Choosing RFI RFP RFQ as a sourcing tool

The choice of which document to use: RFI RFP RFQ for which type
of sourcing project depends on the desired outcome – is it
information, a firm proposal or a detailed price bid that is needed.

A Request for Information (RFI) is a method of collating

information from different suppliers prior to formally sourcing
products or services. It is normally used where there are many
potential suppliers and not enough information is known about
them. It is a structured process where a long list of potential
suppliers can be reduced to a short list of those organizations that
are willing and able to fulfill your requirements.

An RFI should include

 Table of contents
 Introduction and purpose of the RFI
 Explanation of scope
 Abbreviations and terminology
 Template to complete
 Details of next steps - RFP or RFQ

Why use an RFI?

 To compile detail about potential suppliers and their capabilities
 To advise potential suppliers that you intend to source this product or service
competitively
 To show that you are acting fairly and including all participants
 To gather information in a way that decides the next step

A Request for Proposal (RFP) is a formal method of receiving

detailed and comparable proposals from different suppliers for a
defined product or service. It is a comprehensive document that
should provide all the required information needed to make an
informed purchasing decision.

Preparation of the RFP is important and time spent at this stage will
ensure good responses. Often an information meeting is held to
 brief suppliers and answer any questions. An RFI may be used prior
to an RFP if needed.

It should include at least

 Table of contents
 Confidentiality or non-disclosure agreement
 Basic information about the client and the process
 Extent and scope of the project
 Proposed time frame
 Detailed design information and requirements
 Commercial requirements
 Budget
 Evaluation and award criteria
 Submission instructions

Why use an RFP?

 You are notifying suppliers of your intention to buy certain products or services.
 You get a formal submission from the chosen suppliers to enable comparison of the
proposals
 You show that you have a formal and fair process without favoring a preferred supplier.

A Request for Quotation (RFQ) is a competitive bid document

used when inviting suppliers and subcontractors to submit a bid on
projects or products. An RFQ is suitable for sourcing products that
are standardized or produced in repetitive quantities. A technical
specification must be provided as well as commercial requirements.
Sometimes an RFQ can be preceded by an RFP where the shortlisted
suppliers are requested to provide a more detailed price quote.

The RFI, the RFP and the RFQ are all tools that can be used
separately or in combination to achieve a successful sourcing
solution.

What's the Difference Between RFT RFQ RFP RFI?

bySukiMhay&Calum Coburn

Detailed explanations to RFT, RFP, RFQ, RFI. Expert advice for both buyers and
sellers on how to get the most from these procurement and purchasing
processes.
Clients and newsletter readers have asked that we demystify the meaning behind each of the following
procurement terms: RFI, RFQ, RFT and RFP. These processes have steadily grown in popularity in
procurement and purchasing, especially amongst larger buying organisations. Sadly proper negotiation
training is often not given on choosing the best process, and in how to effectively use each process. As
a result, in practice you will find these phrases used interchangeably, as many organisations don’t
understand the differences sufficiently, resulting in the buyers missing negotiation advantages. We
hear procurement or purchasing clients talk about how their departments use these purchasing
processes on our purchasing training for buyers to ‘write the rules’ of the buying game, to successfully
side-step negotiation. There is a great deal that suppliers can do to improve their position. As a
starting point, we encourage both our procurement and sales professionals to get to grips with the
differences between these processes:

RFI – Request for Information

An open enquiry that spans the market seeking broad data and understanding.

RFQ – Request for Quotation

An opportunity for potential suppliers to competitively cost the final chosen solution(s).

RFT – Request for Tender

An opportunity for potential suppliers to submit an offer to supply goods or services against a detailed
tender.

RFP – Request for Proposal

Sometimes based on a prior RFI; a business requirements-based request for specific solutions to
the sourcing problem.

Request for Information (RFI)

As the name suggests, procurement uses RFI’s to gather information to help decide what step to take
next before embarking on negotiations. RFI’s are therefore seldom the final stage, but instead are
often used in conjunction with the other three requests detailed in this article.

An RFI is a solicitation sent to a broad base of potential suppliers for the purpose of conditioning,
gathering information, preparing for an RFP or RFQ, developing strategy, or building a database which
will all be useful in later supplier negotiations about:

 The suppliers, including: facilities, finances, attitudes, and motivations

 The state of the supply market
 Supply market dynamics
 Trends and factors driving change
 Alternative pricing strategies
 Supplier competition
 Breadth and width of product/service offerings, by supplier
 Supplier strategic focus, business, and product plans

Procurement may use RFIs to include a detailed list of products/services for which pricing is
requested. The pricing should be used for comparative purposes for later negotiation, not as the basis
of negotiators buying decisions. Through analysis of RFI responses, strategic options, lower cost
alternatives, and cost reduction opportunities may be identified.

