RFPs, RFQs, RFIs (and even RFTs!)—sourcing and procurement can be a veritable alphabet soup of acronyms, and so many of them sound almost identical at times. No wonder people get confused; what do they all mean?
To understand the difference between RFIs, RFPs, and RFQs, we first need to throw yet another acronym into the mix: RFx. What is RFx? It’s a Request For X (where the X stands for a specific desire).
Procurement requests are usually for three specific things: Information, Proposals, and Quotes (sometimes referred to as Tenders). Procurement departments use RFx as the blanket term for the “Request For” process, but RFIs, RFPs, and RFQs are actually very different things. Lumping them together under the banner of RFx can impede the procurement team from utilizing the particular strengths of each distinct type of sourcing tool. This guide breaks down the differences between RFQ vs. RFP vs. RFI—and explains why each process is so valuable.
What is an RFI?
If there is a Request For process that would come before all the others, it would be the Request for Information—the RFI. In some cases, there is a need for an RFI to kick off the procurement process before an organization is ready to issue requests for proposals or quotes. The RFI is a solicitation document to procure general information about items or services that you might want to purchase—or the vendors who supply them.
RFIs are used to help procurement professionals familiarize themselves with the market in which they are dipping their toes. By reaching out to various vendors in a systematic and structured way, procurement teams are better able to compare the market in an apples-to-apples sense.
What RFIs do not do, however, is provide teams with the full information necessary to select a product or service and make a purchase. Instead, they are designed to inform the decision-making process by helping the authors of subsequent RFPs and RFQs zero in on what they’re looking for.
RFIs are particularly useful for organizations that are buying things they have little experience purchasing, or for complex items or components that require extra due diligence before making a decision.
As an information request, RFIs are not binding for either the requesting company or prospective suppliers. Their usefulness for the requester is in gaining a familiarity with the market, while the benefits for vendors is to identify a potential new customer, market their skills and experience, and make a good first impression.
In this way, RFIs often generate a buzz among potential suppliers who wish to be put on the procurement team’s radar. For procurement professionals, they’re a helpful tool for building a long list of qualified vendors by asking general information.
RFIs normally cover things like:
- The location, size and capacity of factories and facilities
- General production capabilities
- Market information and trends for the targeted goods and services
- Other high-level data and information
After sorting through the responses from an RFI, procurement teams will use the knowledge gleaned to take the next step in the procurement process: the more specific RFP.
What does RFP stand for?
RFP stands for Request for Proposal, and is one of the essential ABCs of procurement. It is a document used to seek formal proposals for a commodity, service or valuable asset. Often, if the procurement team is working in a market that it knows well, they might actually start with an RFP and dodge the need for an RFI altogether. It really depends on the organization and the market.
Like RFIs, RFPs can go out to any number of prospective vendors, depending on the size of the market, the number of prospective suppliers, and the team’s ability to process responses. Like RFIs, RFPs are most often used when organizations are looking to purchase complex, sophisticated, or new items that require technical expertise, specialized capability, or the creation of a new product or service. Unlike RFIs—which are purely information-gathering tools—RFPs often result in a bidding process and the ultimate purchase of a desired item.
RFPs require more detailed and specific information compared to an RFI, because the goal is to find a supplier that matches the procurement team’s precise specifications, production outputs and deliverables, as well as the logistics and timelines for delivery. Because of the enhanced need for details, writing an RFP versus an RFI can be a more complex process requiring a combination of creativity, cooperation, hard work and technical know-how.
To unearth more detailed and specific information, RFPs will use more refined criteria for selecting suppliers and delving further into the details of the proposed purchase. Let’s say the procurement team of an automobile manufacturer was looking to find a new supplier of vehicle windshields. Perhaps the RFI identified 30 suppliers who provide such products to the market. The RFP should help the procurement team focus on, for example, up to 10 suppliers that would best suit the particular vehicles their company manufactures.
Where the RFI provides a view of the market, the RFP identifies suppliers that match their criteria. Factors such as production volumes, windshield composition or safety features, and the supplier’s ability to customize for the particular vehicles the organization is making.
For some sourcing events, the procurement process may end at the RFP. But often a third step is required—especially if price becomes a determiner between otherwise similar proposals. Enter the RFQ.
What is an RFQ?
RFQ stands for Request for Quote. (And to add to the alphabet soup, they’re sometimes also called an Invitation for Bid, or IFB.) There’s also a Request for Tender (RFT), which is essentially the same as an RFQ. (RFT is the term more commonly used by governments and the public sector.)
RFQs often complete the sourcing process by asking suppliers to provide pricing for the items they’ve proposed in the RFP. But RFQs can also be used as the first step in an RFP process if price is a critical first differentiator. Feeling confused? Think of it this way. Which comes first really just depends on the organization, sector conventions, and the need that is being filled. RFQs can also be used as a sourcing tool when you know which vendor you want to work with, but you want more specifics around price. An RFQ can also be used sort of like salary negotiation when you’re renewing contracts with current suppliers.
The critical thing to remember is that RFQs are all about price and cost. They are the procurement process for soliciting quotes for a specific item, task, or project. Use an RFQ when your team knows precisely what your organization is looking for and you’ve already gone through extensive vetting over other criteria.
Your typical RFQ has four steps:
- Preparing the RFQ
- Processing the responses
- Awarding the contract to the supplier that meets the qualifying criteria and presents the best bid
- Closing out the RFQ and reviewing the success of the whole process
To provide the procurement team with the information they need to make an informed decision, the RFQ must be specific about the full requirements of the project. It must provide an understanding of the supplier’s capabilities, costs, price and payment terms.
A well-executed RFQ will help you judge whether or not a vendor can provide what your organization needs at the price you want to pay. It lets you evaluate all solutions that meet your organization’s sourcing requirements based on the cost to your organization. Issue an RFQ vs an RFP when you are sure you want to make a purchase, and you know the specifics of what you want to buy. Otherwise issue an RFP—or an RFI.
Looking for a quick way to sum up the differences between the three main areas of request management—the RFI, RFP, and RFQ?
RFIs educate: An RFI response lets you survey how vendors could fill your needs.
RFPs compare: They let you evaluate the merits of a cohort of suppliers based on common criteria.
RFQs quantify: They give you the cost of meeting that need.
For more advice on managing a smooth RFP process, check out Fairmarkit’s blog, The Source.