What is RFP?
Being a vendor manager, you are looking in for the organization's requirements, and during the process, you are also looking for vendors who can render the services or equipment. So, when you want to reach out to a group of vendors or want to pitch a bid between vendors for a particular use, then the request raised is termed as Request for Proposal.
The RFP will go out to all of the companies listed by Agency A during the RFI process. It could also be picked up by companies that collect, categorize, and house RFPs so that businesses can quickly search for the services they provide.
Perhaps the most relevant piece of knowledge at this stage of the RFP process is the proposal. RFP process is where the answering organization will discuss its plan and how it will be applied.
While RFP is Request for Proposal, RFQ is Request for Quote.
Since it is only the quote, an RFQ is different from the RFP. Suppose you are a business and are seeking services then you would reach to different providers for the same service, to check who is giving a better price. While, along with other specifics RFP contains the price, whereas RFQ talks only about the price.
For example: If Agency A were to issue an RFQ for their kiosk, they would have told the recipients exactly what they wanted. How it should look, how it should work, what it should reveal, etc.
While raising an RFQ or IFB (Invitation for Bidding), the company or the vendor manager also requests for small details as payment conditions and contract durations. These are essential information, especially for government agencies,that need to deal with strict financial constraints.
What we understand is that unlike RFP, RFQ process involves direct contact with the vendor, wherein the third-party has to share their price against the quoted price by the organization.
Importance of RFP
Every process has its way in to the organizational system. There are both sides of the coin that can be discussed. But for now, let’s look at the importance of Request for Proposal
1. Better understanding of requirements: The main purpose of a Request for Proposal (RFP) is to exchange of requirements for a project or service to the vendors, who the manager/organization thinks can provide solutions. This document is used as the project’s baseline as there will be a clarity and joint understanding of the requirements.
2. A chance to compare: With the help of RFP, the organization gets a chance to compare the different quotes offered by the vendors. In the case of ERPs offered by the Value-Added Resellers (VARs), with the help of the RFP, the company can get a clarity about the key services, experience of the VARs, and to check if they are the right fit for the current company's requirement.
3. Intangible Return on Investment: All profits or benefits experienced by the organization need not be tangible. Another key factor of maintaining RFP is, with the help of this documentation, the company can keep a track of all the intangible advantages it incurred through the current vendor transaction. These benefits could be in the form of reduced cost, better productivity, improved customer service, and so on.
Significance of RFQ
While we have briefly discussed about the importance of RFP, here are few significant points about RFQ as well:
1. Clear transactions: Sending an RFQ to a limited number of pre-qualified vendors speeds up the selection process as there would be little to no need to check the bid or the vendors.
2. You are the in charge: The RFQ puts your company firmly in charge of the operation. You're going to decide what to buy, how much, and when. You are also limiting other purchasing options by being so specific.
3. Lesser waste of time: RFQ is created when the organization/vendor manager is completely aware of the vendor’s services and without waste of much time or money soliciting offers from other vendors, they can get straight to the business.
Benefits of RFP vs. RFQ
We do not take sides; it is for you decide after looking at the benefits of both RFP and RFQ. Here’s pitching each other:
The RFP method is excellent for reducing the time taken to attract suppliers to your company.
● RFP is useful if you want to make a complicated purchase. You can ask for more information about the product, not just the price, using it.
● RFP is so flexible that you can get several credentials and make them unique to your business needs.
● With RFP, you can get an excellent product and give details and select the best one for you.
Among the significant applications and advantages of RFQ, some of the drawbacks come with its use.
● The request for quotation reduces the processing times of attracting suppliers; it is a system that undermines competition between suppliers.
● This quotation only works with an invitation, limiting the number of companies participating in the bidding process.
● Another critical advantage of RFQ is the reduction in time as there won't be a sales records requirement.
● The number of citations decreases to the number of providers, allowing you to thoroughly analyze all of the bidders, encouraging the choice to prepare.
On the end note, both RFP and RFQ are great processes for soliciting companies and vendors. Based on the clarity of your requirement it is up to your choice which to choose.