By: ProcurementIQ Staff Writer, Hilary O'Brien
If you’re a procurement professional, chances are you’ve been involved in the creation of an RFP sometime in your career. Whether you love them or hate them, RFPs can be a critical part of the purchasing process. Here’s a brief refresher on the 5 Ws - What, Who, When, Where, Why (and How!) – of RFPs.
WHAT is an RFP?
An RFP (request for proposal) is issued when an organization needs to purchase a product or service. It indicates that the company understands its problem and the general solutions needed to solve it, and wants competitive bids from suppliers. An RFP should provide enough detail to give vendors the context needed to propose a valid solution, but also allow for flexibility so that vendors can be creative. An RFP is used when price is not the sole award factor; quality, service, firm qualifications and other factors will also be taken into consideration.
An RFI (request for information) is a preliminary document used by companies that don’t have much (or any) knowledge about the marketplace they’re looking to enter. It’s a fact-finding document that allows vendors to tailor responses within the context of the stated business challenges. You can expect a vendor to provide its position in the marketplace, how it licenses or delivers its product or service, and what fees you can expect.
An RFQ (request for quotation) spells out the exact specifications required by an organization. By the time a company issues an RFQ, it is able to clearly articulate what it needs from a vendor. When responding, suppliers are generally expected to provide pricing, delivery information, terms and conditions, and any other detail that will allow the requesting company to make a final decision.
RFX is a catch-all term used to refer to any of the “request for …” documents listed above, as well as request for bid and request for tender.
WHO uses RFPs?
RFPs are used by for-profit and non-profit organizations for all kinds of products and services. Governmental agencies are required to issue RFPs to comply with regulations that require fair and transparent competitive bids. Organizations issue RFPs for office furniture to software systems to marketing services and everything in between. However, RFPs are generally not issued if a company is looking to buy something for which price will be the sole determining factor.
WHEN do I need to create an RFP?
You’ll create an RFP any time you’re seeking to purchase a product or service where cost will not be the deciding factor. If you want to evaluate and negotiate elements like quality, warranties, delivery options, styles, customizations, training, service or efficiency, you’d be wise to spend the time creating an RFP.
WHERE do I send RFPs?
You’ll send your RFP to vendors and suppliers who you have preliminarily determined may be able to fulfill your requirements. While there is no set number of suppliers to which you should send it, over time, you’ll figure out a ‘sweet spot’ where you are getting enough responses to make an educated decision, but not receiving too many which can slow down the evaluation process (which can frustrate both internal stakeholders and responding vendors).
WHY do I need to spend so much time on the RFP process?
Creating an RFP can take a significant amount of time, with lots of input from multiple stakeholders, possibly even a committee of people. But the reality is, when you’re trying to compile the level of detail needed to procure a potentially complicated system or product, it can take a long time. There are some steps you can take to make the process more efficient, including:
- Schedule meetings with the primary stakeholders and ask detailed questions, so you’re sure to have the information you need before you create the RFP.
- Conduct preliminary research on potential vendors and narrow down the list to which you send the RFP. Too many responses can really slow down your assessment process.
- Walk a fine line between describing your goals for the solution and being too strict about how you expect to achieve those goals. Vendors need enough room to be creative and customize their responses.
- Investigate whether an RFP software system could help your team with efficiencies. Options exist to streamline the creation of the RFP, manage your responses, control versions and even systems that will import data into your RFPs so you can understand price trends and drivers and market characteristics.
HOW do RFPs benefit me?
Crafting a well-written RFP will benefit you by bringing in quality vendor responses, which will allow you to make the most educated decision that will result in (hopefully) happy stakeholders!
While RFPs may feel like an outdated process, what with the wealth of data available on the internet, they are still a widely used method of gathering information from potential suppliers. If your organization requires you to have an RFP process, or there are products and services that are too complicated to research on your own, you’ll benefit from understanding the 5 Ws of RFPs and working to create the best RFPs possible.