World-class procurement departments operate at about 20% fewer costs as compared to most average companies. However, for a company to achieve such extents of efficiency in the process of procurement, there must be a well-laid out framework of engaging suppliers. Such a structure includes specific critical procedures such as vetting.
At the heart of any effective procurement process is a procedure referred to as the RFP. Most organizations often use this Request for Proposal (RFP) technique, but hardly ever conceptualize its usefulness when handling suppliers.
Business owners don’t understand what is RFP. However, by laying out your company’s needs in an RFP, it’s easier to evaluate potential vendors on their capacity to deliver based on your organization’s objectives and goals.
What Is RFP?
Most organizations already use the RFP without even understanding its actual purpose. For numerous procurement departments, RFPs are part of the tedious project management process they must adhere to within the organization. What most procurement officers miss out on is the actual meaning and importance of RFPs.
RFP stands for, request for proposal. The request for a proposal within an organization is the formal request made by a company that asks the vendors to submit solution-based proposals. The RFP probes the suppliers to present bids on the exact needs their products and services can solve if integrated into the organization.
For the stakeholders in a company, the RFP helps create a competitive environment where potential vendors and suppliers present their respective proposals within a level-playing ground. Companies use the RFP as a way to communicate the open bidding approach the organization hopes to adopt.
Conversely, for the vendors, this is a chance to evaluate the potential client’s project descriptions before engagement. An RFP offers the vendors the opportunity to make an independent choice on who to work with based on the descriptive terms of contract between the vendor and the issuer.
What Is Included in an RFP?
An RFP covers certain fundamental information, which is necessary for the procurement process. Such vital information includes the issuing company’s background. The issuer also provides information on the respective lines of specialization in their business.
This background information is essential for potential suppliers to peruse through beforehand. Such information helps the vendors have a better understanding of the organization and the gaps that exist within the internal system.
Further, the RFP should include a laid down set of specifications that offer a description of the solution the firm is looking for from the various vendors. The issue of an RFP should also include the evaluation criteria for the bids. It’s also important that the RFP includes the requirements for grading for the shortlisted candidates.
Most of the organizations often also go a step further to offer a guideline to bidders. The guidance directs the bidders on the proposal preparation process. These guidelines should include the proposed format of submission and the standards each vendor must meet as a prerequisite for shortlisting.
How Does the RFP Process Work?
While the RFP is a formal document, there’s an entire procedure to it that entails the request for proposal process. Are you confused about what is RFP? The RFP process consists of nine critical steps.
1. Brainstorming
The process of developing an RFP for any organization involves a delicate balance of incorporating everyone’s views and concerns. As such, companies must focus on bringing together all the stakeholders in the process of brainstorming. The stakeholders include end-users, IT teams, finance teams, and any other partner who will likely feel the impact of the project.
The brainstorming process provides an opportunity for each of the parties to bring their ideas in the development of the RFP. This is a brilliant opportunity for the various teams to define the intended goal. The process of brainstorming also provides a chance to explain what success will look like in the end.
The brainstorming phase allows the teams to conceptualize what the perfect vendor ought to have. The step also offers a chance for the organization to define the actual needs and the gaps the successful vendor will bridge.
The brainstorming phase is essential because it also helps you determine the gap that your company is unable to fill internally. You’re writing a “help needed” ad, which means that the onus is on you to determine the anticipated skill sets.
2. Creation of a Meaningful RFP
Once you have the team in place, the next step ought to be the creation of a meaningful RFP. The idea is to ensure that the questions in the RFP speak to the specific needs in the organization. You want to grill the potential vendors in a way that will help you settle for the most qualified.
The creation of the RFPs should include essential questions that can help the organization decipher the supplier’s core capacity. You want to open up the vendors in a way that will help you make an informed decision in the end.
These are some of the queries that can help you develop a solid RFP.
a. Do You Have the Option of Free Trials?
