eSourcing – Request for Proposal (RFP): Definition

Request for Proposal (RFP)

An RFP (Request for Proposal) is an eSourcing event in which a company or organization announces that funding is available for a particular project or program, describes the project’s or program’s needs and asks for proposed solutions from qualified vendors. It is usually the second step after the vendor qualification process (optional RFI) and represents a more product/service specific exchange of qualification information between buyers and suppliers.

The RFP, which has become an increasingly common tool for procurement departments, allows the buyer to gather non price and initial price related information from suppliers on the specific project or service that will be acquired. This step can be comparable to the Request for Information (RFI), but normally goes into more detail about the product or service requested after the suppliers have been qualified from the RFI step.

After this information trading process is complete, the buyer will analyze the responses and decide how to use the information.

Post RFI, the buyer will analyze the responses and define which supplier participants should be taken forward to the RFP stage.

 

The process for performing an RFP event is as follow:

  • RFP writing which can contain, for example:
    • Manufacturing capabilities
    • Development opportunities
    • Testing facilities
    • Company terms and conditions, if appropriate
    • Supplier company financial data if not in RFI
  • Evaluation by all stakeholders
  • RFP update
  • Submission to vendor
  • Vendor proposals reception
  • Vendor proposals evaluation

The results of the RFP are used to finalize the requirements that will be used as a basis of the following RFQ.

 

An RFP is typically used when:

  • You want to gather/provide more specific information about the product or service you are seeking either because it is new or it is an improvement to an existing product or service
  • Your goal is to:
    • Run an event that will include first time suppliers along with suppliers with which you are familiar. This allows you to qualify new suppliers and, at the same time, gain product/service data from suppliers you have used in the past and for which you might not need to gather company specific information. Hence, shortening the overall sourcing cycle.

Timeframe is dependent on product or service, if a comparable product already exists in the market the time will be much shorter e.g. A new replacement trolley. However, a new Inventory system that does not exist requires samples, demo and testing. So a typical RFP will take from 1 to 3 months to create and run.

 

 Examples of use for a Request for Proposal:

  • Professional Services: they involve specialized skill, training and expertise, use of professional judgment or discretion, and /or a high degree of creativity. 
  • Specialized Software Purchases which require supplier implementation
  • Turn-Key systems which include both a product and a service
  • New Products not currently used by Stakeholder

 

Through the use of NeoGrid eSourcing solution, Source & Procure have managed a large number of RFPs across wide ranging categories.

Summary
Article Name
eSourcing - Request for Proposal (RFP): Definition
Description
Definition and description of the eSourcing event RFP or Request for proposal.
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