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Procurement Processes (RFT RFQ RFP RFI) by Suki Mhay & Calum Coburn Detailed explanation to RFT, RFP, RFQ, RFI. Advice to 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. In practice you will find these phrases used interchangeably, as many organisations dont understand the differences sufficiently. Many procurement or purchasing departments use these purchasing processes to write the rules of the buying game, trying to side-step negotiation. There is a great deal that suppliers can do to improve their position. As a starting point, we suggest that sales professionals understand the differences between these processes. We would be glad to talk with both suppliers and buyers wishing to get the best deal from 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, RFIs gather information to help decide what step to take next. RFIs are therefore seldom the final stage, but instead are often used in conjunction with the other 3 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 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

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

Request for Quotation (RFQ)

RFQs are best suited to products and services that are as standardised and as commoditised as possible. Why? To make the suppliers quotes comparable. 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 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 deal impacting the analysis process as determined by the buyer. Supplier decisions are typically made following a comparison and analysis of the RFQ responses. 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 an 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 makes it challenging for the supplier to propose a solution. This is not the best use of a RFT. RFTs should only be used when the buyer is clear on their requirements, and is also clear on the range of possible solutions that might fit the buyer's needs. A RFT is not a very time or cost efficient method to source supply due to its lack of defined business requirements and open invitation for suppliers to respond.

Request for Proposal (RFP)

An RFP is a 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. Indeed, the creativity and innovation that suppliers choose to build into their proposals may be used to distinguish one from another. 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.

While specific data, offerings and quotations may be sought, questions about the following will make up a significant portion of both an RFT an RFP: The specific items on which the suppliers are proposing Business requirements Performance measures Information Ideas Instructions on how to reply Due date 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 having an organisational infrastructure to support it. Else theyll be used as a token exercise to keep your department happy, and will be circumnavigated in practice. Whilst The Negotiation Experts does offer clients some limited advice in this area, we do specialise in negotiation skills training and negotiation consulting services. 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 buyers competitive position and power before participating. Not doing this can end up costing you the business, or worse.

Finding outside resources: the RFI, RFP/RFQ approach

Background
A few years ago, when much of the world was running on Internet time, emphasis was on speed to market rather than on the value of careful, time-sensitive analysis. Today, focus has returned to tried and true business practices. Most businesses find the need to outsource some of their work occasionally. Outsourcing doesnt necessarily mean sending work to India or Asia, it can also refer to the act of hiring temporary assistance from any organization that is not a part of your firm. What is the best way to identify strategic outsourcing partners? How can you ensure that true partnerships, not just convenient vendor relationships, are achieved and maintained? Is outsourcing just a way to find inexpensive labor, or is it an important way to manage your work load?

Definitions
One time-tested process to assist in choosing an outsourcing partner is the use of a Request For Information (RFI) or a Request For Proposal (RFP). Both of these documents can be based on a replicable, company-standard outline, and are very effective as information-gathering tools. Only one of the approaches is a decision-making tool, however. The difference between the two documents is quite important: An RFI implies no commitment need be made to any responding party. It requests information you need to evaluate whether you might want to work with a particular company, or might want to do a particular project. An RFP (or RFQ request for quotation) implies the probability of a commitment being made to one or more responders. It will include the conditions of your acceptance, the return response format (so all replies are easy to review), confidentiality issues, evaluation criteria, etc. An RFP response should be incorporated into the final contract you sign, as the more specific you make your RFP, the less you will have to negotiate later. It is a good idea to hold a vendor conference shortly after issuing an RFP, so that all responding parties have the same information and get the same clarifications. Simplexity recommends a standard outline of items that should be included in an RFI or RFP. Please see the Articles & Opinions section of our site. Generally, RFIs or RFPs are needed when the dollar amount of the project exceeds the amount that can be reasonably approved by the highest-level manager in your area. Additional senior management approval may be required as well. It takes significant time and effort on the part of a responding party to complete an RFP in a quality manner, so make sure you are serious about your project before you issue one. If you arent, or if you dont have the funding yet, then issue an RFI. In most cases, responses are confidential because they contain competition-sensitive information

Implications to your business

Outsourcing can provide value to your business initiatives in many ways. Most companies that decide to outsource some or all of their projects or operations do so for one of the following reasons: 1) The project requires skills that currently do not exist in your organization and may not be needed again once the project is completed. 2) There is a need to refocus the business on its core competencies. 3) Your competition is very active, your market is quickly expanding or contracting, your cost of business is increasing unpredictably, or some other factor is putting unusual pressure on your core business imperatives.

4) When there is a need to lower costs, you may achieve some savings with outsourcing if you handle it carefully. Although outsourcing cannot guarantee lowered costs over the long term, it most certainly will reduce short-term direct expenses for facilities, salaries and benefits, training, and capital purchases. 5) When you are in a position of rapid product introduction, outsourcing can help reduce time to market. When you outsource intelligently, you can get more work done in parallel, rather than letting work become serially bottlenecked inside your organization. 6) Outsourcing can provide an opportunity to bring critical or hard-to-find skills on board without a drawnout recruiting and hiring process. Be careful not to underestimate the time and skills needed for managing an outsource relationship. At times it will need the sameor moreattention you would provide an internal group doing a similar function.

Conclusion
Use any of the document titles with an understanding of what the responding party will consider the degree of commitment to be. Vendors always know the difference between the RFI and RFP, no matter what you call it. An RFI tends to be pretty general, and usually provides a wide range of responses that are difficult to objectively compare. RFIs are generally used to find a suitable set of vendors to whom to issue an RFP. You might issue an RFI to ten vendors to whittle down the list to three, for example. An RFP, on the other hand, is so specific in its detail that multiple responses, when obtained from the vendors, are easy and objective to evaluate. In fact, many savvy managers will create the evaluation matrix they will use for the RFP first, and then create the RFP. RFPs should be architected so they can be included as a part of the final project contract.