1. Money

Request for Proposal (RFP) and Request for Quotation (RFQ)

Step #3 In The Vendor Selection Process

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Now that you have analyzed your business requirements and completed your vendor search, you are ready to start the meat-and-potatoes of the vendor selection process. A well written Request for Proposal (RFP) or Request for Quotation (RFQ) is the key for selecting the best vendor at the best value for your company. Writing a RFP or RFQ is not difficult if you understand the objectives and function of the document.

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.

  1. Submission Details
    Deadlines, mailing address of your company, contact person for questions and clarifications

  2. 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.

  3. 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.

  4. 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
    • Milestones
    • Deliverables & Timelines
    • Technical or Business Requirements
    • Software functionality
    • Hardware requirements
  5. 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.

  6. 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.

  7. 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.

Distribute the RFP/RFQ to Selected Vendors

Finally, compose a cover letter and send two copies of your RFP or RFQ to each of the vendors that you selected from your search process. Make sure that appropriate contact information is included in order to provide assistance to any vendor that needs it.

Download an RFP/RFQ Template

Next Step: Proposal Evaluation and Vendor Selection

  1. About.com
  2. Money
  3. Operations / Technology
  4. Managing Vendors
  5. Successful Vendor Selection
  6. Request for Proposal (RFP) and Request for Quotation (RFQ)

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