Bidding success is the major key driver for companies of all sizes. When making bidding and pricing decisions, it is crucial for companies to ensure that the outcome is to be positive on their general performance. Either the business offers services or goods, it needs to have the right quality for its targeted customers; meaning that before the final product or service is delivered to the end customers, the quality process needs to be reviewed and validated.
In fact, a good quality good or service is always the result of a great building blocks (people or goods) choice. Therefore, choosing the right suppliers is vital for any business to stay competitive and reach its strategic and performance goals. However, making the right choice may appear to be difficult in a business world where you have many suppliers offering similar products within a narrow range of pricing.
Fortunately, there are available ways that help companies make their most optimal choice such as a request for proposal. A request for proposal also referred to as an RFP, is a detailed document used by a potential buyer to request several suppliers to submit a competitive proposal that meets all the company’s needs.
What is a request for proposal?
A request for proposal (RFP) is a document soliciting a proposal, sent by a business to numerous potential suppliers to show procurement interest of a service or product, and for the suppliers to provide a business proposal that would correspond to its needs. RFP refers to both the RFP solicitation process and the RFP document, which is the tool used for soliciting proposals.
In fact, the request for proposal is used to present the preliminary business’ requirements, explaining the structure and needs’ format to the potential suppliers. To present a good RFP, a business needs to state its current strategy, short-term and long-term goals along with a detailed insight of its need so that suppliers can provide an effective offer matching its expectations.
A request for proposal:
- Informs suppliers that a company is showing interest in procurement;
- Requires the company to specify its purchase in detail;
- Inform suppliers about the competitive selection process;
- Give the company a wide selection choice;
- Ensures a factual response to the specified requirements;
- Respect a structured identification and selection procedure as it is a major factor in public sector procurements.
What is the purpose of an RFP in project management?
An RFP can be used for various reasons at different stages of a project. The primary basic function of an RFP is to solicit offers from interested parties providing enough information for the business to decide who the best candidate is and what is the best approach to successfully perform the project, an RFP can also be used to:
Procure a Specialist Consultant or Specialist Service Provider: An RFP can be used to ask a consultant to help develop the business vision for the project and analyze its feasibility. Moreover, an RFP can be useful to hire the required stuff to achieve some of the project aspects. The information included in an RFP usually vary by the project’s type and stage.
Solicit Partnerships: An RFP can be used to find the right project partner to collaborate with by considering various factors such as values’ alignment, shared visions, and organizational capacity. An RFP is an excellent tool to solicit responses that give enough details about an individual or company for a business to determine if they are suitable for its project.
What is the RFP process?
A request for proposal is the most commonly used procurement tool by companies who seek to select the most optimal candidate for a business opportunity. It is usually submitted in the early procurement cycle; either at the preliminary study or procurement stage. The proposals that are submitted as a response to an RFP are analyzed and selected using different criteria such as price, qualifications, and experience.
REFs are unique. However, some common steps can be stated as follows:
Preparation: A significant amount of preparation is needed when writing and administering an RFP. Gathering all relevant and up-to-date information about a business opportunity is imperative to define exactly what the company is asking for. Providing detailed requirements in the RFP document will solicit more accurate responses from the potential suppliers as well as make the whole process easier for the administrator as there will be less likely any type of confusion or unanswered questions.
Draft of the RFP Document: Once the criteria are fully determined the RFP document should be drafted and the evaluation and selection process defined. The following questions need to be answered:
- Why? Reasons why the company is using an RFP.
- Who? Description of the company’s background.
- What? Description of the nature of the opportunity.
- How? Needed information respondents must provide such as proposal evaluation requirements and contract award requirements.
- When? Selection process deadlines with the contact information.
Issue the RFP Document: A business might have a shortlist of candidates if an RFQ has already been issued. However, if this is not the case then a tendering service can be useful to enable the RFP to reach the targeted audience; by using the help of gateway organizations that can circulate the RFP document to a broad range of prospective suppliers through portals.
Host an Informational Meeting: Hosting an open meeting with the interested parties can be a great opportunity to meet the proponents and to provide them with additional information they might need to respond.
The Proposal’s evaluation: Once received, the proposals are passed to the evaluation committee to be assessed against the relevant selection criteria outlined in the RFP document. Make sure that the criteria are relevant to your needs
Proponent’s notification: Once the selection process is done, both successful and unsuccessful proponents need to be notified. Individual debriefing sessions can be hosted if requested.
Sign the Contract: When the chosen proponent agrees, a contract is negotiated and signed between both parties.
How to facilitate your RFP process?
Once you receive offers from your potential suppliers, your business might lack enough funds to source its needs. You can choose to go for a bank loan. However, that would mean you try and secure a credit line is involved and more debts on your balance sheet; meaning that you might not be eligible for one. Therefore, if your business can’t qualify for a bank loan, you can choose to factor your good invoices to a factoring institution. This is a good option, as the credit risk is equal to the default risk of the high-quality customer, and not the seller.
Instead of having to wait up to 30, 60, or even 90 days to receive payment, you can factor your creditworthy invoices and have access to instant working capital to ease your cash-flow by unlocking the tied-up cash in your account receivables.
Here how it works:
- Your company submits creditworthy invoices to the factor;
- The factor verifies the invoices and the customers’ satisfaction;
- You receive an advance, up to 90% of the value of the invoice, depending on the industry;
- You can be approved in as little as 24 hours as your personal credit score isn’t considered;
- Fast application process along with no upfront fees;
- Your business has no additional debt, and you can source funds to afford your suppliers’ offers for your immediate.
What are the advantages of RFP?
Preparing a request for proposal is an excellent primary step to find the right vendor from whom your business can outsource needed goods or services. Some of its benefits can be stated as follows:
- Negotiate a lower cost of the project
- Detect false assumptions or unrealistic expectations through vendors’ feedback
- Determine which part of the project is better suited for the internal team
- Create competition between suppliers
- Equal opportunity for your suppliers
- Generate competitive advantages for your business.
How to finance your RFP?
When your business receives a large order from your customers, and you get an offer from your suppliers to whom you have issued an RFP, but you still lack the funds to cover your order, a bank loan would usually be your first thought. However, depending on your credit line and your business lifecycle stage, you might not be eligible for one. In that case, invoice factoring can be a brilliant solution for you.
You can choose to contact a factoring company as an alternative to bank financing to get the required funds for you to fulfill your order. In fact, the factor will verify the order, issue a financial capability letter and provide you with the needed funds. In return, you must factor the invoices resulting from that transactions to cover the upfront payment. Once paid, the remaining balance will be returned to your business minus the service fees.
The financial capability letter that the factor issues confirms to both your customer and supplier that you have access to sufficient financial resources to cover the purchase of goods.
Businesscash, acting as both your factoring company and PO financier, not only helps you acquire the needed funds to pay your suppliers, but you can also benefit from their industry awareness and professional expertise and assistance when deciding which offer to result from your RFP is the most optimal and beneficial for your business.