Request for Proposal (RFP) and for Quotation (RFQ)
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 to selecting the best vendor at the best value for your company. Writing either is not difficult if you understand the objectives and function of the document.
Decide Which to Write
An RFP is used if quality, service, or the final product will be different from each vendor that is responding.
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.
The objectives of either document should include:
- Obtaining detailed proposals in order to evaluate each vendors' response so the best interests of your company are met on all fronts.
- Leveraging the competitive nature of the vendor selection process to negotiate the best possible deal.
- Ensuring that the interests of all stakeholders within your company will be met and a consensus reached.
- Putting your company in control of the entire vendor selection process and setting the selection rules up front.
- Building the partnership between you and the vendor right from the start.
Structuring the RFP or RFQ
The RFP or RFQ should be structured in a way that clearly and succinctly presents your needs to the vendor. Each document will be different depending on the type of company and product you are searching for, but there are some standard sections that should be included in any typical RFP or RFQ. Tailor each section for your individual needs:
- Submission details should include deadlines, your company mailing address, and a contact person for questions and clarifications.
- An introduction and executive summary should be the last section written after the entire document is finished. It provides prospective vendors with a brief overview of your company and the requirements for your product or service.
- A business overview and background should describe your business, products, and market sector. This will help prospective vendors understand the needs you are trying to fill.
- The detailed specifications should be the longest section of the document. For an RFP, it will contain the qualitative measures and requirements that will drive the selection decision. For an RFQ this section should provide the quantitative measures you are seeking in the vendor's response. Example criterion might include product drawings, engineering tolerances, service levels, milestones, deliverables and timelines, technical or business requirements, software functionality, and hardware requirements.
- Assumptions and constraints vendors need to be made aware of must be listed in this section. Failure to be forthright and upfront with the vendor will open the door to renegotiation of the agreement at a later date and the possibility of straining the relationship you have with your vendor. Possible topics include travel expenses, upgrade/modification costs, licensing rights, etc.
- 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, warranties, delivery penalties, service levels, etc.
- The final section should be an overview of the selection criteria 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 to Vendors
Finally, compose a cover letter and send copies of your RFP or RFQ to each of the vendors you selected during your search process. Make sure appropriate contact information is included in order to provide assistance to any vendor that needs it.