04/ 02/ 2002
The June 2000 issue of "Mobile Computing & ; Communications" contained an excellent article about creating and using Requests for Proposals (RFPs)when purchasing equipment (The ABCs of RFPs, by Karen D. Schwartz). The article was targeted for large companies that are purchasing high volumes of expensive products. But in today's Workshop, Jeffrey Moses adapts the main points of the article for small businesses that may benefit from putting any of their important purchases out to bid.
An RFP can be defined as: A document that precisely delineates all specifications of the products or services that are to be purchased - including technical parameters, planned usage, deadlines for submission of bids, time schedule for setting up equipment or services, etc. RFPs are generally presented to a number of different vendors, who prepare responses to each of the specifications, along with guarantees of performance and price.
There are several major advantages to using an RFP when proposing to purchase products or services:
- Vendors will return carefully prepared written descriptions of the products or services they will provide, along with how they will satisfy each requirement and what the varying costs will be, an RFP not only acts as a determinate of price, it functions as a proposed contract.
- When RFPs are sent out, the resulting competition between vendors forces each to put their best efforts forward regarding proposed service and price.
- The detailed responses from vendors can be used to negotiate further price reductions from other vendors, if desired.
Many large corporations, as well as government agencies, put out official RFPs whenever making major purchases. Small businesses, however, may find it time-consuming to put out full-blown RFPs, which often cost thousands or even tens of thousands of dollars in employee time to put together. However, small businesses typically can create a perfectly suitable RFP that addresses all their needs for a fraction of that cost. The basic elements of an RFP are:
- An Executive Summary paragraph that provides a clear description regarding: a brief description of the products or services that are to be purchased, what is required of the vendor in response to the RFP, the deadline for when the response should be returned, how the response should be written and submitted, the contact person at your company, etc.
- Full details of your company and what your goals are for purchasing the products or services.
- All technical details of the products or services desired. Also included could be information about the products or services that your company is now using.
- Any price parameters that you can provide.
Taking the time to define and write down the above information in detail has the added benefit of enabling you to determine exactly what you need and how much you want to pay for it.
However, if you're not interested in taking the time to define each of the above four points, you may want to use a Request for Information (RFI) or Request for Quotations (RFQ) instead of an RFP. An RFI is much more informal than an RFP in that it simply asks for general information about what a vendor could supply. Usually an RFI cannot serve as a contract, but it can be used to pin down specific prices. An RFQ requests vendors to supply firm price quotes based on minimum specifications provided by you.
An RFP is an excellent way to pin down all details, in advance, for large purchases your company will be making. These purchases could include: computer hardware/software; custom software design; consulting services of many types(legal, financial, R & D, ongoing operational consulting, etc.); security services (including both office security and ongoing confidential-document disposal); shipping/fulfillment services; outsourcing activities of all types; contracting/building expansion; and numerous other products and services that are important to your company's long-term operations.
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