A request for proposal (RFP) is a formal request issued by an organization that seeks specific products or services to address the organization’s essential business needs. After receiving the RFP, the vendor submits a proposal that demonstrates their qualifications, costs, and solutions in providing the requested services. From there, the issuer of the RFP vets the offerings and chooses the best solutions and cost of services.
The RFP process is vital. It can also be complex and time-consuming. Though it can be a challenge for those involved, the right resources and approach can help speed up and optimize the process.
Here, we break down the vendor RFP process into six steps to help you manage them.
6 Key Steps in the Vendor RFP Process
In response to an RFP, a proposal provides the issuer with information that allows them to make an informed decision so they can achieve their business goals.
RFPs take a lot of preparation and research for both issuer and vendor. Although it might seem complicated, it is relatively straightforward when broken down into these six steps.
1. Gather Required Information
The ultimate goal of an RFP is to establish a partnership that both the issuer and vendor will benefit from. To give the vendor a complete understanding of the business and business needs, the issuer should provide information on two key areas:
The background of the company and context of business needs
The problems the issuer faces and hopes to address through a partnership with the vendor
A clear document gives the vendor the information they need to respond appropriately or pass on the opportunity if they are not qualified.
When putting the RFP together, the issuer can organize it into four primary categories:
Stated early in the RFP, the purpose sets expectations to ensure that only qualified vendors respond. It should include information on the objective, such as the primary challenges that need to be addressed.
Outline the goals the issuer wants to achieve. Include questions concerning how the vendor expects to solve challenges and what a successful outcome of the partnership will look like.
Once they know the critical factors of the solution, the issuer creates an approach to scoring the vendor based on price, speed of solution, customer experience, and other considerations.
Finally, provide a section in the RFP where the vendor can add solutions beyond the scope of services, which might be beneficial for future projects. To illustrate the competitive nature of the RFP process, the bid-to-win percentage in professional services is just over half, so responders look for any opportunity to separate themselves from the competition.
2. Craft the RFP Document
The questions posed in an RFP provide the vendor with the guidelines for their response. Some can have hundreds of questions, but it is better to simplify the process by keeping the number of questions to a minimum while also receiving the correct information. Fewer questions also streamline the process of selecting a vendor, decrease completion time, and encourage vendors to respond.
When crafting questions, consider two categories:
Questions concerning essential requirements should be responded to with a “yes” or “no” so you can quickly eliminate underqualified vendors.
Questions seeking to identify vendors that have a strong understanding of your business, industry, and needs can be “open text,” which allows vendors to share their vision and unique approach to solutions.
In addition to solutions-based questions, ask about reviews, testimonials, or case studies to have an objective view of the vendor’s processes.
3. Perform Preliminary Evaluations
After receiving proposals, the issuer performs a preliminary evaluation to select a shortlist of qualified vendors. To do so, the issuer follows three steps:
Compare vendor strengths as they relate to requested services.
Eliminate unqualified vendors or incomplete proposals.
Identify factors that differentiate the vendors for an in-depth evaluation.
To get started, you might want to consider the accuracy of their proposal, their years of business, and their experience working with companies in the same industry.
According to the Association of Proposal Management Professionals (APMP), companies bid primarily on their current market or potential market. Be sure to consider possible market bids because they can often provide additional incentives, such as lower cost of services, to grow their business.
4. Follow Up with Vendors
With the down-selected shortlist, issuers begin a more in-depth evaluation process to determine who will win the bid. Issuers should engage with the shortlisted vendors by asking follow-up questions concerning critical factors. At this stage, issuers should also have an RFP vendor evaluation template that sets weighted scoring criteria.
This step is also an opportunity for vendors to show how their offerings differ. Interacting with key points of contact can give the issuer an idea of how a working relationship might unfold.
5. Complete Final Evaluations
With a clear understanding of what each vendor can offer, the issuer will be able to select the vendor that provides the best solution.
At this stage, the issuer compares the vendors side by side through a strategic scoring process based on the sections that are the biggest concerns. Key stakeholders should have a lead role in evaluating and scoring the finalists.
From there, key stakeholders should share scores to come to an agreement. If no consensus is found, consider additional interviews or follow-ups that might help answer any discrepancies among the issuer’s team.
6. Perform Contract Tasks
Once the issuer has selected the vendor, the next step is to create a contract that includes, among other things, a statement of work and metrics for evaluating the work. This contract should be as detailed as possible because it will be the primary reference point for the engagement period. It should include the expectations and resolutions if those expectations are not met.
Once the selected vendor signs the contract, the RFP process is complete.
Optimize the Vendor RFP Process with Contract Management
An RFP and the contract to follow can be both incredibly detailed and complicated. To ensure you are not missing any items that might derail the service engagement, partner with SRM’s consultants, who have extensive experience in vendor contract negotiations.
For more information on optimizing your RFP, download our checklist “Best Practices When Developing a Request for Proposal for the Manufacturing Sector.”