Considering the complexity in procurement requirements and compliance audits, long timelines for RFPs are true and relevant. For example, organizations take an average 70 days for RFx-to-award cycle in procuring IT-related products or services. Every procurement professional understands the long hours and mammoth efforts required to collaborate across business teams and vendors to streamline the entire vendor selection process. Implementing RFPs sound pretty good to hear but difficult to execute in the real world.
Where to start – RFP or RFI or RFQ?
Consider a scenario where your organization has decided to start a new division and needs to hire 100 employees within the division. To ensure efficient business operations, your organization needs to provide laptops, printers and other facilities for new hires. So how should your organization move forward? Should the organization buy laptops and other devices right from the market?
Here’s where RFI comes into the picture.
What is RFI (Request for Information) ?
Request for Information (RFI) helps procurement teams to capture granular details of their sourcing needs from expert vendors in the market. Any organization can start this low-cost process by inviting potential vendors to provide detailed information for the complex high-spend purchase. Based on this information, enterprises can build vendor databases and may even achieve vendor base rationalization for each sourcing category. Periodic RFIs ensure that existing vendors are aware of complex requirements and the procurement team is updated with market trends. RFIs help procurement teams to include many vendors without spending much energy in the vendor qualification stage.
What happens after RFIs are received?
Once RFI responses are received from all vendors, procurement managers can gather information about products/services (i.e. laptops in this case) available in the market. Business teams and procurement managers together can prepare refined requirements in the form of RFPs (Request for Proposals) for potential vendors. Request for Proposals (RFPs) consist of well-defined questions and evaluated criteria at a detailed level of specifications. Preparing RFPs is the most common and arduous task for procurement teams. Procurement PMO/CPO should interact internally with all business stakeholders (budget owner, domain experts or evaluators) to define procurement approach for the right quantity, at the right quality, delivered at the right time and at the right price as per available budgets. Procurement PMO/CPO also interact externally with vendors to enable RFP questionnaires followed by RFP publish stage.
What is RFP (Request for Proposal)?
An ideal Request for Proposal should have:
- Deadlines and milestones for each RFP lifecycle stage
- A detailed description of the required products/services
- Vendor qualification questionnaires (purchasing criteria with weightage)
- Comparison and award criteria for each RFP response
- Administrative and compliance requirements
- All guidelines for communication among vendors
Considering our scenario of procuring laptops in an organization, a successful RFP process will help procurement teams to get warranty services, hardware requirements and achieve savings in procurement.
Where to use RFQs (Request for Quotation) ?
Within organizations, some purchases are highly standardized for repeatable item categories and domain experts can provide highly specific requirements for those categories. This results in well-crafted vendor questionnaires and only price quotations are needed from vendors. Requests for Quotations (RFQs) are documents created for such business scenarios. Existing or potential vendors are invited to respond to RFQs and stakeholders will consider pricing as important evaluation criteria.
Key Challenges in RFPs, RFQs, RFIs
- Procurement managers often use emails with RFX documents attached to gather and process information. It makes really difficult to access reusable knowledge lying in email inboxes and in Microsoft Excel or Word.
- Procurement managers or PMOs often get overwhelmed with collaborating with stakeholders and collating all responses into a single document to make informed procurement decisions.