RFI vs RFQ vs RFP: What should you use as a Procurement Pro [Step-by-Step Guide]
RFI vs RFQ vs RFP - These are terms you need to know if you’re a Procurement Professional. It’s likely that you will be running your own RFIs, RFQs, and RFPs when a requester, who is finally following the Procurement Process in your business, asks you to find them goods or services.
When you need to go out to the market to meet your requirement as a procurement pro, how do you do this?
You may know exactly what you want to buy as part of your procurement process.
Or Not!
Typically, you'd issue one of these:
Request For Information (RFI)
Request For Quotation (RFQ)
Request for Proposal (RFP)
Did you know that there are some major differences between an RFI, RFQ and RFP.
You, as a Procurement Pro really need to know what the end goal is before you choose to go for one of these - RFI, RFQ or RFP.
Why?
Each one has a different purpose.
When talking about one of these, in this Procurement Profession, we usually refer to them as a Request for X or RFx.
The RFx process is designed to enable you to find the ideal Supplier to meet your requirement.
That’s the end goal of this.
In this article, we're going to cover off:
Step 1: What is the purpose of an RFI, RFQ and RFP
Step 2: What is the difference between an RFI, RFQ and RFP
Step 3: When to use an RFI, RFQ and RFP
Step 4: How to create an RFI, RFQ and RFP
Step 5: Pros and Cons of an RFI, RFQ and RFP
By the end of this article, you will know everything you need to know about how to use an RFI, an RFQ and an RFP.
For starters, let's go to Step 1.
Step 1
What is a Request for Information (RFI)?
An RFI is a document you use to gain information from a wide selection of suppliers/vendors.
This will help you, as the procurement pro, to determine if your requirement can be met by the market and to what extent.
This helps you work with the internal stakeholders to shape the requirement correctly.
An RFI is best used to discover what your suppliers can do to meet your requirement.
Your RFI may go out to your existing approved suppliers initially.
If you get a good response on the RFI, great result. If not, you might go out to new Suppliers.
Depending on your current approved Supplier List, you might have room to go out wider to new suppliers at the start.
What is a Request for Quotation (RFQ)?
An RFQ is a request you issue when you know what you need, typically for commercial off the shelf goods, services and software products.
You may use an RFQ to target a single supplier or you may use it competitively and go out to multiple suppliers.
An RFQ is used to compare the same thing with different suppliers when used competitively and the focus is usually on costs and savings.
Understanding the cost implications, payment schedules and any other relevant details with the Supplier should be a key focus of the RFQ.
What is a Request for Proposal (RFP)?
An RFP is a request where you have a requirement and you're happy to receive different proposals or outcomes from carefully selected suppliers who will become vital to your business.
These requests are usually for the most important and strategic procurements that you will undertake.
An RFP is awesome to use when there are a several factors involved.
You might need specific expertise that you don’t have in-house, you may have a wider client requirements that need to be met or you might just need to speed up innovation to maintain your product position in the market.
Step 2: What is the difference between an RFI, RFQ and RFP
We've kinda talked about the differences on an RFI, RFQ and RFP already but let's go granular now.
RFI
An RFI is an exceptional method for finding out what is going on in the market.
You may have any number of Suppliers, from a few to fifty by way of an example, who you think could undertake whatever is your requirement is for, whether it's going to be that you need to procure some new software, a new facilities management supplier or you're looking to invest in some procurement tech software.
You may already have an approved list of suppliers and you may be looking further afield to onboard new partners who may be capable of providing whatever it is you're looking to procure.
The RFI lets you cut through the noise of the market.
That's the simplest way I can put it.
It can then allow you to select only a few or even a single supplier for any RFQs or RFPs that you submit to the market.
That's powerful. The RFI enables you to find the right supplier for your project or requirement.
It requires some work up front but the results can really pay off in terms of getting what you want from a pre-tested market.
When times are tough at present, when every minute matters in a multitude of ways, you do not want to have fifty suppliers who could do what you want, unvetted with no communications from you.
That would be a recipe for disaster.
Ensure you carry out an RFI when the market is strong or where you're not quite sure of your approach.
RFQ
An RFQ is different in that it's a request for some items, services or software where you know exactly what you want.
For example, I had clear specifications for several 3d printers and there were a few different shops/brands that could provide us with the printers based on our specs.
I issued the RFQ, confirmed pricing and support costs and went with the lowest cost supplier.
The printers had a slight variance but were effectively the same model. The RFQ was successful in this instance.
This saved me a lot of time as it was a short time-barred RFQ and the supplier provided most of the information and did the hard work whilst I focussed on other matters.
An RFQ is different from both an RFI and an RFP for that sole reason.
With an RFQ, you know exactly what you want and you are going to multiple suppliers/vendors to get the best price.
This means you can quickly evaluate all the responses from your selected suppliers and select the best-priced supplier.
Additionally, more procurement tech SaaS tools are being released that automate the RFQ process using data collected from thousands of suppliers across the world to make this a simple exercise for procurement pros going forwards.
Alongside the pricing, the Supplier will let you know what their payment terms are if they're happy to accept your contract terms or want to use their terms and will let you know what the lead times and delivery times are for the items you're buying.
