In the 2019 fiscal year, the United States government spent $586 billion on contractors. Government agencies solicit contracts for projects that require specialized expertise.
Agencies also request contracts for projects that are complex. It would be too time-consuming for the department to complete it efficiently in-house.
Much like businesses and non-profits, government departments want to get the job done well. But, they also want to stay mindful of their respective budgets.
So, a department will solicit competing bids from contractors. To get these bids, the government agency will develop request documents.
It will create a Request for Proposal (RFP) or a Request for Quote (RFQ). The agency must follow a standard RFP process–or RFQ process–when it develops and publishes its proposals.
But what are the differences between the two proposals? And which proposal is right for your project’s needs?
RFP vs RFQ: What’s the Difference?
Both RFP and RFQ documents are requests aimed at attaining a range of bids from various firms and vendors. The documents encourage firms to bid on the opportunity to execute a project. Government agencies, businesses, and non-profits create these documents.
This article specifies four points of contrast. This helps you see the similarities and differences between the two documents. The contrast points are:
- purpose and goals
- structure and format
These four points empower a thorough RFP RFQ comparison. We will interrogate these two documents, each in contrast to the other. Then, you will learn whether RFP or RFQ is better for your organization’s project.
An organization creates both RFQs and RFPs in the context of beginning a new project. It creates either document to invite vendors to bid on the project.
In both cases, vendors are suppliers. A vendor might supply goods or services. The key is, vendors provide supplies directly to a company, agency, or non-profit.
Prices are often negotiable. This is part of the reason why an organization creates request documents–to meet their cost goals.
In some circumstances, organizations create request documents due to legal mandates. State departments must abide by regulations that ensure fair, transparent procurement practices.
So, state agencies must post RFPs and RFQs on a website that functions as a request document database. This distributes the requests.
The state might host the website. Or, a third-party vendor might maintain the site.
Requests with sensitive material will be distributed physically (via mailed USB drives). In this case, a project manager or consultant will distribute the requests to relevant vendors.
Organizations create both request documents at the beginning of a project. But, they will develop an RFP earlier in the process than an RFQ.
An RFP requests proposals for a long-term partnership. Or, it requests proposals to execute a plan. That plan creates ongoing changes.
An organization may not be ready to purchase yet when it publishes an RFP. It may still need to clarify its specific preferences.
An organization creates an RFQ when it is ready to purchase. Typically, it will send an RFQ to invite bids on a simple, one-off project.
When a company already knows the specific, detailed elements of a project, it no longer needs proposals. Instead, it simply solicits quotes. This way, it can compare prices on tools that will get the job done.
Purpose and Goals
Both documents serve the same general purpose: net a high Return on Investment (ROI) for a project. An organization aims to get the best price for the job.
Both documents aim to give an organization enough information about vendors’ price options. Once it has that data, the organization can use it to run an online auction. Or, it may begin earnest negotiations with the vendors it prefers.
Beyond these two purposes, though, each requested document has unique goals. The different goals reflect the stage of the project’s development and where the project fits into the group’s overall priorities.
The goals of a Request for Proposal are four-fold. These are:
- announce the project
- establish relationships with vendors
- generate creative visions or plans
- establish a reasonable cost estimate range
An RFP document can meet these goals by detailing the project enough to spark creative solutions. The key is, the RFP cannot be so vague that subsequent proposals won’t actually solve the organization’s problem.
Yet, if the RFP is overly specific, it may quash creative solutions that pertain to the project’s execution. The goal is not to land the cheapest bid, but to solicit the best plan.
If it goes well, the responses to RFPs will show the organization the potential range of costs to execute the project. All proposals will stay within the organization’s budget.
Yet, the organization may not know what’s reasonable to expect until it sends out the RFPs. This is because the organization is not a subject-matter expert. Gaining expertise through its connections with vendors is at least part of the RFP process.
The goal of an RFQ is more straightforward: solicit price quotes. An organization that sends out RFQs does not need an elaborate plan in response. Instead, it already has a clear vision of what it needs.
An organization will typically send RFQs to vendors when what it wants is standard. It may want to compare cost estimates on wholesale quantities of a known product.
RFQs enable businesses to meet a few related sub-goals. The document solicits price quotes, and it also seeks information about:
- the quality of the product or service
- proposed terms of payment
- proposed length of the contract
Vendors will often include this data in their RFQ responses. If an organization wants more information than that, it is wiser to create a Request for Information (RFI) or an RFP.
A Request for Tender (RFT) is more appropriate when an organization strictly wants to compare prices. RFTs do not solicit any other information.
An organization will use similar processes to develop and distribute both types of request documents. Both require the organization to clarify their project needs to a degree. And, both involve asking vendors to compete to land the contract.
Yet, the differences between the RFP process and the RFQ process can be stark. Here’s how the processes work.
An organization begins an RFP process when it wants to instigate a long-term project. Often, a procurement professional organizes the process. An internal committee or team also participates.
The RFP process follows four steps. These steps are:
- establish RFP requirements
- craft the RFP document
- distribute the document to connect with vendors
- evaluate proposals using pre-established criteria
To establish RFP requirements, the procurement professional must establish needs. They must consider every department’s concern if it will be affected by the project.
