Difference Between Sealed Bids & Request for Proposals

Sealed bids and requests for proposale are two forms of project quotes used in construction.

The construction industry utilizes various ways in which pricing for projects is submitted. Requests for proposals and sealed bids are two types of delivery vehicles used to provide project information and pricing to the customer.

Significance

Requests for proposal are also known as RFP's and they are responses to a request for a project. The RFP stage is the first step in competitive bidding. Sealed bids contain information regarding a project including project parameters and pricing. All entities that submit a sealed bid are not aware of what others have bid. Sealed bids are turned in to the project owner by bidders who successfully submitted and had an RFP approved for the same project.

Features

Requests for proposals allow bidders to highlight their experience and knowledge in an area through the proposal itself. The RFP response then determines whether or not the potential bidder will be invited to submit a sealed bid that contains the actual pricing associated with the project. Sealed bids are useful because they allow for all bidders to submit pricing to a potential customer in a confidential manner. Sealed bids are used to keep bidding results confidential until a winner is selected.

Pricing

With sealed bids there is the option of setting a minimum or maximum dollar amount. The reserve price ensures that a bidder does not submit a price too low which could result in the contract or bidder not being able to fulfill the project at the amount awarded. Request for proposals do not have reserve prices attached to them as an RFP allows for variations between bids, and bidders can make changes to the project scope. Therefore, because RFP responses are not all identical, no reserve price can be set.

References

• Food and Agricultural Organization of the United Nations
• HUD: Frequently Asked Contracting Questions