the proposal themselves because the system works as invite-only.
RFP is beneficial if you are requesting to make a complex purchase. Using it, you can inquire more information about the product, not just the price (as you would in case of an RFQ). RFP is so customizable that you can put in multiple qualifications and make it very specific to your business needs. With this in mind, you can get really good specifics about the products and offers and choose the right product for you.
On the other hand, setting too specific requirements can turn away your bidders and block their creativity. The other disadvantage of the RFP process is that the suppliers may abuse the absence of big competition and try to negotiate on their own terms.
Request for proposal serves as a versatile tool for companies to inquire more information about certain products as well as attract new suppliers to cooperation. Every mid to large-sized company has to master creating of RFP and know how to do it efficiently.
With this document, you can build better relationships with your suppliers. Work on the skills of creating RFPs and it will pay off in the long term.
To make it more convincing, the strategy should be your top priority when it comes to expanding your business.