What is Request for Proposal (RFP)? A Definitive Guide
Need certain business services, but don’t know where to turn? In many cases, all you have to do is ask! A Request for Proposal, or RFP, is an official request to acquire products or services that your company requires for a specific project.
Interested in getting the best value for your company? Want access to skilled, short-term talent that’s beyond your core workplace capabilities? In both cases, an RFP can provide immense benefits for your company.
Today, we’re sharing how the RFP process works. Read on to learn how to create one and how it can help propel your company to new heights.
What is an RFP?
In short, an RFP is a document that a business, non-profit, or government agency creates and submits for a project.
Within the RFP, they’ll list specific details about the project, along with the steps that require assistance from outside sources to complete. Then, they’ll request bids from suppliers who are capable of providing that support.
If a company can provide the requested products or services, they’ll submit what’s known as an RFP response. As individual bids come in, the agency that created the RFP will evaluate them against their scoring criteria to determine the most qualified partner for the job.
Why Should You Complete One?
Do you need to complete and submit an RFP for every business requirement? No.
Yet, what happens if there’s a project you want to pursue, but you don’t have the resources on hand to complete it fully? For instance, you might be looking for a skilled developer who can help you perform a countless number of web services, but you lack an in-house IT expert who can take on the project for you.
Rather than losing out on the opportunity, you can issue an RFP to fill in the gaps and fulfill any unmet needs. That said, can’t you just reach out to individual suppliers on your own? Why go through the RFP process?
The simple answer is that it gives the project structure. When you organize and detail your needs into an RFP, you’re better able to gauge each supplier’s level of understanding around your project. You also create a benchmark against which you can measure your project’s success further down the road.
In addition, there are many entities, including government agencies and non-profit organizations, that are required to use RFPs to give legitimacy and transparency to their projects. An RFP reveals that a company is taking project goals and the supplier selection seriously.
Understanding the RFP Process
While your company might vary these procedures a little, most business leaders follow the same basic process when creating and issuing an RFP. Let’s take a look at the RFP process to most commonly follow.
Establishing Scoring Criteria
It might seem backward to start from the end, but you need to establish how you’ll ultimately select the winning bid. In other words, which factors are the most important and valuable to this project?
Is it a supplier’s pricing estimate? Or, are you more concerned with the unique skill set they can offer or their past performances and references? Working with your team, define these criteria before you publicly release your RFP for bids.
This helps you weed through the proposals that miss the mark right out of the gate. This way, you can quicken the selection process, easily rank qualified suppliers, and begin work sooner.
Formatting the RFP
Within the body of the RFP, you’ll identify your needs for the project. While each RFP will read differently, a few of the most common categories to write about include:
- The history and background of your company
- A detailed project description
- The background of the project and the results you expect
- The resources you need to complete the project (materials, tools, software, labor)
- The project budget
- The anticipated project timeline
- Defined project milestones and deliverable due dates
In addition, you can also include supplemental information in your RFP. If you have specific questions for suppliers to answer or extra details you want them to provide, list them there.
The RFP should also clearly state the deadline for proposal submissions, as well as specific steps to follow when it’s time to submit. Some businesses will require suppliers to mail their bids in, while others (such as government agencies) will use online systems.
Sharing Your RFP
Once you’ve taken the time to complete your RFP, it’s time to get the word out! There are several outlets and platforms you can use to do so.
First, you can post the link to the RFP on your website. You can also share it on your social media pages or distribute it to trade news outlets. Once a supplier decides to bid on your project, they’ll review the requirements and provide an official proposal response in the format you’ve requested.
This response will outline the approach they propose to take to meet your needs. In most cases, suppliers will provide both a written technical proposal and an accompanying pricing proposal that includes products, labor, and travel incurred.
Selecting a Winning Bid
When the RFP deadline has passed, it’s time to review the submissions against your previously-defined evaluation criteria.
Once you select a winning supplier, you can still continue negotiations in many cases. Go through each line item and review the associated price. Then, negotiate to lower the bid even further.
Many companies will issue a final call to their top few suppliers, asking them to submit a “Best and Final Offer” proposal at their lowest cost.
Navigating the RFP Process With Ease
While an RFP can benefit your business in many ways, it can be overwhelming at first, especially to a new small business owner.
Knowing when to use one and how to structure it can set your business up for easier purchases and greater networking opportunities. In the future, if a growth opportunity arises that’s outside of your direct wheelhouse, you’ll know how to solicit the resources you need to move forward.
The RFP process is only one important business aspect you’ll encounter as your company gets off the ground. If you need additional support with other common business services or financing, we’re here to help.
Review our full selection of business services today and let’s grow your business and take this next step together.