Then, the consultant must clarify the goals of the proposed project. What problem does the organization want to solve?
Finally, the organizer must establish a budget. After this, the organization can craft the RFP document.
Writing the RFP
RFPs have a standard structure and format (see below). When crafting the proposal, the committee must answer all questions posed by the standard structure.
Specifically, any RFP committee must elaborate on its purpose, goals, and evaluation criteria. How will they judge the merits of a response to their proposal?
The best RFP documents balance specificity and open-mindedness. Team members will craft an RFP to garner proposals that address their needs, yet leave room for creativity in the proposed solutions.
When a group distributes an RFP document, they may use a public website that acts as a database. Or, they may invite responses to vendors they have pre-vetted.
Once the organization receives replies, it will evaluate the proposal responses. It must use its pre-established evaluation criteria to measure the merits of vendor proposals.
When an organization wants to use an RFQ, it follows a three-step process. This process develops and distributes the RFQ.
First, an organization must strategize. The RFQ development teams must decide what is needed to complete the project. This includes the quantity and quality of products.
The team must also decide how much onboarding support they’ll need. Then, they establish the organization’s preferred payment structure and deliverable timeline.
Finally, they’ll develop the requested document. After that, they must choose how to present and distribute the RFQ. The options are:
- open bid process
- sealed bid process
- invited bid
- the reverse auction (online)
Some organizations, like government agencies, must abide by presentation regulations. So, these organizations must use an open or sealed bid process on a third-party platform (a dedicated RFx database).
This process alerts all vendor members of the database to the RFQ. It then encourages vendors to submit bids within a time window.
A sealed bid process also uses a third-party platform. Agencies gain a few advantages with sealed bids: they take on a lower risk of fraud and price-fixing.
Sealed bids are similar to open bids. But, the agency does not view any bids until the deadline ends.
Invitations vs Auctions
Alternatively, some agencies must hold a reverse auction. These auctions are conducted digitally. The lowest bidder is automatically the auction winner, regardless of the specifics of the bidder’s response.
An organization invites bids when it wants to contract with a vendor it already trusts. In this context, a business knows the quality of the products will meet its standards.
But, it risks paying more than it otherwise might. A vendor might submit a lower offer in a more competitive context.
Structure and Format
Structure and format comprise the biggest RFP RFQ difference. Both documents must meet standard structure and format expectations.
Some government agencies must meet strict regulations when they create these documents. Regulations specify fonts, word-count, and header and sub-header titles for both documents.
Businesses and non-profits do not face such tight restrictions. But, they must also structure and format their proposals within industry norms. This empowers vendors to create useful, accurate responses.
An organization will choose whether to create a short-form or long-form RFP document. A short-form RFP is a single page.
Short-Form RFP Structure
The short-form RFP notes the company’s name, project name, and the due date for the proposal at the top. Writers break the body of the short-form RFP into six sections:
- project overview
- project goals
- scope of work
- roadblocks or barriers
- evaluation criteria
- submission requirements
At the foot of the short-form RFP, an organization notes the project’s final deadline and the budget. It will also note contact information if the RFP is distributed directly to vendors.
Long-form RFP Structure
A long-form RFP is a multi-page document. Organizations typically maintain a template for long-form RFP documents.
You can read publically available templates, then adapt them for your organization. The State of Maryland published this free RFP template.
Outside of the United States, search for long-form RFP templates compatible with popular document programs. There are standard long-form RFP templates compatible with popular document programs.
These include Microsoft Word, Apple Pages, and Google Docs. Typical long-form RFPs include these sections:
- company background
- project overview
- project goals
- existing roadblocks
- target budget and financial constraints
- evaluation criteria and metrics
- submission requirements
- additional information about vendor preferences
- contact information
The specific description and depth of each section vary. It is critical to provide enough details so that vendors’ proposals will meet your needs.
RFQs are one-page documents. Designers divide RFQs into three sections:
- buyer information
- seller information
An organization will enter information into each section. In the “buyer information” section, the organization will write:
- its name
- a brief description of the organization
- its goals for the product
- product quality preferences
- contact information
After that, the group will fill out the “seller information” section. This includes:
- preferred product details and specs
- product quantity
- delivery parameters
- budget or price estimate
The “seller information” section may include a chart for the vendor to fill out. The chart’s columns articulate the description, quantity, unit price, taxes, and total amount for each product.
Finally, the group will fill out the evaluation section. This incorporates:
- evaluation method and criteria
- project timeline
- terms and conditions
- submission instructions
This section is concise. Writers may fill out the project timeline with bullet points. Brevity is the critical difference between RFP and RFQ structures.
High-Impact Project Development
Developing a project demands quickness and precision. Whether your group is in the midst of the RFP process, or still in the preliminary stages, technical specialists can help.
At Nizek, we celebrate expertise. Our professionals know their field backward and forward, so it’s easy to tailor our code to your needs. Web development, app development, and product design are all in our wheelhouse.
Whether you need all three services or something else entirely, talk to us. We’d love to help you achieve your goals.