Request for Quotation (RFQ)

RFQ’s are best suited to products and services that are as standardised and as commoditised as
possible. Why? Procurement want to make the suppliers’ quotes comparable before negotiations
begin.
An RFQ is a solicitation sent to potential suppliers containing in exacting detail a list or description of
all relevant parameters of the intended purchase, such as:

 Personnel skills, training level or competencies

 Part descriptions/specifications or numbers
 Quantities/Volumes
 Description or drawings
 Quality levels
 Delivery requirements
 Term of contract
 Terms and conditions
 Other value added requirements or terms
 Draft contract

Price per item or per unit of service is the bottom-line with RFQ's, with other dimensions of the
negotiation deal impacting the analysis process as determined by the buyer. Supplier decisions are
typically made by the procurement department following a comparison and analysis of the RFQ
responses for negotiation benchmarking advantage.

RFQs are typically used as supporting documentation for sealed bids (either single-round or multi-
round) and may be a logical pre-cursor to an electronic reverse auction.

Request for Tender (RFT)

An RFT is a procurement open invitation for suppliers to respond to a defined need as opposed to a
request being sent to potential suppliers. The RFT usually requests information required from a RFI.
This will usually cover not only product and service offerings, but will also include information about
the suitability of the business.

It is not unusual for a buyer to put out unclear or vague business requirements for an RFT. This lack of
clarity on behalf of the procurement department can make it challenging for the supplier to propose a
solution. This is not the best use of a RFT. RFT’s should only be used when the buyer is clear on their
requirements, and is also clear on the range of possible procurement solutions that might fit the
buyer's needs, giving the buyer a negotiation advantage.

A RFT is often not a very time or cost efficient method for procurement to source supply due to its lack
of defined business requirements and open invitation for suppliers to respond. Without proper
procurement training however, too many buyers issue RFQ's that are in reality RFT's.

Request for Proposal (RFP)

An RFP is procurement's solicitation sent to potential suppliers with whom a creative relationship
or partnership is being considered. Typically, the RFP leaves all or part of the precise structure and
format of the response to the discretion of the suppliers. In fact, the creativity and innovation that
suppliers choose to build into their proposals may be used to distinguish one from another. Later
negotiations tend to take more time and be more wide reaching in their impact on the buyer's
business.

Effective RFPs typically reflect the strategy and short/long-term business objectives, providing detailed
insight upon which suppliers will be able to offer a perspective. If there are specific problems to be
addressed in the RFP response, those are described along with whatever root cause assessment is
available.

With good procurement training your RFP and RFT should seek specific data, offerings and quotations,
and also seek specific questions about the following to assist your later negotiations:
  The specific items on which the suppliers are proposing
 Business requirements
 Performance measures
 Information
 Ideas
 Instructions on how to reply
 Due date
 Technical and other training
 How will we evaluate how feedback will work
 Describe the process for selection
 Request for cost breakdown (sometimes)
 Communication: cover letter (sets the stage), calls in advance
 Who to contact with questions
 Addressee - chosen carefully

Advice
Buyers: to correctly implement these processes requires a level of negotiation skills and having an
organisational infrastructure to support it together with some procurement negotiation training. Else
they’ll be used as a token exercise to keep your department happy, and will be circumnavigated in
practice. While The Negotiation Experts does offer clients advice in this area, our focus is in sales,
procurement negotiation training, and other negotiation courses.

Sellers: how and 'if' you participate in these processes is the first question you need to address. If you
have a company policy, be sure to examine your and the buyer's competitive negotiation style,
position and power before participating. Not doing this can end up costing you the business, or worse:
you could win unprofitable business.

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What's the difference between an RFI, an RFP, and

an RFQ?
A Request for Information (RFI) is used when you think you know what you want but need more information from
the vendors. It will typically be followed by an RFQ or RFP.
A Request for Quote (RFQ) is commonly used when you know what you want but need information on how vendors
would meet your requirements and/or how much it will cost.
A Request for Proposal (RFP) is used when you know you have a problem but don’t know how you want to solve
it. This is the most formal of the “Request for” processes and has strict procurement rules for content, timeline and
vendor responses. The appendices in the Guide to Successful Software Acquisition provide templates for this
approach.