In the competitive solicitation process, I oftentimes find there is confusion about the different types of ‘requests’ that can be solicited. Is it a proposal? A quote? Or is it a matter of simply looking for some preliminary information?
Regardless of the nomenclature, there are three types of requests that most organizations use: RFIs, RFQs and RFPs (collectively “RFXs”). All three have certain features in common, but each has clear distinctions. Understanding those distinctions will vastly improve your competitive solicitation process and increase the likelihood you’ll select the right vendor for the job.
Here’s a rundown of each document’s distinctions and guidance on when you should use it.
Request for Information
A Request for Information (“RFI”) is a preliminary document used gather information about the products/services you are looking to procure, and the solutions, capacity and capabilities of vendors who you’ve identified as potentially being qualified.
The RFI is a great tool to use when you need more information to help you understand the marketplace and, at a later point in time, create an RFQ or RFP for the products/services you want to buy. You can also use it to stimulate the supply market and to condition prospective suppliers about the potential opportunity that may exist.
Because an RFI is more of a fact-finding document, you’ll want to ask open ended questions that allow the vendor to talk about its full range of offerings. Typically, the RFI will state the broad business challenges you’re having, and then the vendor can tailor its response within the context of those challenges. Often times, the vendor will provide an overview of the market, explain its position in the marketplace (for instance, what industries it specializes in) and help you understand how they charge for the products and services they sell.
Request for Quotation
A Request for Quotation (“RFQ”) is a document used to solicit quotes from prospective vendors, generally when the goods/services being procured are not costly or complex. They are most beneficial when you’ve established a clear and complete set of technical and functional requirements, and when there is little difference in the solutions and expertise offered by prospective vendors.
The key elements of an RFQ should include, at a minimum, clear technical, functional and other requirements, pricing preferences (i.e. fixed fee, time and materials, etc), and delivery terms. Many companies also include their standard terms and conditions in the RFQ to ensure the prospective vendor considers those in their response. These can include payment terms, indemnification, right to cancel and other important contractual clauses.
Request for Proposal
Different from an RFQ, a Request for Proposal (“RFP”) is used for more costly and complex procurements, especially when there are a variety of factors you need to evaluate and consider when selecting the right vendor and solution. As a result, the RFP process is more comprehensive and time consuming than the RFQ process. It generally involves multiple stakeholders and requires a greater focus on vendor risk management.
An RFP contains more specificity than an RFQ in terms of a company’s needs, and allows for much more creativity in proposal responses from prospective vendors. In addition to outlining the scope of work, delivery terms and fee requirements, RFPs also generally include company background information and broader goals around the goods/services being procured. The key is to provide sufficient context to vendors in order for them to propose a valid solution, while also allowing leeway for the vendors to apply creativity and best practices to fulfill those needs.
Which one is best?
The answer really depends on two things: what you’re procuring, and the experience you have with the products/services being procured.
If the procurement is complex and is for a new technology or entirely new set of technical/functional requirements, it would be a good idea to perform an RFI to better understand the marketplace. While it takes more time, it allows you to get smarter about the viable solutions, vendors and related risks.
If the procurement is relatively simple and the requirements are clear, an RFQ is a really efficient way to ensure you are getting the right pricing from a relatively similar group of vendors.
And an RFP is the right tool to use when requirements are more complex (or aren’t quite as clear), and when you’ll need to evaluate both the solution and the vendor on a variety of factors beyond just price.
Regardless of which method you use, we recommend establishing guidelines and standards to help the folks who manage the procurement do it the best way possible. RFx templates and checklists are both important tools to help with this process.
Vendor Centric specializes in helping organizations create and mature the policies, procedures and systems they use to manage their important vendor relationships. Learn more about our Vendor Management Framework and how we can help you implement the right-size vendor management program for your organization.