This article explains the concept of a Request for Proposal (RFP) in a practical way. After reading it, you will understand the basics of this powerful project management tool.
What is a Request for Proposal (RFP)?
In the world of business to business, it is of great importance that there is a good relationship between cooperating parties and that negotiations are conducted on a basis of trust. Especially in the IT sector, tailor-made solutions are important and the client must know exactly which services are purchased and which conditions they meet in advance. A Request for Proposal, or RFP, may provide a solution. An RFP is about the requesting party’s request to one or more suppliers to provide clear and comprehensive quotations for specific services and/or products. With an RFP, organisations provoke a formal offer from potential suppliers of IT solutions. These are often larger companies or government agencies that work based on a tendering process. In the RFP, the client specifies exactly what they are looking for. It also includes the evaluation criteria that any bids must meet and on which they will be assessed. Request for Proposal is the name given to a quotation request and is mainly used for the purchase of solutions within the IT industry. They are extremely important for companies that issue RFPs. After all, they increase the chance of winning a tender and thus allow companies to become ‘preferred suppliers’.
RFP and complexity
In addition to the IT sector, there are many other sectors in which RFPs are frequently requested. An RFP is an important document for clients to properly indicate what they are looking for and to receive offers from different suppliers. It offers clarity in the products and/or services that the client will purchase.
RFPs are often requested by government institutions in procurement projects; procedures in which a (major) client announces that they are going to carry out a project and thereby invites suppliers to offer a detailed quotation, including price, time, and conditions. In this way, a tendering procedure allows for complete and open competition. In this context, a client may also request an RFP to actually encourage the competition. A proposal can then be accepted based on the quickest response and the best offer on the complex situation that the client desires.
In addition, the complexity of for example an IT project requires a comprehensive RFP. In case of multiple offers, a client may look for a well-integrated solution from a different perspective, with a combination of technologies and possible configurations being adopted. Regardless, in addition to the complexity that emerges in the RFP besides price and conditions, IT expertise in particular will be decisive for choosing a particular supplier. Moreover, the RFP must also include a component that, for example, deals with all hardware, software, and any training required to implement a new system in the organisation.
RFP, RFI and RFQ
In an RFP, a client indicates his wishes for a specific project and what he expects from the supplier. Any preconditions are also indicated in advance. Suppliers who respond initially do this by means of a so-called Request for Information (RFI). They often want to gather even more detailed information before they start writing a custom offer. After all, projects are often for the long term and involve large amounts, and drawing up a tender takes a lot of time and energy. This is why it is important that the final offer stands out and the supplier is invited by the commissioning party for more details. To positively encourage this decision, suppliers often combine an RFI with a short demonstration or (video) presentation of the offered solution.
Another term that closely relates to RFP is Request for Quotation (RFQ). This is a less complex request from the client. The products that must be purchased are already known. However, the client is primarily looking for the most interesting price. This is what the RFQ focuses on. For this reason, RFQs are often issued for less complex assignments.
Content of an RFP
Every organisation can draw up an RFP, but its usefulness is not always the same. In addition to a price indication, it is especially interesting for clients to examine the so-called Return On Investment (ROI). After all, a major investment following the purchase of services or products will have to pay for itself. To get as detailed a picture of all suppliers as possible, it is wise for the client to include a number of fixed elements in an RFP. Note, however, that detailed or restrictive requirements will limit the creativity and innovative solutions of suppliers.
A clearly drawn-up RFP invites suppliers to provide a clear offer. For this reason, the following components are pretty much essential in any RFP:
Description of the contracting authority
A distinctive request will ensure suppliers know exactly what the client desires. The questions in the RFP must be clearly formulated and must be unambiguously interpreted by the suppliers.
Provisions and rules
Provisions and rules set by the client, in order to make a final decision. Legal conditions, confidentiality, and other assessment criteria must possibly also be established in advance. This ensures suppliers are aware of what is required of them.
By providing information about themselves as requesting parties, suppliers know whether their product and/or services align with a custom solution. The client may also explain any wishes and requirements. By describing this fairly specifically, suppliers can act accordingly.
Questions for supplier
By asking question, the client receives specific information about the supplier’s products and/or services. In most cases, the supplier’s terms and conditions will also be requested.
Guidelines about how the tender must be drawn up by suppliers. The scope of the assignment is defined and the tasks to be performed by the supplier are discussed. These guidelines also include clear agreements about the response time of the supplier.
RFP preparation: an intensive process
The preparation of an RFP is an intensive process for the client and involves many different disciplines and departments. Because it is often a major and far-reaching assignment, it is important that this entire process is done accurately and that the aforementioned components are carefully taken into account. As is customary in tendering processes, the focus of an RFP must be on the client’s request. The more thoroughly requirements and questions are formulated, the better a Request for Proposal can help to create an initial selection of suppliers. Alternatively, the client may also invite potential suppliers for a pre-bid conference, allowing them to ask questions about the request document and obtain more information about the project.
It’s Your Turn
What do you think? Can you apply the concept of a Request for Proposal (RFP) within your projects? Do you recognize the practical explanation or do you have any additions? What are your success factors that contribute to good cooperation with (potential) suppliers?
Share your experience and knowledge in the comments box below.
- Andrea, J. (2003, June). An agile request for proposal (RFP) process. In Proceedings of the Agile Development Conference, 2003. ADC 2003 (pp. 152-161). IEEE.
- Hunt, T., & Westfall, L. (2003). Software Acquisition & Supplier Management: Part 1–Product Definition & Supplier Selection. In Annual quality congress proceedings (Vol. 57, pp. 359-372).
- Mandell, S. F. (1986). The Request for Proposal (RFP). Journal of medical systems, 10(1), 31-39.
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