Whatever industry a business is in, the cliche concept of communication is the key simply never gets old.
One of the key elements that make up a business capable of making it in a cutthroat market is to convey the message clearly and transparently.
Documentation is often one of the most crucial elements in running and communicating among businesses. Whether talking to your clients, your suppliers, or even other businesses, it is crucial to have everything in black and white.
For one, documenting deals is a foundation of transparency among the parties involved and exudes company professionalism and formality.
One of the many documents that businesses use is a business proposal. A written document about a job and its specified requirements are submitted to a prospective client.
In many cases, the proposal process may be solicited or unsolicited. This may start off when a client shows interest in your product or services and asks your company to submit a proposal before they make their purchase.
However, another type of formal request used by a number of companies in different industries is known as a Request for Proposal (RFP). An RFP document basically specifies the product or service to be provided, the specific requirements, and the project timelines.
But how do you create a Request for Proposal (RFP)? Read along to find out!
What is a Request for Proposal (RFP)?
A Request for Proposal (RFP) is a document that lays out the specified requirements of what product or service a customer wants to purchase and the respective evaluation criteria.
The Request for Proposal (RFP) is primarily used when a company knows what they want to purchase and is soliciting multiple bidders.
An RFP provides the framework for the acquisition that enables a streamlined sales process until the contract solicitation.
Once the Request for Proposal (RFP) has been received and reviewed, the issuing organization will then create a short list for final selection among the best proposals submitted and open contract terms and negotiations.
The bidder who meets the organization’s needs as suggested by the Request for Proposal gets the project.
To cut the long story short, a request for proposal is the document that helps determine whether vendors have the right solution to solve and support your project. A company then puts together an outline of the specified requirements for potential suppliers to understand what they need, and what solution they can provide.
Understanding the RFP Process
Basically, the process for soliciting a request for proposal begins when the soliciting vendor creates and submitted their first draft of their RFP. This step allows potential vendors and potential suppliers to ask questions and learn more about the problems that the issuing organization tries to solve.
Once they gather information, it will then be used to improve the final draft of the request for proposal.
Various companies whether a business, non-government agencies, and government agencies use RFP for their projects to help them look for and identify the best and most qualified vendors for their projects.
RFPs are used for intricate and big-funded projects. These projects often require a number of sub-contractors. They describe the organization issuing the request for proposal, the project scope, and the evaluation criteria.
In the RFP process, the bidding process and the contract terms are also put into black and white. It is supported by the technical details of the work and the timeline the organizations expect to complete the project.
RFPs also inform bidders on how to prepare the proposals with guidance on required formats and presentations. It may include instructions on the organization’s expectations on the information they should receive.
It is important to note that proposals should not be overly detailed as it may hinder the contractor’s creativity or obscure as it may leave the contractor confused.
Many RFPs are issued by government agencies and other public organizations in various sectors. It often leads to full and open competition among bidders and welcomes to receive proposals from private companies to remove any bias from the selection criteria and process.
This way, agencies can ensure that the winning bidder is the most competitive and offers the lowest priced bid possible.
However, private and public organizations may issue RFPs to attain multiple bidders and review to gain different insights into their current projects.
For example, a government agency wants to change its reporting operations from a paper-based system to a computer-based system. Therefore, they can include important factors such as their request for the hardware, software, and training for its users so they can have a seamless transition of the new system to their business.
Once the review process takes place, the government agency can a wider perspective on the alternatives that are presented by the various vendors that have sent in their proposals. Check out the detailed guide for the sales budget.
Components of a Request for Proposal
Contractors and suppliers see RFPs as very essential as it brings convenience on their end. It helps them easily identify what a company needs, thus eliminating any avenues for guessing games. The RFP process includes important information about the project to be completed.
Here are some of the important components you should consider in creating your RFP.
Schedule Time and Date of Bidding
You have to include your due day and date for your proposal. It can also include related terms such as getting disqualified for latecomers.
Pricing for Items
Many RFPs require your organization the total cost for your project. Many vendors may prefer itemized pricing for more organization and transparency.
RFPs often require a potential vendor to include their experience to support their claims of capacity to provide the solution for the organization.
It is often included that an organization informs vendors on how long a project will be completed or deliver the services and goods.
Terms for Damages, Penalty, and Evaluation Criteria
Some RFP may include related terms on damages and penalty fees which the winning bidder can encounter once they fail to meet the evaluation criteria presented by the business. Know more about sales opportunities and sales acceleration.
