Odds are that you will be introduced to a request for proposal (RFP) at some point in your career. You may have to respond to an RFP or write one to facilitate a procurement process for your company. When that time comes, we want you to know how to write a request for proposal that will realize the best outcome.
Organizations distribute RFPs to outsource to prospective vendors when a product or service cannot be fulfilled inhouse. Sometimes an RFP is sent out as a form of protocol to keep vendor management fair and transparent, yet most often, an RFP process allows organizations to gain deep insight into vendor capabilities.
What is the Purpose of an RFP?
Before we get into RFP details, we will go over the purpose of an RFP. An RFP requests information from vendors that respond at will based on the vendor’s business objectives and service capabilities. Vendors respond to the RFP with a detailed sales proposal that describes service offerings and solutions for the issuing organization’s primary concerns. It is a sales pitch and a saving grace all in one document.
The RFP is just one of several procurement documents that organizations use to fulfill sales objectives and to build partnerships. Typically, an RFP response will provide more information than other procurement documents.
What are the Benefits of an RFP Process?
An RFP process provides several benefits to organizations. One of the main benefits to an RFP process is being in control of the price ceiling and price floor for the terms of the contract agreement. Most RFPs will contain a Terms and Conditions section that references pricing and nonnegotiable terms. You can influence how vendors price services in your RFP and save costs in the long run (vendors will offer competitive prices). Here are some other benefits of an RFP process:
- Increased vendor transparency. For government requests for proposals, information is open to view for the public. Often, vendors are aware of the competition, and will see the questions that competitors ask during the Q&A period of the process. Healthy competition is one of the best ways to control costs and to gain quality RFP responses.
- Detailed solutions. Your organization will gain extensive information about service vendors that can be referenced later – you have a better idea of which vendor would make a good partner for future needs. An RFP process allows your management team to understand vendor offering in greater detail prior to partnership, reducing risk.
- Quality sales pitches. Vendors spend a large hunk of time writing an effective proposal in response to an RFP that offers vendor differentiation because the expectations are high and there is a lot of competition. Most RFP response processes can only have one winner. The level of quality work that is provided in a finished proposal is a good indication of the quality of work that the vendor will provide in a partnership.
Competitive prices, service solutions, and vendor differentiation are all elements of an RFP response, and the only way to get this information in the best format is to create a good RFP.