A request for proposals (RFP) is the earliest stage in a procurement process, or the process of obtaining necessary goods or services. The request for proposals invites potential suppliers to submit a proposal for the commodity or service your company needs. This request for proposals makes the acquisition of the necessary goods or services systematic and competitive and allows your company to select the best option among creative solutions from multiple providers.
A request for proposals is not just a request for a price estimate, but rather is a request for a detailed report that includes basic company information and history, financial data, technical abilities, product information, and verifiable customer references. The request for proposals generally includes detailed descriptions of the item, project or service requested in order to get accurate responses from providers. Usually the request for proposals isn't open to the public, but instead sent to a previously approved list of potential providers.
A request for proposals serves to obtain necessary facts and figures in order to ensure sound business decisions for complex projects. Through the RFP process, companies have to compete to provide the best proposal for the commodity or service in question in order to win the buyer's business. This allows the buyer to examine multiple options for the best combination of quality, terms and service at the best price possible. The request for proposals is also used to encourage suppliers to come up with creative solutions to the business problems presented in the RFP. Because the request for proposals process can be long and drawn out, it should only be used when necessary for complicated projects.
A request for proposals makes your interest in procurement known to various providers and encourages the providers to offer their best product or service at their best price. From the beginning, potential providers are aware the selection process is highly competitive. The RFP process requires the purchaser to specify what it plans to purchase and the suppliers to respond factually to the request. Through a structured evaluation and selection procedure, companies and organizations can show their objectivity in the selection process.
The RFP process also has its drawbacks. Because requests for proposals require a lot of effort on part of both the buyer and the supplier, they can be very time consuming. The time and effort required to prepare documents and plan meetings can cause delays. Because of the amount of time and difficulty involved in responding to a request for proposals, some companies may decide not to participate. Defining exactly what the company wants to purchase can be difficult, and unclear requirements often result in unsatisfactory proposals from potential suppliers. Furthermore, proposals can be lengthy and hard to for the purchasing company to effectively evaluate them.
Well-written request for proposals should include several key elements. Apart from basic elements, such as a summary of the business to be conducted, a description of the goods or services requested and detailed business requirements, requests for proposals should also include information for suppliers on how to respond. Information for suppliers should be included on how to approach the buyer, evaluation procedure to be used, desired proposal format, deadline, selection criteria to be used, contact information and the planned timeline for the project.