5 Steps from RFP to Award

Five key steps from when you issue a RFP to when you Award. The following RFP infographic provides a basic summary of the chain of events which often transpire when you are required to issue a request for proposal for a product or service. Some of these steps and the amount of time required to properly issue, evaluate and award a RFP are often underestimated. Hopefully, this graphic on the 5 steps on the RFP to Award process will provide some useful insight when it comes to the process.

RFP Infographic

5 Step Summary – FROM RFP TO AWARD

Step 1 – A need is identified and SOW provided

All companies, regardless of size, that are making the effort to issue a Request for Proposal (RFP) are doing so because they have a need for a product or service and are looking for proposals from qualified suppliers to assist with this need. This requirement typically comes with clearly defined specifications. With a Statement or Scope of Work defined the group should now collaborate on the development of the RFP.

Step 2 – Invite suppliers to your RFP

Identifying a list of competent and qualified suppliers to invite to bid on your RFP is often the most important part of the whole RFP process. Some companies prequalify suppliers prior to issuing the tender, some depend on experience or history from past projects, while others depend on recommendations from colleagues. Regardless, of how you put together your vendor list, this is not one area to short cut.

Step 3 – Question and clarification period

Important to remember that the more detailed your SOW is the fewer questions and clarifications will surface during the response period. The benefit of a detailed SOW is you will receive more accurate quotations as unknowns will not be factored into cost.Typically, three to four weeks is given for a RFP response depending on complexity and whether site visits are required.

Step 4 – Evaluation of responses

Okay, now you have all these proposals or responses from your bidders. What’s next? Some companies use what is called an evaluation matrix. In it, areas like commercial terms are scored and used to justify an award. Basically, you are reviewing proposals in depth and shortlisting the responses you feel are best suited to your project requirements.

Step 5 – Award

With your evaluation complete, you are now ready to issue an award. Some companies use an award letter and PO, while others use a letter of understanding (LOU) followed by a contract.  Remember to issue rejection letters to unsuccessful bidders. Contract monitoring and hopefully a successful completion to your project. This is a very basic overview and summary of the typical chain of events which occur when issuing a RFP. Check out our website for more details on buyer and supplier solutions like sample RFP’s, response letters and any other forms you might be searching for.

If you have found this information to be useful, please consider sharing this infographic on the 5 steps from RFP to an Award.

 

Forms used by Procurement

Typical Forms most used by Procurement Professionals

In order to manage the need to purchase supplies and services, purchasing professionals turn to certain forms or documents to obtain the internally requested products or services.

Some standard forms you might be familiar with would be: Request for Quotation; Request for Proposal; Invitation to Bid; and there are many others.

While most of these procurement forms are relatively straightforward, the Request for Proposal is a form that has continued to evolve since its first started to appear in the early ’80’s. Since then, RFP’s have become more prevalent, more refined and in some cases are all some companies issue (not what we recommend). Regardless, companies that purchase goods and services need procurement forms to help them manage their business. These forms are a necessary evil and will help you ultimately complete the task of getting to an award.

Role players in an RFP / RFQ

Before we can detail the forms most used by purchasing department today, we think some color on the process is needed. Typically there are 3 or 4 role players when it comes to the RFP or RFQ process. There is a Tenderer aka Bidder / Offeror / Vendor; then there is the Owner which is the parent company issuing the document — then the user or internal department making the request or the group needing the material or service — and last the procurement officer who is the person managing the RFP / RFQ. They often generate the documents, issue, analyze the offers, make a recommendation and manage the award. There are others like the accounting department which will pay the vendor and so on.

Supplier/Vendor: A seller of materials and/or supplies who submit a proposal or quotation against your requirements.

Now back to the most popular forms used today:

  1. RFP – (Request for Proposal). Without question, this form is considered the go to form for procurement professionals, on larger dollar spend and when your selection criteria might use additional factors other than price, like service capabilities or technical.
  2. RFQ – (Request for Quote). To some this is up for debate, but depending on the organization, sometimes the Buyer is simply looking for price and delivery on a simple material request.  We need 6 widgets and here is the part # so in this instance a RFP is way overkill and is not worth the cost or effort.
  3. EOI or RFI – (Expression of Interest) or (Request for Information).  An Expression of Interest (EOI) or (RFI) is used to gauge interest from potential suppliers for a potential upcoming project on the drawing board or hope to officially tender in the near future. An EOI, gives you the opportunity to pre-qualify vendors to ensure they are capable of completing the work under the restrictions or specifications outlined in your document.
  4. LOI or LOU – (Letter of Intent) or (Letter of Understanding). Often the next document to be used by the purchasing department if the spend warrants (vs going right to a PO).  It captures the summary terms negotiated by both parties during the award process and these details will eventually make their way into the formal contract. Simply, the Buyer is looking for a document they can use to bridge them over until a formal contract document can be executed.

