How to Setup and Manage Your Request For Proposals (RFPs)
A request for proposal or RFP is an effective tool for businesses to search for the best products/services at the most reasonable prices by finding the appropriate vendor or supplier. It is a method through which businesses send requests to a number of possible suppliers so that these suppliers can create and send their business proposals and one among these proposals can then be selected.
In this article, we shall learn more about 1) what is a RFP, 2) what purpose it serves and 3) how can you setup and manage your RFP. So what are we waiting for, let’s read on to find out.
REQUEST FOR PROPOSALS (RFPs)
A request for proposal or RFP is an invitation for all potential vendors and service providers to participate in the bidding process for certain product or service. Such requests are done by a company that is keen to purchase those products or services. The idea of this invitation is to collect several business proposals submitted by all potential vendors or a suppliers and to select one or some of them to complete the requested project. An RFP must be submitted by your business during the procurement stage or initial study phases of a project. It is in the form of a document in which your organization can state what it is looking for and also provide evaluation or assessment criteria for proposals.
An RFP is an important document that can influence the kinds of products or commodities your organization ultimately acquires since such documents have the capability to influence the response from supplier. Thus, you must pay enough attention while framing the request and make sure it has all the main points that are needed for the supplier’s knowledge and insight to prepare a appropriate proposal. The following are some of the functions that an RFP must try to fulfill:
- It must inform the recipients/suppliers that your business is keen to procure.
- It must encourage suppliers to showcase their best efforts by hinting that the selection process will be highly competitive.
- It must specify exactly which product/service/commodity your organization is looking to procure.
- It must enable wide response and distribution.
- It must make sure that suppliers give their response appropriately by giving instructions for a response.
Just like a request for proposal, there are certain other similar requests that are drafted and sent by business organizations to their suppliers or other parties in order to get certain feedback from them. The following are the other 4 types of similar requests:
- Request for Quotation – A request for quotation or RFQ is a kind of a request made when there is no need for a complete proposal and when price is the main aspect on the basis of which the supplier is selected. An RFQ can also be used before an RFP to get an idea of the price range.
- Request for Qualification – RFQ or request for qualification is another type of a request that is distributed before starting the RFP procedure. This kind of a request is used to collect supplier information so as to establish a database of possible vendors and then shortlist the few suitable ones.
- Request for Information – An RFI is a request for information about products and services that are available to meet the demands of the buyer. This helps buyers know strengths and capabilities of the various suppliers before a major procurement.
- Request for Tender – An RFT is more commonly used by a government in order to request all possible suppliers to send their proposals for a big project.
HOW TO SETUP AND MANAGE YOUR REQUEST FOR PROPOSALS
A RFP, as stated above is a highly important document for your organization as it can help you win the best vendors and long term associations. This is why, it is important to pay a lot of attention to writing it and setting up the entire procedure. A well-written RFP should focus on your main objectives and your expectations from the vendor. It must be properly structured and well-formatted so that it looks professional. When you start setting up your RFP, you must have a clear goal in mind and base the entire drafting process with this goal in mind.
Besides setting up an RFP, managing it is another thing that you must pay enough attention to. Right from the first step of assembling the team to the last phase of sending out the RFPs, each step must be given enough weightage and must be managed well. The following are the main steps to set up and manage your RFPs:
Step #1. Include the right people
The first step that you must follow in order to set up an RFP is to form a team that will be responsible for the creation of the RFP document as well as the management of the RFP process later. It is a good idea to start with a small team of people so that the variety of perspectives as well as the skills possessed by each individual can be focused and streamlined easily. The team members must be selected by you carefully by considering their knowledge, skills possessed, suitability to the project as well as their experience in the particular field. Each individual selected must be truly involved in the process and should be able to make a considerable contribution to the project. If the team selected turns out to be large, then groups within the team can be formed and duties can be delegated so as to ensure smooth functioning of the process.
Step #2. Research and differentiate between wants and needs
An RFP that you create must be clear, concise and self-explanatory. It must not confuse the recipients in any way and should create a distinction between your needs and your wants. To create this differentiation, you first need to understand and analyze what your needs are and how are they different from your wants. A need is an absolute necessity whereas a want is an additional choice. Your RFP team must clearly specify your necessities and expectations from the vendor or the products and services offered. The ‘wants’ can then be stated additionally by including words like ‘may’, ‘optional’, ‘additional’, etc.
Perform some research while creating this differentiation so that you can be absolutely sure about the things that you definitely require and the things that you can still do without.
Step #3. Writing the RFP
Of course, one of the most important parts of the overall RFP process is writing the RFP document. Whatever you write in this document must be pre-planned and well organized. An RFP must be written only after you have defined your needs and are aware of your main requirements. In order to draft it effectively, you must first create an outline and include the main sections that you will need. The following are the main sections of an RFP which you need to include and pay attention to:
- Introduction – Your RFP must have a solid introduction that gives an outline of the request and states its objectives. You must briefly explain why you are writing an RFP and what you hope to achieve from it. Provide a summary of the main points in not more than a few words and make sure that you include the due date clearly.
