DEFINITION of 'Request For Proposal - RFP'
A type of bidding solicitation in which a company or organization announces that funding is available for a particular project or program, and companies can place bids for the project's completion. The Request For Proposal (RFP) outlines the bidding process and contract terms, and provides guidance on how the bid should be formatted and presented. A RFP is typically open to a wide range of bidders, creating open competition between companies looking for work.
INVESTOPEDIA EXPLAINS 'Request For Proposal - RFP'
A Request For Proposal for a specific program may require the company to review the bids not only examine their feasibility , but also the health of the bidding company and the ability of the bidder to actually do what is proposed. The RFP may provide detailed information on the project or program, but can leave leeway for the bidder to fill in the blanks with how the project would be completed or program run.
A request for proposal (RFP) is a solicitation made, often through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals. It is submitted early in the procurement cycle, either at the preliminary study, or procurement stage.
The RFP presents preliminary requirements for the commodity or service, and may dictate to varying degrees the exact structure and format of the supplier's response. Effective RFPs typically reflect the strategy and short/long-term business objectives, providing detailed insight upon which suppliers will be able to offer a matching perspective.
Similar requests include a request for quotation and a request for information.
In principle, an RFP:
- informs suppliers that an organization is looking to procure and encourages them to make their best effort.
- requires the company to specify what it proposes to purchase. If the requirements analysis has been prepared properly, it can be incorporated quite easily into the Request document.
- alerts suppliers that the selection process is competitive.
- allows for wide distribution and response.
- ensures that suppliers respond factually to the identified requirements.
- is generally expected to follow a structured evaluation and selection procedure, so that an organization can demonstrate impartiality - a crucial factor in public sector procurements.
An RFP typically involves more than a request for the price. Other requested information may include basic corporate information and history, financial information (can the company deliver without risk of bankruptcy), technical capability (used on major procurements of services, where the item has not previously been made or where the requirement could be met by varying technical means), product information such as stock availability and estimated completion period, and customer references that can be checked to determine a company's suitability (including educational and military background of its employees on the project --- college graduates and those with advanced college degrees may add "value" from the bidder, as may an employee's military background [especially in a similar area] as the contract).
RFPs often include specifications of the item, project or service for which a proposal is requested. The more detailed the specifications, the better the chances that the proposal provided will be accurate. Generally RFPs are sent to an approved supplier or vendor list.
The bidders return a proposal by a set date and time. Late proposals may or may not be considered, depending on the terms of the initial RFP. The proposals are used to evaluate the suitability as a supplier, vendor, or institutional partner. Typically organizations follow a detailed vendor screening process to short list the vendors who should be invited for further rounds of negotiation. This screening process could either be vendor scoring models or internal discussions within the buyer organization. Discussions may be held on the proposals (often to clarify technical capabilities or to note errors in a proposal or in many cases to negotiate on the price). In most instances, only selected bidders may be invited to participate in subsequent bids, or may be asked to submit their best technical and financial proposal, commonly referred to as a Best and Final Offer (BAFO). Subsequent changes can be referred to as the Best and Revised Final Offer (BARFO).
Once both the parties i.e. a buyer organization and seller organization agree on the technical and commercial terms and conditions of the proposal, they could move on to next steps like contract signing, statement of work which would formalize the purchase transactions.
A request for quotation (RFQ) is used when discussions with bidders are not required (mainly when the specifications of a product or service are already known) and when price is the main or only factor in selecting the successful bidder. An RFQ may also be used prior to issuing a full-blown RFP to determine general price ranges. In this scenario, products, services or suppliers may be selected from the RFQ results to bring in to further research in order to write a more fully fleshed out RFP.
RFP is sometimes used for a request for pricing.
A request for information (RFI) is a proposal requested from a potential seller or a service provider to determine what products and services are potentially available in the marketplace to meet a buyer's needs and to know the capability of a seller in terms of offerings and strengths of the seller. RFIs are commonly used on major procurements, where a requirement could potentially be met through several alternate means. An RFI, however, is not an invitation to bid, is not binding on either the buyer or sellers, and may or may not lead to an RFP or RFQ.
A request for qualifications (RFQ) is a document often distributed before initiation of the RFP process. It is used to gather vendor information from multiple companies to generate a pool of prospects. This eases the RFP review process by preemptively short-listing candidates which meet the desired qualifications.
A request for tender (RFT) is more commonly used by government.
In Business Analyst World / Tender / Project, RFP is created by customer. They create specific requirements from their own research or conducted by other party. It contains all you (Business Analyst) need for proposal. The content in the RFP must be similar or contained in the proposal. If you have any question, usually there will be an event called "aanwijzing" in Indonesian habit. It is a event of question and answer between the customers with consultants regarding the needs of what is required, specification used and finally will be used as a reference to make an offer.
Other terminology related RFP or proposal is EULA, BoM and BoQ. You can see the article here. And don't forget about agreement, you can find article about MoU and LoI here. Maybe this article just an overview, but from my experience, every RFP is unique. The most important thing is you must understand the content, and aware that RFP can be updated or changed by the owner.