There is a process that any company performs when it’s time for it to produce another product or service. Here is an example: Company A is planning a new venture and needs to spell out the specs it requires from a third-party vendor.
Companies that are interested in working with Company A submit bids based on the requirements, and Company A then evaluates the bids that are submitted and selects the one (or more) that most closely matches its requirements. There is a document that is used for this purpose, and that document is called a request for proposal (RFP).
What Is an RFP?
An RFP is a common business term; as the name suggests, it’s a formal document that details how a company or organization plans to purchase goods or services from another company. In most instances, it is a document that declares that an organization is pursuing a new project, and will be accepting bids from interested parties.
An RFP serves a different purpose than other similar types of documents that often accompany RFPs. These documents include request for information (RFI), request for expressions of interest (REOI), request for tender (RFT), request for qualification and request for quotation. In addition, an RFP also can be used to create benchmarks that help measure the success of a specific project.
How Is an RFP Used?
An RFP document defines the project that the issuer is undertaking and spells out its goals, as well as the bidding process. It seeks out a potential partner who can meet (or exceed) the requirements outlined in the RFP. Because most RFPs include complex specifications, it requires analysis and comparison data, and the bids should be from qualified vendors. When going through the submissions, the issuing company is then able to weigh the bids (or vendor proposals) to see which ones match the requirements in the most satisfactory manner. Another reason why companies use RFPs, particularly those that require oversight, such as public and government entities, is that RFPs ensure transparency in the bidding process.
RFPs are commonly used in the world of mergers and acquisitions (M&As). M&As tend to be extremely complex business transactions that have many moving parts, mainly due to the glut of information that needs to be communicated. In these cases, RFPs are required for hard data analysis and comparison. It certainly helps when having these documents “side by side” to compare and contrast the bids from prospective vendors.
How To Write an RFP
Understanding how an RFP document works will help you streamline the creation process by breaking large tasks into smaller tasks, which helps the entire process become less overwhelming.
- Brainstorming: Determining the scope and budget of the project is the first step, and committing those requirements to paper is a way to nail down the requirements.
- Drafting the RFP: Using a proposal template is recommended. Also, spelling out all the requirements and the scope of the specific project is necessary, as is asking the important questions. These RFP questions include pinning down details on competitors, the implantation processes, any training required, references, and case studies of previous engagements.
- Accepting bids: Depending on what type of company creates the RFP (public, private, not-for-profit, governmental agency), there may be certain requirements that have to be followed when soliciting bids. In some cases, these vendor proposals must be made public, while in other instances, they do not have to be.
- Narrowing the field: Winnowing the proposal document can be a tedious task, but ranking them in the order of being able to meet your requirements will help you narrow down all the RFP responses to a manageable few.
- Negotiate with the winning bidder: Once you’ve decided on your top choice (or two), getting the best deal possible for your organization is key. At this point in the RFP process, the potential vendors are usually still willing to negotiate on items to secure the winning bid.
- Picking the winner: This is where the qualified vendor who provides the best match to your requirements is chosen. At this point, a polite “thank you” should be extended to those bidders who weren’t selected.
- Sealing the deal: This means having your legal team perform a final review of all the paperwork and having all parties involved sign all contracts.
- Review the RFP process: Once you’ve gone through your first RFP, you’ve also established a way to review the process and use that knowledge to help streamline all future RFPs your company goes through.
Working With a VDR
Dealing in the complex world of M&As and RFPs requires some additional tools to streamline and make the entire process more cost-efficient. One of these tools is a virtual data room (VDR), which is a highly secure online location, where all parties involved in RFPs can safely and securely share and store the documentation required for the transaction.
The features of a sophisticated VDR consist of secure access (which includes enterprise-level encryption), multiple layers of security and user-friendly admin controls. In addition, there are customizable rights management options that will grant only certain users access to certain documents, all of which allow all parties to be able to shorten the timeline and costs of the transaction.
The CapLinked Solution
CapLinked is an industry leader in the VDR space, delivering online workspaces that are secure yet user-friendly. CapLinked VDRs feature an interface that is compatible with virtually every OS, giving users the ability to upload and download documents from virtually any type of computer, tablet or smartphone.
To see how robust its secure VDR is, sign up for a free trial at CapLinked that will allow you to see its project management features, document collaboration controls, customizable permissions and more.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.
Sources
WordRake – RFP 101: What Is the Purpose of an RFP?
TechTarget – RFI (request for information)
Artscape D.I.Y. – What is a Request for Expressions of Interest (REOI) and How Do I Use One?
G2 Learn Hub – What Is a Request for Tender? Examples and Templates
Artscape D.I.Y. – What is a Request for Qualifications and How Do I Use One?
Investopedia – Request for Quote (RFQ)
CrowdStaffing – RFPs: When To Use Them and When To Avoid (Bonus Inside: RFP Toolkit)
Candid Learning – What is an RFP?