- Background information – The suppliers who will be receiving your request must know who this request is coming from. This is why, it is important to write down information about your organization including its name, address, what it does, how long has it been in the industry and a brief history.
- Description of the project – The RFP must also speak about your project and company. It should be able to give out information about the purpose of the project.
- Requirements – This part is one of the main sections of the RFP and must consist of the detailed explanation of what are your main needs and requirements for vendors. Be very sure of what exactly you want and then translate it on the RFP professionally. All the bidders are able to make a suitable or appropriate bid only when they know what requirements they have to fulfill. Those requirements can be stated in a point-wise format and must be easy to understand.
- Expectations – The RFP must also state clearly the kind of expectations your business has with vendors, products or services so that a vendor who is not able to meet these expectations may not send a proposal at all.
- Selection criteria – It is important for you to explain clearly the criteria based on which the winning bid will be selected. The criteria for choosing one or more vendors must be made absolutely clear and transparent so that the vendors can gear up and get ready for putting their best foot forward.
- Timelines – Besides the deadline for submition of proposals, which you need to specify in your RFP document, you also need to create a timeline of processes and procedures that will take place from the starting of the project, till its end. Be practical and flexible as far as the deadlines are concerned so as to enable the vendors to work freely and be encouraged to respond to you.
Step #4. Identify who and how to send RFPs
Another thing that can help you with setting up and managing your RFP is to decide how and who to send it to. Most companies mail RFPs, but this is not the only method of distributing them across vendors. You can also send the RFPs through the mail or simply post them on your website and notify your vendors about it.
Now, you need to identify and decide who to send the RFPs to. Most businesses tend to have already a list of vendors. In case you don’t have such list, you can find potential vendors and narrow down the list by going through the professional network. Try to limit the number of recipients for your request and narrow down the overall list so as to make the second half of the procedure easier for yourself.
Sending RFPs to only known vendors of big companies in the industry may not be the best idea since even small or new vendors may meet your requirement or expectations. Moreover, small vendors are sometimes more keen on winning new contracts and may hence give a better overall performance.
Step #5. Consider a confidentiality clause
All the suppliers and vendors who take out time to respond to your request and send in their proposals might have certain reservations about the confidentiality of the information they are sharing with you. If they do not find a confidentiality clause or its reference in the request, they may not even respond back, since to most, security of their data is of supreme importance. So make it a point to introduce a clause of confidentiality which states that you agree to not reveal the information of the vendors in any situation or circumstance. This will help the vendors to trust you and divulge important or sensitive information. Of course, the request will not consist of the entire contract but should point out to the main clause.
Step #6. Check details of delivery
You need to double check on the manner in which you wish to receive RFPs. There are many ways in which this can be done, and some of them include hard copy, fax submission, and email submission. Also, you must be clear about how many copies you wish to receive from the vendors. You must specify your preferred details of delivery in the request in order to avoid any confusion for the vendors and to make way for a smooth process. If you do not enter these details, each proposal received by you will be different and may not be suitable to your liking. Some of the other details that you may want to specify include last date for submission, the correct time zone, the signatures needed on the proposals and others.
Step #7. Collect & evaluate Vendors
After fully finalizing the RFP document and sending it across several vendors, you will start collect the proposals from them. When going through the proposals rate the vendors and define the winner by keeping in mind your key evaluation criteria.
POSSIBLE PROBLEMS AND HOW TO HANDLE THEM
An RFP is a crucial document that can bring some order and structure to the procurement decision for your business. It allows you to compare different suppliers and then select the one that offers you the best products/services at the most suitable rates. But in spite of its benefits and good intent, an RFP can have some inherent problems that may need resolving in order to gain the maximum out of it. The following are some of the possible problems with hints to handling them:
- Poor odds – An RFP is usually sent across to several companies (even hundreds of them) but the number of responses received may not always be huge. This means that there is a high chance that the supplier who was most suitable for you may not respond to your request, thus leading to overall poor odds. You may still find business from the remaining supplier who did respond, but it may not the best option for you. In order to improve your odds, you must try to build a relationship with the procurement manager of your company and hire someone experienced for this job. Improving the odds may depend a lot upon the skills and expertise of this employee.
- Predefined procedures – Another major problem with an RFP that may act as a roadblock for you to find the best supplier is the strict deadlines and predefined procedures that it consists of. However important deadlines and a well-structured procedure maybe for you, it may not always allow the supplier to be flexible and work according to his suitability. When a supplier receives a request for proposal and sees stringent specifications, he may lose half the interest and may not even respond. Thus, you must make it a point to allow a practice timeline and make it an effort to consider the comfort of the vendors as well.
- Preexisting associations – If your business has had a few pre-existing business relationships with certain vendors who performed well on previous occasions, then this may give them a biased edge over others and may hurt the RFP process. In order to avoid the unfair competition among vendors, make it a point not to favor a known supplier on flimsy grounds. Always have a fair procedure of selection of the vendor from the bunch of proposals received.