There are many other documents a Buyer will use in today’s purchasing and if you, like many of us, find the RFP Process overwhelming or too time consuming hang tough as Our Step by Step RFP Guide will be released soon. It will simplify the RFP Process by providing a step by step guide c/w with sample forms typically used when issuing a RFP — from start to finish. All forms will be provided in edit friendly Microsoft Word format. This comprehensive guide and template pack will be provided at a discount to all our subscribers and with returning customers receiving additional discounts over and above discounts offered to our subscriber base.

Evaluating your Spend

Every business should have a clear understanding on their operating costs and should be constantly evaluating this spend regardless of size or how big your company is. What does it mean to be evaluating your spend? If you asked your accounting department to provide a list of the top 20% of vendors in relation to how much money you spend with them annually, this would be a start. This list of suppliers will represent close to 80% of your operating budget. I know, the pareto principle is overused but in this instance is 100% on point.

Prudent business owners will dedicate a large portion of their time or their purchasing department’s time on analyzing this 80% cost. These are your target vendors and where you need to focus your efforts. Requesting price concessions for your guaranteed or long term business and suggesting that they partner with you on productivity improvements are two quick solutions you can key in on.

There are multiple ways to approach this:
1. First drill down and gather specific details on this spend. How many widgets am I buying of a specific product in a 12 month period? This is known as your annual usage. What is our cost to procure these items? Is there a better quality product which will perform the same function and reduce operating costs? Are there like vendors that can provide a similar material or service?

2. Approach your existing vendor directly or by way of a RFQ and request firm pricing for a 12 or 24 month period. In exchange for this commitment, you are expecting preferred pricing. This does two things, stabilizes your costs for the next 12 – 24 months and reduces ordering costs as these commodities can be covered by a contract or supply agreement.

3. Creating competition is the best way to achieve fair market pricing for goods and services. To achieve this, you need to issue a Request for Quotation (RFQ) for the above item(s). If your spend warrants, you should do your homework and pre-qualify vendors for these items. Ensure they are of similar quality by asking for samples and get a sense whether these suppliers can meet price and delivery timelines based on your usage or existing requirements. No use buying something for 10% less than what you are presently paying if the new vendor cannot deliver!

4. It gives the vendor comfort knowing they have your business for the next 12 months in exchange for better pricing. By granting them a contract for the next year, the expectation is the vendor would guarantee they carry relevant inventory in their local branch which would then allow you to reduce on-hand inventory. In this instance you are reducing carrying cost, cash outlay for inventory and achieving a reduction in unit costs. Savings all the way around!

Issuing a RFQ (Request for Quote) to determine present market pricing is always the preferred way of doing business. It is ethical, transparent and begins to condition your suppliers of your intention on monitoring your spend. It sends the message that your company is focused on ensuring you are receiving the best possible product at the best possible price.

If creating a RFQ to help manage costs is on your radar, there are many sample RFQ templates available on-line or the team at RFQPro would love to help you get the ball rolling.

See a list of our templates and forms by visiting our In the Pack Page

Here is to your success — Mark.

How effective are your RFP’s?

How Effective are your RFP’s?

That is the question and unfortunately many professionals do not have this question on their radars. They often roll them out the door not truly realizing how ineffective they are.

Request for Proposals are quickly becoming the go to procurement form. They are on the rise because more and more companies are using them for all kinds of project work. Whether this is the right form they should be using for the task at hand is another blog post altogether! In this post we are going to focus on how to improve the effectiveness of your RFP which will help you produce the desired results and how to write a RFP without spending extensive amounts of resources.

To get right to the point, you will save time, money and energy if you focus your efforts on the content you include in your RFP. Increasing and including the correct content will increase its potential for success.

What determines the effectiveness of the RFP you have spent hours developing?

  • Is it the number of questions your supplier’s ask during the response period? YES, if you are getting lots of questions then the Statement of Work is not detailed enough.
  • The actual number of quality vendor responses received?  YES, responding to a RFP is expensive and vendors will put in the effort to provide a quality response if the deliverables are clear. A win for both parties.
  • The prices quoted by your vendors? YES, this will be a factor. If your RFP content is clear the quoted prices will reflect this. Removing unknowns will reduce costs.

[Read more…]

How our Quotation Forms can Help

Creating a procurement form from scratch is not in every business manager’s top 20 list of items they want to be doing at work each day. For most of us, it is not even in the top 100! Purchasing people are results oriented…they want to be reporting to management on $ savings, contracts, trends and not that they spent their day writing a tender.  The RFQ and other procurement related forms are important and do require an attention to detail. Is there an easier way to accomplish this task so you can spend your time on more fruitful projects?

At RFQPro.com we supply sample Procurement Templates for a variety of potential quotation requirements and this is how our quotation forms can help you in your day to day tasks.

Here is a link to the list of some of the forms we offer: https://www.rfqpro.com/pack-breakdown

In this list you will notice we provide both generic and specific types of tender documents which can be used [Read more…]