RFP
An RFP is usually used when you're looking into competitive procurement, when the solution to your requirement isn't clearly defined and where you know what a good outcome to the requirement looks like.
This is important.
Vital.
A Deal Breaker if you get it wrong.
One of the most pressing reasons to use the RFP is that your Supply Chain and your Suppliers have more innovative solutions to your requirements.
Think about it.
Your engineers might need a heat sink to add to an electrical device to stop it from getting too hot and melting.
They might have a design drawn out.
They might have an idea of the materials.
But your Suppliers may specialise in heat sinks whereas you do not and they may have made vast strides of improvements in the design, the materials and the electrical system integrations that you are your team cannot comprehend.
This is why I personally believe the RFP is still a vital part of a procurement teams arsenal.
It should be used in this way.
RFPs require so much work from prospective suppliers.
Don't overuse it.
Keep it as simple as possible and don't expect your suppliers to complete hundreds of pages of questionnaires.
Step 3: When to use an RFI, RFQ and RFP
Step 4: How to create an RFI, RFQ and RFP
The key to creating an RFI, RFQ and RFP is to focus on the ask and to not overload the Supplier.
Before we specifically cover each of them, I want to urge you all to do one thing!!!
Yes, it's worthy of three exclamation marks.
I want you to invest in some procurement tech that allows you to create, manage, evaluate and collaborate with your suppliers.
If you're reading this and you've been running RFIs, RFQs and RFPs using a combination of word documents, excel documents, emails, in-person meetings with note-taking, google searches and a dozen other manual exercises, then you know it can be painful.
Extremely painful.
Messy.
Yes, it definitely gets messy and if you are managing are large scale RFI or RFP, where you could have a large number of suppliers at RFI and less at RFP (but have more information coming in), your email inbox seems to explode each day with questions.
The clarification questions really can eat into your ability to get work done, as you have to constantly send those emails to the subject matter experts within the business for them to answer.
You become an admin assistant for large parts rather than someone who can really add value by engaging everyone, working on other projects and tracking the progress of what you're doing to ensure you are on track.
Here's how you make these documents.
RFI -
Set out the top-level requirement.
Make sure you include anything here that the supplier must have such as an ISO27001 certification. The last thing you want to do is down-select a supplier from the RFI to issue an RFQ/RFP to, for them to come back on a mandatory requirement as say we are non-compliant. You've wasted everyone's time if you do this.
Ensure questions are link to what you're looking to achieve.
Let the Suppliers know a timeline for you to complete the RFI and then move into the RFQ/RFP stage.
Let the Suppliers know that you will be down-selecting a handful of suppliers for the full requirement. Stress the importance of their input.
Keep it as light touch as possible. RFIs can be a massive time sink on suppliers, which is costly and they aren't guaranteed anything at the end of it. We need to be better at this and not just dumping a dozen hundred-page policy docs on the Supplier. Make it easy to digest and summarise everything where possible.
RFQ -
Specify what you want. Whether this is a model number, a specific service or a specific set of requirements that you know can be met with no changes from a suppliers goods or service offering.
Ask for information on pricing, payment terms and contract terms (and detail what you'd expect here from the Suppliers).
Make sure you detail when you need the items, where you need them and the purpose for use if you want to ensure they come with some kind of warranty.
Detail quantity/frequency of the required goods/services.
RFP -
Be clear on what you want.
The best RFPs focus on outcomes rather than focusing on a specific way of doing/providing something. THEY ARE NOT PRESCRIPTIVE!!!!
Allow innovation - your requirement, regardless of how detailed it is, might not get you to the end goal you're searching for.
If you're using a competitive procurement process, be honest, let them know what you're looking at and ensure that the supplier cannot game the result.
Utilise compliance matrixes. These are basic lists, that detail your requirement and the supplier can start how compliant they are. You can also bolt these into the final contract.
As with the RFQ, RFPs need to be clear on the timeline to delivery, and the period that the service will need to be delivered for.
You need to detail any key issues/dependencies. Especially if you've got an incumbent supplier - are they running into problems? Make the RFP explicit on what these are.
Detail any key flow down requirements from your clients. This might be contractual, ISO centred or it might be an entire part of the requirement that you cannot deliver on.
Allocate risk appropriately in advance and provide information as to how you will contract with the selected supplier.
Step 5: Pros and Cons of an RFI, RFQ and RFP
The one obvious downside is time.
Most RFX documents are low quality, rushed and require the suppliers to give so much information that they likely don't give as much when an investor is looking into them.
With that comes the issue that these take time to complete and time to review which means the entire sourcing process can become drawn out.
When you add negotiation to the mix, it simply gets more complex.
They are great for getting:
information you genuinely need
insights into the market you didn't have such as how suppliers price their goods/services (don't ignore any submission, they all tell you something)
a way of procuring that is well structured and that should mitigate risk in the supply chain
internal buy-in, especially as your internal teams should have been a part of this.
There's a lot of value to issuing and receiving an RFI, RFQ and RFP.
You need to make the most of them and make them easy to complete from a supplier perspective.
If at any time you make this difficult for a supplier, you won't get the responses you imagined.
Have you used any of these recently?
How did it go?
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