Request For Proposals Explained
A request for proposal is a solicitation often made through a bidding process by a company or agency interested in acquiring a service, commodity or an asset from a Supplier. This document is intended to provoke potential Supplier’s to submit proposals for the supply of the requested items. An RFP is normally submitted in the early stages of the procurement cycle either at the procurement or at the preliminary study stage and dictates the preliminary requirements for the service or commodity being requested and may also prescribe, to some extent, the exact format and structure the supplier should respond to the request.
Effective request for proposals will typically reflect the plan and long/short term objectives of the business; providing a detailed insight through which the supplier is able to offer a corresponding reply to the request. This form of request is quite similar to a Request For Information (RFI) and a Request For Quotation (RFQ).
Principally, a request for proposals will:
• Inform the supplier that the organization is looking to purchase services or goods from them and encourages them to do their best when replying to the request.
• Require the company or business to specify what it is looking to purchase from the supplier. In the case a requirements analysis has been prepared in advance, it can be incorporated in the request document.
• Alert suppliers that the entire process (the selection process) is competitive and that they should therefore quote their best prices.
• Allow for the wide distribution and response of the document as it is aimed at soliciting different reactions from different suppliers.
• Ensure that a supplier responds factually to the stated requirements.
• Promote a well-structured evaluation and fair supplier selection process, giving the organization a chance to display impartiality; especially in a public sector procurement.
The Different Aspects of an RFP
Typically, a request for proposals will usually involve more than just a request for price. It may also request information in relation to the supplier’s technical capabilities, company history and information, financial status (can they deliver without risk of becoming bankrupt), product information (estimated completion period and stock availability) and customer references (essential in determining the company’s suitability as a supplier).
Other Aspects Addressed By The RFP
A request for proposals will often include specifications of the project, service or item being requested. The more comprehensive the specifications, the more accurate the proposal will be. In most cases, these requests are sent to a list of approved vendors or suppliers.
The bidders (suppliers) are required to reply to the request by a certain date and time that is set by the requester. Depending on the terms stated by the RFP, late proposals may be considered or ignored. Supplier proposals are only used to evaluate whether the supplier or vendor is a suitable supply candidate for the requesting company. As such, the sending of an RFP and the receiving of bids, their evaluation and the short-listing of promising bidders is usually a precursor to further negotiation rounds.
Short-listed suppliers who sent successful bids may then be invited to take part in further bids or may be requested to submit their best and final financial and technical proposals known as BAFO or Best-And-Final-Offer. Any subsequent changes to these proposals are known as BARFO or Best-And-Revised-Final-Offer. Once an agreement is reached, the requester and the supplier can then move on to the next step, which is the signing of a supply contract.
The above information details how a request for proposals works from its creation to the reaching of an agreement. Taking everything into consideration, the RFP document plays a very important role in the early stages of the procurement process and will considerably determine how the whole process unfolds.