10 Additional Answers
Ok call me crazy be we avoid all of these like the plague, maybe not avoid but buck the system... Most RFx are designed to pit suppliers against each other and educate the consultants/IT pros for free.
Since your solutions are unique and can't be put into an apples to apples comparison (if they aren't take a good hard look at your marketing team), you require far more buy in from the RFx'er than just a list of questions, get an appointment with the company pick their brain (not the time to sell).
If you are going to make a legitimate shot at the business because it it a big enough opportunity, you need to act like an insider. Develop a inside champion, I guarantee the competition is not doing it.
(Health Economics/Public Policy, Richard Hom Consulting)
RFP - Client has a business problem. The bidders are proposing their possible solutions to the problem. Client gets to evaluate and approve bidders on factors other than just the 'lowest' price. This also spreads the political grief for the Client if the project goes south. If you see an RFP, you can be assured that there are many stakeholders involved.
RFQ - Client generally knows what the problem and is looking for bidders who can provide a concise solution and bid price. Sometimes these are things rather than problems and are frequently decided on price.
RFI- Client doesn't or probably doesn't know there is a problem and is looking for someone to help them identify the problem. Usually a winning RFI bidder may be the favored vendor to compete for a RFP.
All of the above are process proven paradigms to acquire goods and services and are usually offered by larger corporations and most governmental agencies.
(Director, Lennex Consulting)
Hi Chris, I see that Richard has done an excellent job on the criteria for what instrument a client may use in a given business situation, I will detail below my experiences to add some context to the commercial, legal and personal agenda's of each.
Genrally speaking the RFQ is the most bankable document for the parties that includes an offer to purchase and sell.
From my experiences in and around the mining sector, RFP's (Request For Proposals) are used to assist in budget picing projects, feasibility studies and to make high level but general assessments of suppliers capabilities and not necessarily infer an intent to purchase in the near term.
RFQ's tend to be more prescriptive and provide a level playing field in terms of their use as a tool to evaluate suppliers good and services and should be constructed such that they can be executed as a contract. Legally, your submission will be a formal offer to supply at the price detaild in your submission. An RFQ is usually triggered by a business need to purchase.
I've seen the RFI used in corporate profiling of suppliers to allow companies to maintain a register of supplier capabilities, which include non transactional details such as e-commercial capabilities, insurance cover, history of litigation etc etc.
Hope this helps, Steve
BTW, Alex's point is well taken. Seller beware!
I will throw away an RFP if I suspect it's a waste of time, tool to start a bidding war between vendors, exercise in due diligence to comparison shop against a prefered vendor in order to drive their price down, or written by the purchasing dept which tends to focus on specs that are not important to the end users (a recipe for low user adoption).
In addition, I have a rule that the number of pages in the RFP be proportionate to the size of the deal (ie, big RFP + small deal = don't bother).
One also needs to beware of 'consultants' putting out RFPs for competitor analysis - they might be working for one of my competitors and not a legitimate buyer!
(Vice President - Channel Development, Phone.com)
I would comment further to those already made. An RFI is indeed used when the subject area is wide-open and no final decisions for direction have been made. As such, an RFI is generally not expected to produce a firm quotation and in fact may include a statement that an RFP will be issued to appropriate vendors subsequent to the RFI if the determination is made to move in that direction. RFIs are the broadest of the three tools. RFPs do elicit creativity, whereas RFQs are strictly based on price. An RFP may also use an evaluation tool such as a Weighted Factor Matrix that considers the relevancy of specifically predetermined criteria. RFQs generally consider whether or not the response is valid and then base the decision on price primarily.
It is also interesting to note that formal procurement documents are used worldwide and not always called RFI/RFP/RFQ. For example, I have responded to and consulted on 'Tender Offers' and other similar instruments internationally. Most of these tend to fall into the RFP category although the terms are often used loosely.
On last comment is that I strongly believe in the use of an RFP when consulting for an end-user client. Many times, the client has not done a thorough needs analysis and the process of creating an RFP oftentimes forces the organization to think through what it really needs. The same is true regarding the creation of an evaluation team and the evaluation criteria that are to be used in narrowing down the field to the Best and Final Offer (BAFO) stage.
These acronyms originate with IBM terminology from decades ago, with the quotation request as the final stage after the other info has been requested during the supplier selection and assessment process.
(Director of Client Operations, Ziff Davis B2B Focus, Inc.)
Thanks for the answers
In Government contracting an RFQ is used for acquisitions that are under the Simplified Acquisition Threshold (SAT)which is currently $150,000 and an RFP is used for acquisitions that are over that amount. See Federal Acquisition Regulations (FAR) Part 13 for simplified acquisition procedures (under $150,000)and FAR Part 15 for contracting by negotiation (over $150,000).
Ok, this is a question, but I feel that having seen the answers, there has to be a practical example that hopefully one of these can provide. I'm certain we are not the only org that is stuck with this problem, if you can bear with me.
Some good analysis above, but I am still confused on helping our organization the process to use. The problem lies in the stage at which the costs are provided. My company simply do not know the estimated cost to replace a system, and therefore we cannot budget. But if we use the RFP process (since this appears to be the most appropriate one to obtain the real costs), but are not ready because we need to go back with the figures to request funding, how are we able to proceed?
Basically, my company would like to replace an in-house application that is archaic, and requires a web interface, and full redesign on the backend. I have been asked to obtain the estimated total cost to do this.
However, the problem is I do not know if any companies are willing to provide this cost upfront to us if we used an RFI? The reason I was thinking of doing an RFI rather than an RFP is that hopefully we would be able to obtain approximate cost fo the project, and therefore be able to request appropriate funding, in advance of engaging potential vendors in an RFP. I'm not sure if an RFI is used like this, or whether there is another mechanism to obtain a cost? It doesn't appear to be the proper use for the RFI, but I do not see how we can go ahead with an RFP.
Whilst I can create an RFP immediately to list all the functional requirements, however, I feel we would not be ready in engaging the vendors, since in an RFP potential vendors would provide a price for their full solution, and they would expect a contract negotiation pretty soon after.
That would be fine if we knew what to budget for, because we could then be ready to finish off the RFP and progress to a contract. However, because we do not know the cost upfront, we would end up receiving the vendor quotes before we knew how much we could afford. Example: If the bids come in and is much higher than expected (say $1M, instead of $100K), we would need to either trash the idea, or go through to request additional finance for the project before we could engage in vendors.
We would not even be able to shortlist any vendors, and infact hold up the natural RFP process which is to progress to a contract.
Does that make sense to you? Its sort of a catch 22, in that we cannot realistically send the RFP until we know the price we can affort (and can get funding approved before we begin), and if we send RFP without knowing the expected cost, we could end up putting the vendor off for a long time after the RFP before we get to a contract.
I just dont want to potentially violate business etiquette, but we do need to know what the costs are for a new system.
Any advice would be appreciated!
A request for proposal (referred to as RFP) is an early stage in a procurement process, issuing an invitation for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. The RFP process brings structure to the procurement decision and allows the risks and benefits to be identified clearly upfront.
A request for quotation (RFQ) is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services. RFQ generally means the same thing as IFB (Invitation For Bid).
An RFQ typically involves more than the price per item. Information like payment terms, quality level per item or contract length are possible to be requested during the bidding process