If you have worked on a supplier’s side for a given length of time in a B2B business, you are likely accustomed to the term RFP. Many often while dealing with clients, procurement agents have received RFPs from their side whenever you showed interest in your client’s products and services. Used as an acronym for ‘request for proposal’, the RFP is a written representation consisting of a detailed overview of various costs and offerings from a range of vendors. Any organization willing to understand the rate at which products and services are being sold by several vendors can obtain the RFP. This particular document can aid any organization searching for enterprise-grade services with the rate charged for the particular services by several vendors at once. Participation of a particular vendor or a group in the RFP evaluation process will require him or the group members to answer a set of questions regarding the methodology of the manufacturing process, the cost of products charged by different vendors, and several other questions related to the sale of the services.
RFP undoubtedly plays a vast role in organizational software. Also, a significant number of people associated with receiving RFPs from clients know how this software is structured and operated. The procurement agents are well-aware of performing due diligence before sending out such requests to vendors, to make it easier for the vendors to serve at their best.
With such advancements in understanding the working principle of this software, there are still many companies who get the meaning of the software wrong. A significant problem plaguing with understanding the meaning of the modern RFP system is that it has become an umbrella term applied to RFIs, RFPs, and RFQs. Although the three of them share some similarities, each has a clear line of demarcation among them. Understanding the distinctions will help organizations conduct a more defined selection process as they search for their supplier base.
Here is a distinctive rundown of each document: RFP, RFI, and RFQ. Read on to know the difference.
RFI is the short form of ‘request for information’. It is a document requested and used by procurement subcontractors who have little or no knowledge about the market they are about to make an entry. The request for information is a preliminary written representation consisting of primary information about any topic related to the business marketplace. For instance, an organization does not have the required knowledge about CRM and it is searching for the maximum amount of information regarding the same. The organizational head can ask for an RFI where he would get enough information about the CRM and the related range of options in the CRM space.
The request for information document is more of a fact-finding document, which is why it allows buyers to ask open-ended questions to the vendors and help the buyers learn about the full offerings of the vendors. In a nutshell, the RFI will help buyers state broad business challenges faced by them as they enter into the marketplace to the vendors, and the vendors can respond within the context of the challenges. The vendors will do so by mentioning its position in the marketplace, showcasing its licensed product offers, and the fees they expect from the respective buyers.
Used as an acronym for a request for proposal, the RFP is a document asking suppliers to propose solutions to business requirements or problems of customers. RFP is usually followed by an RFI. You will never find an organization directly going to RFQ from RFI without getting processed through the RFP process. An RFP is a more detailed and defined way of stating the requirements of a business. The RFP contains much more specificity when it comes to explaining the business goals for a particular project. The document also maintains enough clarity while identifying requirements for the work being processed. The pivotal task of this document is to provide vendors with sufficient details for the proposal to propose a valid solution, yet it still gives the vendors a scope to squeeze in best practices to fulfill the requirements.
The RFQ is short for ‘request for quotation’. A company looking for enterprise-grade services gets the opportunity to drill down the exact required specifications. Since the RFQ deals with the most accurate requirements from the buyer’s end, there is no scope for the vendors to include creativity, unlike as done in the RFP document. The vendor is left with no flexibility to suggest the best practices, which is expected to deploy predetermined software solutions. Typically, the RFQ lists the requirements of a buyer in the form of a table where the vendors have to state if they can meet the requirements. Based on the answers thus given, the procurement subcontractors will decide to either proceed with the vendors or move on with some other supplier base.
Now you know the difference between RFP, RFI, and RFQ!