Seeing is believing. Most times, vendors over-promise only to later under-deliver with excuses to boot. The best way to ensure that you get what you paid for is to request for a free trial. A free trial will set the organization at a vantage position to make an informed decision on the service provider.
b. Who Are your Competitors?
This question may seem intrusive, but it’s critical. You need to know that your future vendor is genuine about their position in the market. You’ll also get the opportunity to know about other possible vendors with the same capacity or better equipped to deliver.
Writing the RFP is never a one-template-fit-all kind of approach. Your needs and anticipated skill sets in a supplier may differ from another organization’s preferences. As such, the process of writing the RFP should never be limited to a specific approach.
3. Utilize Online Proposal Tools
You should, nevertheless, consider the various templates online that offer a guideline on the creation of the RFP. Such online models can help you piece together an RFP that will target the most qualified vendor. With a proposal tool, you can easily create questionnaires and track all proposal-related information with minimal hassles.
Proposal tools can be a blessing in disguise for greenhorn buyers and vendors with limited information on the procurement process.
4. Reproduce and Distribute
Now that the RFP is ready as a blueprint, it’s time to proceed to the distribution phase. This is a critical phase because you want to reproduce as many RFPs as possible to reach the intended target. If you’re going to get a decent response, you have to try and contact as many vendors as possible.
Distribution of the RFPs should, however, be based on your capacity to vet. You don’t want to waste too much time on the process.
5. Have a Reliable Feedback Channel
The reality of the RFP process is the fact that you are bound to get overwhelming responses from potential vendors. However, how these responses get to you is often an underlying concern for many organizations. Whichever the medium of feedback you settle for, ensure that it is fast and reliable
6. Evaluate Responses
The weight of the RFP lies squarely on the evaluation team tasked with receiving and assessing the responses. This phase may be overwhelming, to say the least, considering the pressure to fish out the best from the rest. The team needs to go beyond vetting to ensure that the shortlisted vendors meet the threshold of the “ideal candidate” as outlined in the brainstorming phase.
For most organizations, this phase involves disqualifying potential vendors on the premise of technicalities. You can opt for various techniques to help you narrow down your search.
Sometimes, the organization may use an RFI to help in narrowing down the shortlist. Such an approach ensures that you have a smaller shortlist by the time you send the RFP. A request for information (RFI) is a document that seeks to solicit general insights about the vendors, such as the services and the solutions they offer beforehand.
7. Final Shortlist
The initial evaluation presents you with the chance to narrow down your search. But the shortlist, on the other hand, is the last phase before the final stage. All the vendors at this stage ought to be serious contenders with the capacity to deliver.
Ensure that everyone who makes it to this stage has all the traits necessary to be the ideal candidate.
8. Negotiations
The issuer has the upper hand during the entire RFP process. As such, it’s at the negotiation phase that you must dangle the carrot.
Most vendors are more than willing to negotiate. Ensure that you push the best vendor in the pack to seal the deal at a price you are most comfortable with, based on the cost-benefit analysis.
9. Selection
Finally, you can now narrow down the search to your best bet. At this point, you’re sure beyond any reasonable doubt that the vendor will deliver. However, make sure that the ideal supplier meets all the stipulations.
Be courteous enough to inform the unsuccessful prospects about your decision. This is an essential part of closure in the RFP process.
10. Contract Signing
The RFP process begins with the issuance of a request for information and ends with an agreement. The signing of the contact is an indication of the pact between the vendor and the issuer.
Your Procurement Process May Experience Remarkable Improvements If You Utilize the RFP Tools
Most organizations only use the RFP process because it is procedural. However, once you understand what is RFP, your organization’s procurement process will never be the same again. The systematic process of shortlisting and selecting the most suitable vendor leaves nothing to chance.
Are you hoping to become a world-class procurement department? Sourcing for the most reliable proposal tools can help you get there.
Was this article useful? Read on for more handy content.
