Decide: Request for Proposal or Request for Quotation
Request for Proposal (RFP)
An RFP is used for services or complex products where quality, service or the engineered final product will be different from each vendor that is responding.
Request for Quotation (RFQ)
An RFQ is used for commodities, simple services or straightforward/uncomplicated parts with little or no room for product or service differentiation between responding vendors. Negotiation points could include: delivery schedules, packaging options, etc.
Objectives of a RFP or RFQ
- Obtain detailed proposals in order to evaluate each vendors' response so that the best interests of your company are met on all fronts
- Leverage the competitive nature of the vendor selection process to negotiate the best possible deal
- Insure that the interests of all stakeholders within your company will be met and a consensus reached
- Puts your company in control of the entire vendor selection process and sets the selection rules up front
- Starts building the partnership between you and the vendor right from the start
Sections of the Request for Proposal or Request for Quotation
The RFP or RFQ should contain the following sections. Keep in mind, that each document will be different depending upon the type of company and product you are searching for. Tailor each section for your individual needs.
- Submission Details
Deadlines, mailing address of your company, contact person for questions and clarifications
- Introduction and Executive Summary
Write this section last after the entire document is finished. This is used to provide prospective vendors with a brief overview of your company and the requirements for your product or service.
- Business Overview & Background
Give a brief overview of your business, products and market sector that you cater to. This will help your prospective vendors understand what business needs you are trying to fill with the vendor selection process. Also provide important background information that will benefit the vendor when responding.
- Detailed Specifications
This should be the longest section of the document. For an RFP, it will contain the qualitative measures and requirements that will drive the vendor selection decision. For an RFQ this section should provide the quantitative measures that you will be looking for in the vendor's response. Example criterion includes:
- Product drawings
- Engineering tolerances
- Service levels
- Deliverables & Timelines
- Technical or Business Requirements
- Software functionality
- Hardware requirements
- Assumptions & Constraints
Any assumptions and/or constraints that the prospective vendors need to be made aware of must be listed here. Failure to be forthright and upfront with the vendor will open the door to renegotiation of the agreement at a later date and runs the possibility of straining the relationship you have with your vendor. Possible topics include: travel expenses, upgrade/modification costs, licensing rights, etc.
- Terms and Conditions
Any terms and conditions of the contract must be listed in order for the vendor to make a fair and honest response. These may include: financing options, contract length, renewal options, warrantees, delivery penalties, service levels, etc.
- Selection Criteria
The final section should be an overview of the selection criteria that you will be using to make your decision. Some companies prefer to keep this information totally confidential; while other companies believe this will help prospective vendors focus on what is important to your company.