Many firms regularly file or respond to requests for proposals (RFP), which can help streamline the identification, evaluation and comparison of potential suppliers for large or intricate projects. Sometimes, an RFP might be referred to as an invitation to bid or quote for services.
When to draft an RFP
Creating an RFP can be a time-consuming and expensive process, so it’s not something that would be used for smaller equipment purchases such as buying a new printer or one-off operational costs like individual machine repairs.
In general, businesses should consider using an RFP when they are buying a product or service for the first time, and when the project is quite complex, says Dominic Monkhouse, Managing Director of business advisors Monkhouse & Company.
Projects that benefit from an RFP are those where:
- The project is long-term or not yet finished.
- Multiple suppliers could be involved in the project.
- You're willing to partner with new suppliers.
- You aim to easily compare various suppliers.
- The project's worth exceeds the expense of forming the RFP.
It can take many weeks to finalise an RFP document, particularly if you have multiple stakeholders involved, so it’s important to allow enough time.
“It’s often wise to have someone from finance, someone from IT and someone who represents the people who will use the service or product you are buying,” Monkhouse says. “Involving the leadership team is also important in securing their buy-in for the project, and the associated investment.”
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How to draft an RFP (including template)
Larger organisations may work with a dedicated partner or department that specialises in RFPs. For mid-sized companies, on the other hand, it is possible to create your own RFP by using a template - but even then Monkhouse says that you must make sure to tailor an RFP to your specific goals or needs.
Click here to download an editable RFP template.
The key elements to include in any RFP are:
Overview: Briefly state the project's problem to be solved, your company's goal, and the assistance required. Include a short profile of your business.
Description: Explain in detail what specific aid your company needs, along with any stringent requirements.
Deliverables: List tangible outcomes you desire from this contract like handling a certain number of transactions per month, issuing press releases annually or revamping the website within a specific timeframe.
Guidelines: Indicate what you'd like potential vendors to feature in their proposition: references, case studies, certifications or strategies related to sustainability and flexible working.
Selection criteria: Define factors for selecting a new supplier such as case studies, estimated costs and timelines. Pricing details including additional charges should be requested too.
Timeline: Clearly provide key dates for RFP responses such as submission deadline, evaluation period and decision date.
Examples of RFPs
Monkhouse states that RFPs are often used to acquire construction, marketing, and IT services for complex projects involving various stakeholders and suppliers of strategic importance to the purchasing company. However, RFPs can also be utilised for any product or service suppliers, including raw materials.
Kirkfield is a specialist manufacturer of rubber and tape products. The company uses RFPs to evaluate new supply chain partners who are often in other parts of the world, and may be in different time zones, explains company Founder, Tony Flood. “Using RFPs allows us to gather more information than might be available on a vendor’s website, but we do invite specific companies to bid for a contract if we are creating an RFP,” he says.
The RFP is an opportunity to set out the company’s needs upfront. “We supply very specific information about what we are looking for, the anticipated yearly spend, periodic supply terms, payment terms and a time restriction on submitting a proposal,” says Flood.
How to share an RFP with a client
Once you have created an RFP, the document can be shared as widely as you choose. Publishing your RFP on a commercial tendering website will help you reach a large audience, but could be expensive, and result in a large volume of responses that are time-consuming to manage.
Alternatively, businesses can publish details of the RFP on their website and then email selected suppliers inviting them to bid for the project. This ensures that you are approaching suppliers that you already believe are qualified to deliver the work while making it available to other interested parties.
Advantages and disadvantages of the RFP process
Advantages
Flood says that, for his business, speed and the ability to compare prospective suppliers is a key RFP advantage. Earlier this year, Kirkland created an RFP for a new neoprene material and invited several companies to bid. “We emailed one company in China and received a response with a quote within 24 hours,” says Flood.
“After that, we had a sample within a few days, and then a trial quantity of product to test on our production line within one month. Based on those results, we signed a contract and have already bought three 40-foot containers of materials. We’re hopeful that this company will be a really important supplier to us in the future.”
Other advantages of RFPs
- Allows a business to provide clarity to suppliers around project deliverables, costs and contingencies.
- Allows businesses to thoroughly identify and evaluate new suppliers.
- RFPs provide transparency and visibility of the budget.
Disadvantages
The problem businesses often face when using RFPs to secure new suppliers is the lag in adapting RFPs to changing business requirements. Writing an RFP for unknown products or services can be tricky due to insufficient know-how on what questions should be asked.
“We do see a lot of RFPs that ask about international standards, or very detailed pricing information when what the business really needs to know is whether this supplier has a good culture, whether they have the right experience to deliver value, and what quality of work they can be expected to deliver,” says Monkhouse.
Other disadvantages of RFPs
- Certain businesses find the process to be time-consuming, particularly when multiple stakeholders are involved. Moreover, evaluating which supplier to choose can be complex and lengthy, and some may be unfit.
- Not all suppliers respond to RFPs. Some may bow out of the selection process if the evaluation period becomes too time-consuming for their business.
RFPs vs request for information (RFI)
If you're a business owner unsure of what to purchase, but aware of a problem and a potential vendor, consider using a request for information (RFI) process rather than an RFP.
Unlike an RFP, which is used to shortlist potential suppliers for a specific task like CRM system implementation or marketing campaign delivery, an RFI gathers general information about a company and its products. If your business plans to initiate the RFP process without familiarity with possible vendors, incorporating an RFI as a preamble can be beneficial.
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2. Once you have enrolled your Card Account, you’ll get up to £75 in statement credits between January and June, and the same between July and December for United Kingdom purchases with Dell Technologies on your Business Platinum Card – up to £150 in statement credits annually. Terms and conditions apply.
