When you’re looking to make a large or otherwise significant spend, it’s imperative that you do your due diligence. And there’s no better way to ensure your decision-making is objective and thorough than by using a Request For Proposal. Here’s what you should to know about putting together a successful RFP:
More than anything else, an RFP is a communication document. It tells prospective suppliers what you want to purchase and your expectations for delivery, customizations, or service needs. If you can’t write your RFP to communicate your requirements, it won’t be doing its job—and the result will likely be a purchase that’s not fit for purpose. RFPs should be clear about the specifications of the desired purchase, the measurable requirements for evaluating proposals, and the way you will select the winning vendor.
Mind your Ps and Qs (and Is!)
To improve your procurement activities, start with working out what you’re trying to accomplish — because an RFP might not even be the tool you want to use.
There are two other types of documents that businesses can use to request engagement with prospective partners: requests for quotation (RFQ) and requests for information (RFI). All three provide different levels of insight for your decision-making. RFIs survey the capabilities of various suppliers. RFPs compare vendors’ merits against their peers, usually in a bidding process for items that require technical expertise or specialized competencies. RFQs quantify the responses of bidders to give you the cost of a specific product or service.
RFIs can help you better understand your needs—especially if you don’t yet know what products or services will help fill your requirements. They ask general questions designed to educate and inform.
RFQs explore the financial details of a purchase. They can help you zero in on the specifics of a need or sidestep a lengthy process if you already know what you want. Questions focus on the financial cost to meet requirements.
Getting the best out of your prospects
When you’re ready to evaluate several suppliers, a well-written RFP will provide you with detailed information and a clear comparison between the services, products, and vendors in the market.
It’s a tool that helps you cast a wider net over suppliers and gives you greater leverage in negotiations—increasing your odds of a successful acquisition. RFPs provide transparency and accountability—not just in the initial decision-making but also for future sourcing efforts since the document can become a reference for new purchases and a way to help standardize your organization’s procurement activities.
Most large organizations already have policies in place. But we can always improve on our practices. Many procurement leaders at large companies worry that their procedures have become too complicated, making it harder to convince prospective partners to bid. On the other side of the equation, suppliers often complain that the time it takes to respond can outweigh the value of the contract.
Smaller companies or procurement departments with less experience of RFPs should also take note of these big-company challenges. Keeping them in mind can help the uninitiated sidestep pitfalls in developing their own policies.
The solution is simplicity
Clarity is the key to improving — or developing — a policy.
Be clear about what you want, why you want it, and when you need it so you can communicate these criteria to prospective suppliers. The better they understand your needs, the more likely they are to respond to your RFP and provide you with straightforward answers to your questions. The more responses you have, the better your chances of hitting your procurement goal.
For RFPs to have clarity, they must be consistent and straightforward — qualities you should embed in the document and process-design stage.
Simplicity means asking the right questions in the correct order. What you include in your request makes a world of difference in both the number of responses you will get and your ability to compare proposals and eventually make your decision. At a minimum, you should include:
- Who you are (and what are your values as an organization)
- An overall idea of what you want to achieve with the purchase
- The scope of your requirements—including details, specs, and deliverables
- Expected outcomes and performance criteria
- Budget constraints, payment terms, and penalties
- Details of the evaluation and award process
- A facility for prospective suppliers to ask you questions.
Depending on your organization’s size and desired spend, it’s likely you will also want prospects to provide you with certain information about themselves. To ease your mind that you’re dealing with a solvent and capable partner, you may want to ask for financial reports, corporate information, technical competencies, and references.
Consistency means adding uniformity and standardization. A repeatable process reduces the amount of time it takes to make acquisitions and will improve your overall procurement decision-making.
RFPs (and Qs and Is) are powerful tools for helping procurement teams pinpoint products and services. But to be most effective, request documents must follow one simple rule: Be clear about what you want.
Elevate Your Business: A Comprehensive Procurement Plan For 2024
Why collaboration is essential to building successful RFPs