Definitions

Request for Proposal

Request for Proposal

For other meanings, see RFP (disambiguation). For information about Wikipedia proposals, see .

A Request for Proposal (referred to as RFP) is an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. A bidding process is one of the best methods for leveraging a company's negotiating ability and purchasing power with suppliers. The Request process brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront. The Request purchase process is lengthier than others, so it is used only where its many advantages outweigh any disadvantages and delays caused. The added benefit of input from a broad spectrum of functional experts ensures that the solution chosen will suit the company's requirements.

The RFP may dictate to varying degrees the exact structure and format of the supplier's response. The creativity and innovation that suppliers choose to build into their proposals may be used to judge supplier proposals against each other, at the risk of failing to capture consistent information between bidders and thus hampering the decision making process. Effective RFPs typically reflect the strategy and short/long-term business objectives, providing detailed insight upon which suppliers will be able to offer a matching perspective.

Similar requests include a Request for Quotation and a Request for Information.

Key objectives

  • Obtain correct information to enable sound business decisions.
  • Decide correctly on strategic procurement.
  • Leverage the company's purchasing power to obtain a favorable deal.

Key benefits

  • Informs suppliers that your company is looking to procure and encourages them to make their best effort.
  • Requires the company to specify what it proposes to purchase. If the requirements analysis has been prepared properly, it can be incorporated quite easily into the Request document.
  • Alerts suppliers that the selection process is competitive.
  • Allows for wide distribution and response.
  • Ensures that suppliers respond factually to the identified requirements.
  • By following a structured evaluation and selection procedure an organisation can demonstrate impartiality - a crucial factor in public sector procurement.

Specifications

An RFP typically involves more than a request for the price. Other requested information may include basic corporate information and history, financial information (can the company deliver without risk of bankruptcy), technical capability (used on major procurements of services, where the item has not previously been made or where the requirement could be met by varying technical means), product information such as stock availability and estimated completion period, and customer references that can be checked to determine a company's suitability.

In the military, an RFP is often raised to fulfill an Operational Requirement (OR), after which the military procurement authority will normally issue a detailed Technical Specification against which tenders will be made by potential contractors. In the civilian use, an RFP is usually part of a complex sales process, also known as enterprise sales.

RFPs often include specifications of the item, project or service for which a proposal is requested. The more detailed the specifications, the better the chances that the proposal provided will be accurate. Generally RFPs are sent to an approved supplier or vendor list.

The bidders return a proposal by a set date and time. Late proposals may or may not be considered, depending on the terms of the initial RFP. The proposals are used to evaluate the suitability as a supplier, vendor, or institutional partner. Discussions may be held on the proposals (often to clarify technical capabilities or to note errors in a proposal). In some instances, all or only selected bidders may be invited to participate in subsequent bids, or may be asked to submit their best technical and financial proposal, commonly referred to as a Best and Final Offer (BAFO).

Other requests

The Request for Quotation (RFQ) is used where discussions aren't required with bidders (mainly when the specifications of a product or service are already known), and price is the main or only factor in selecting the successful bidder. RFQ may also be used as a step prior to going to a full-blown RFP to determine general price ranges. In this scenario, products, services or suppliers may be selected from the RFQ results to bring in to further research in order to write a more fully fleshed out RFP.

RFP is sometimes used for a Request For Pricing.

A Request for Information (RFI) is a proposal requested from a potential seller or a service provider to determine what products and services are potentially available in the marketplace to meet a buyer's needs and to know the capability of a seller in terms of offerings and strengths of the seller. RFIs are commonly used on major procurements, where a requirement could potentially be met through several alternate means. An RFI, however, is not an invitation to bid, is not binding on either the buyer or sellers, and may or may not lead to an RFP or (RFQ).

References

See also

External links

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