How does the RFP differ from other business documents?
As part of the procurement processes, companies may send another form of request that is in conjunction with the RFP.
Here are some of the other business documents that may go along with an RFP.
Request for Information (RFI)
RFIs can help you compile information about a specific project. It helps you make better and strategic decisions about the acquisition projects and further define the complete scope of your RFP.
Request for Expressions of Interest (REOI)
These documents are usually created during the pre-development stage to help determine the potential vendors and their possible intent on your project.
Request for Qualification
Requests for qualification help in determining vendor information that enables you to narrow down your pool of potential vendors. Although, they are not as detail-oriented as RFPs as they do not include other information such as prices, requirements, scoring process, etc.
Request for Tender (RFT)
RFTs are structured and formal invites sent to a vendor to bid on your project based on clear and detailed specifications.
When should you issue RFPs?
Well, issuing an RFP is entirely up to you. More often than not, issuing an RFP stems from having to address a need that cannot be supported by your internal resources. Thus, an RFP can be an effective way to reach out to vendors, partners, consultants, or businesses that have the suitable resources, skill sets, and expertise to support the RFP requirements.
However, it is also important to note that issuing an RFP can be time-consuming and eat up a lot of resources. Therefore, it is vital to determine when is the right time for your company to issue an RFP.
Take note that you may not create a request for proposal for simple and uncomplicated projects especially when there are no organizational policies or regulations to require this form. Therefore, requests for proposals are often beneficial and necessary for a more complex and intricate scope of work which may include heavy analysis of data.
How does a good RFP document give you the best and final offer?
When you are able to create a good request for proposal, you do not only get to the best and final offer, but you get to have a seamless selection process as well.
With a good RFP document, you get sensible and secure offers from a number of qualified vendors. When you have a clearly written RFP, you can set your expectations and compare skills and vendor rates that best fit your needs.
Additionally, your RFP can help you further understand the scope of your requests. As you go along with your research, you can gather information about the pricing and services that can help you get the best and final offer that works out for your company.
A well-defined RFP can help you further assess your bidders and evaluate their capability to support your business expectations. Through this, you can easily evaluate the strengths and weaknesses of the bidders while saving time and effort in doing research.
As an organization issuing an RFP, you have to understand that creating a well-drafted document involves a multi-step process that can be time-consuming and intricate.
RFP can determine how companies present themselves to suppliers and vendors
Therefore, the development of well-drafted RFP documents should be done professionally, accurately, and objectively as the reputation of your company is on the line.
Steps in conducting the RFP Process
Once you decide to create your RFP, you have to go through the different steps to complete your proposal process. Take note that companies go through the RFP process differently. However, you may encounter these steps when creating your proposals.
In drafting proposals, it is important that you go through comprehensive planning to make sure that you are productive and efficient. In this phase, you can discover essential factors such as project scope, timelines, and estimated budget.
It is also essential to include those who will manage and carry out the RFP process and who have the right knowledge to evaluate and submit suggestions for an accurately curated RFP.
Additionally, a big part of the discovery phase is to identify who will be primarily affected by the purchasing decision and solution. It helps you consider how your purchasing decision might affect ongoing projects, organizational funds, and even your teams. Check out some sales-related guides, B2B sales, SaaS sales and tech sales.
Drafting and Issuance of RFP
Drafting the RFP is the most crucial phase of the process. It should be done accurately and objectively to describe what your business needs. In a nutshell, the more comprehensive your description of the problem is, the better vendors can understand how they can provide the needed solution for your business.
Some companies find it convenient to use an RFP template to save time and effort. In doing so, choose a template that includes all essential factors that you want to include in your document.
Scoring Process and Shortlisting
As you collect RFP responses, you should have reliable scoring metrics that can accurately and objectively evaluate your vendors which can help you eliminate the remaining bidders that do not meet your criteria.
Identify the weak and strong points of a vendor and create a shortlist that targets the strong competitors.
You may also give out questions within the submission time frame until you finally get to your final decision.
Selecting the Winning Bidder and Sending Contract
Once all the responses have been submitted and all shortlisted vendors have been compared, you can now make a decision. Ensure that the bidders review is consistent with what they have submitted about their solution and how other clients perceive them as well.
Once you get to the two most competitive offers from bidders, you can start negotiating with them and offering the contract to whoever the winner is.
At the end of the process, do not forget to spend some time contacting the remaining bidders about your final decision and briefly explaining your decision to them.