What is RFP and what does RFP stand for?
To those new to the procurement industry, RFP sounds a lot like RFI or RFQ. In fact, it’s a classic rookie mistake to use the terms interchangeably.
We can hear you say, “But wait, are these terms divergent? What is the difference between RFP and RFQ?”
Yes, they are very different as each document serves an independent purpose. So, let’s take a closer look at what requests for proposals (RFPs) are, the RFP definition, and what the actual RFP process entails. We are also going to study the differences between RFI vs RFP so we remove all confusion.
What Does RFP Stand For?
Definition
The definition of request for proposal (RFP) varies from website to website. However, according to Investopedia.com, a popular RFP definition is:
“….a business document that announces and provides details about a project, as well as solicits bids from contractors who will help complete the project.”
In our own words, RFP is a sourcing tool that compares and evaluates various responses from suppliers and highlights the merits of individual vendors.
With this understanding, we can turn our attention to the RFP process.
What Is The RFP Process?
The initial step in the procurement cycle begins with a request for information (RFI) issued to a select group of vendors. After evaluating the RFIs sent back by the suppliers, procurement teams can choose the vendors they wish to send RFPs.
An RFP is more formal than an RFI and its main purpose is to compare vendors. Suppliers served with an RFP understand exactly where on the procurement cycle the buyer is.
In this way, they provide clearer and more detailed information about their service offerings or products and explain how they do business to the inquirer.
What To Include In Your RFP
So, now that you’re ready to prepare your RFP what elements should be included in this document?
Here are some basics:
· Thorough and specific questions
· Information about the problem you are trying to solve
· Information about the quantities and quality of the product(s) required
· Demonstration of intent to buy
· Request to see samples of the vendor’s products or services
· Request vendor pricing plan and details about preferred payment timelines
· Ask about the vendors’ qualifications, competency, skills, and references
The more precise you are with your questions, the better the answers you are going to receive. Clarity will speed up the time between initial inquiry and contract signing.
TIP: Your proposal and associated questions should be short, clear, and straight to the point. Avoid overly detailed proposals as these are wearisome to read through. Additionally, the proposal should not be flimsy without sufficient information to guide the contractors.
BONUS: You don’t have to write an RFP if you don’t have the time to. Today, procurement managers can leverage software such as ProcurePort’s RFP templates to quickly draft a campaign that can be broadcast to a series of potential suppliers.
Benefits Of RFPs
As can be imagined, there is much to take away from using a structured Procureport RFP template. Some of the key advantages of an RFP include:
· The RFP guides the bidding process
· The RFP clearly profiles the bidding process
· RFPs encourage competitive price wars
· RFPs enables the buyer to receive several quotations simultaneously
Differences Between RFI vs RFP
As procurement software specialists, it is our job to simplify such terms to our audience and to give RFI definition, RFP definition, and RFQ definition. So, we are now going to address RFI vs RFP and answer the question, “What is the difference between RFI and RFP?”
Summary of an RFI
· Process in which information is collected, evaluated and analyzed so potential vendors can be identified.
· RFI is the initial step in the sourcing cycle. An RFP follows the RFI stage.
· RFI is ideal for research, getting an overview of solutions to current problems.
Summary of an RFP
· An RFP is the next step following an RFI and is a more strategic, detailed, and intensive process.
· The RFP process involves vendors supplying comprehensive information about their services, products, and business dealings to buyers.
· Ideal for use when the buyer is ready to enter into a contract with the supplier or is looking for something specific.
To put it simply, an RFI is designed to inform the buyer about solutions and an RFP is meant to compare the vendors so a decision can be made.
Conclusion
RFPs are an excellent way to obtain specific information from various vendors. Procurement managers can benefit from automated RFP templates to streamline operations and reduce the time between sourcing and contract negotiation.
They can also create more detailed vendor directories for quick reference. Used correctly, RFPs can improve procurement experiences considerably.
If you would like to discuss RFx software and RFP templates with a consultant, or to schedule a demo, contact us today.