A well-executed request for proposal (RFP) is an absolute necessity in the hands of a procurement professional. Its basic function is to solicit bids for the product or service you want to purchase, but if done right, an RFP can do much more. It can better inform you in your decision-making and ensure that you get the best return on investment possible. If you don’t have a streamlined system for issuing and using them, you might not be getting the most out of your RFPs. Here’s a look at the entire process, along with some tips about how to better use RFPs in your procurement process.
What is an RFP?
An RFP is the procurement professional’s official notice to bidders that outlines the requirements for a purchase. In it, you will give a detailed list of requirements, pose questions to the bidders, and present your criteria. Bidders will submit proposals based on that information, which will include answers to your questions and a confirmation about whether or not they can conform to your stated criteria.
Once you receive the bidder’s responses, you will be able to analyze them and develop an informed analysis of your options. RFP’s are an important tool that helps the procurement process run smoothly. Used efficiently, they create an atmosphere where you’re in control of the purchase because you’ll have a clear view of the most competent providers and viable solutions.
Remember, the better your RFP, the better chance you have of attracting qualified vendors and proposals.
Preparing the RFP Efficiently
The preparation stage of an RFP is important, because if you get it right the first time, it will reduce the project timeline and enable you to make the best purchasing decision. Here are some general principles you should adhere to in a properly prepared RFP:
- It should clearly outline the specifications of the project requirements.
- It should make it easy to later compare vendors, products, services, and costs.
- It should enable you to make an informed decision.
- It should allow vendors to interact with you before you make a purchase commitment.
- It should clearly state the terms and conditions of the contract.
- It should be associated with a firmly established evaluation criteria.
- It should allow for outside solutions that you may not have considered.
There are typically 12 sections that go into an RFP, and each one serves an important purpose. Here is a brief outline of a typical RFP.
- Project Overview
In this section, you should briefly describe your problem and suggest a solution. But leave it open because vendors may propose a solution you haven’t considered. For example, if you want a new marketing campaign proposal, explain why your current one isn’t working so vendors will gear their proposals to your specific issue.
- Talk About Your Company
Here, you will to give vendors an idea of your company’s background and its values. For instance, if you are considered cutting edge in your industry, that knowledge will impact how vendor’s put together their proposals.
- Outline the Project and Its Goals
The more details of your project you provide to vendors, the better their proposals will be. You should not only outline your objectives, but also provide quantitative measurements that will demonstrate whether or not the objectives are met. For example, if you’re hiring a firm to create a marketing campaign, give specifics about what you want it to accomplish and how success will be measured. For instance, do you want it to further your brand? Increase sales?
- Define the Deliverables
Here’s where you’ll give details about the scope of the project and its expected deliverables. You will need to outline exactly what you are hiring a vendor for and provide sufficient details. For instance, for the marketing campaign project, you might include SEO, content writing, pay-per-click ads, keyword research, and website refinement. If you are asking for bids for hard products, be sure to include detailed specifications of what you’re looking for.
- Project Timeline
You likely have a timeline you need to adhere to, and vendors need to understand that in order to determine whether or not they can meet the requirements. Be specific in this section of the RFP, and tell vendors exactly when you need the finished product or service.
- Point of Contact
This lets vendors know who they will work with while completing the project. If you’re the only contact for the project, state that. If there are other decision makers involved, it’s up to you if you want to disclose that up front or save it for the negotiation stage.
Because you’re putting your RFP out for bids, you won’t need to get specific with your budget, but you should give vendors a range so they can design their proposals around it. This will allow you to receive more targeted proposals that will fit within your parameters. If you fail to give vendors an idea of what you want to spend, it could result in a bunch of bids way out of your range, which is a waste of everyone’s time.
- Post Project Support
If you need ongoing support from the vendor after the project is officially closed, you’ll need to outline those needs in this section.
- Selection Criteria
It’s here that you’ll define what criteria you’ll use to select your vendor. Because each bidder will have different strengths and capabilities, you want them to focus on what matters most to you for the project. For example, in the marketing RFP we used in our example, some vendors will excel in price, others in quality, and others on fast delivery. Some of them might work solely in-house, while others use subcontractors. By making your criteria clear, vendors should submit proposals that will be easier to compare.
Any specific items you’d like to see in the proposal can be listed here, such as a cost breakdown, implementation plan, etc. Also, tell how you want vendors to submit their proposals: in PDF files, MS Word, hard copies, or via a bid submission system. Do you want them to be signed by a particular person in the company? If so, will you accept a digital signature?
- Deadline and Selection Process
In this section, you’ll state the timeline for proposal submission. Include the initial deadline, then outline the selection process and provide dates for semifinalist selection, interviews, and the final selection.
- Individualized Requests
Of course, you may require more information for your project, such as detailed information about each vendor’s experience in the area, a list of references, or a list of everyone who will be working on the project. This is the section where you outline those requests.
Review the RFP
Now that you have a working document, it’s time to review it with everyone involved in the project to get their input. Make updates and revisions as needed.
Get the Necessary Approvals
If you need approvals before distributing the RFP to vendors, now is the time to get them. Keep in mind that you may have to make some additional revisions at this point.
Once the RFP has the approval of everyone involved and all the revisions have been made, it’s time to distribute it to vendors and ask for bids. Depending on how your department functions, you may need to hold an RFP bidders conference or simply accept the proposals as outlined in the criteria section of the document.
Evaluate the Proposals
The next step of the RFP process is taking all the proposals you’ve received and reviewing and evaluating them against your stated criteria. To do this, you should use a predefined scoring system that looks at each proposal and determines which requirements and priorities it meets for criteria, degree, and priority.
For each category, you need to determine if the vendor met the physical, service, pricing, delivery, installation, terms and conditions, warranties, references, abilities, and other intangibles that are important to you.
Next, you’ll use a point system to evaluate how well the proposals met your criteria. You can use a point range of 1-5, with 1 meaning the vendor did not meet the requirements and 5 meaning they fully met them. Do this for each vendor.
Now it’s time to evaluate your priority rankings. Evaluate each of your priorities and determine which of them you can compromise on and which you can’t. Then compare that with the proposals to determine which vendors best are able to fulfill your priorities.
Select the Winning Vendor
Finally, after you’ve reviewed all the proposals, it’s time to select and award the vendor whose proposal best meets your needs. Use the RFP to create a statement of work, and notify the losing bidders that the RFP process is closed.
For procurement professionals, a well-executed RFP can make the difference between a process that flows and one full of problems. If your system isn’t honed, consider the process listed above and see if you can streamline your procedure.