Bidding success is the primary 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 about their general performance. Either the business offers services or goods, it needs to have the right quality for its targeted customers; meaning, before delivery of the final product or service to the end customers, there is a need to review and validate the quality process.
Top quality good or service is always the result of high 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 decision 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 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. Many commonly refer to this as RFP.
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. The RFP document is a tool which one can use for soliciting proposals.
One can use the request for proposal to present the preliminary business’ requirements, explaining the structure and needs’ format to the potential suppliers. In representing a good RFP, a company needs to state its current strategy. Whether short-term and long-term goals, along with a detailed insight into its need so that suppliers can provide a compelling 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 significant factor in public sector procurements.
What is the Purpose of an RFP in Project Management?
One can use an RFP for various reasons at different stages of a project. The primary 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 perform the project successfully.
You may also use RFP for:
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 varies 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 presented as a response to an RFP are analyzed and selected using different criteria such as price, qualifications, and experience.
What are some of RFPs necessary steps?
There is a need for a significant amount of preparing when writing and administering an RFP. Gathering all relevant and up-to-date information about a business opportunity is imperative to define what the company is asking. Providing detailed requirements in the RFP document will solicit more accurate responses from the potential suppliers as well as make the whole process accessible for the administrator as there will be less likely any confusion or unanswered questions.
Draft of the RFP Document
Once the criteria are entirely determined the RFP document should be drafted and the evaluation and selection process defined. There is a need to answer the following questions:
- What? 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 short list 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 an excellent 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 for assessment against the relevant selection criteria outlined in the RFP document. Make sure that the requirements are pertinent to your needs
Once the selection process is complete, there is a need for notification in both successful and unsuccessful proponents. Individual debriefing sessions can be hosted if requested.
Sign the Contract
When the chosen proponent agrees, both parties will negotiate and sign a contract.
How to Facilitate Your RFP Process?
Once you receive offers from 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, 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;
- Approval for your funding can be in as little as 24 hours as we don’t consider your credit score;
- Fast application process 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 are as follows:
- Negotiate a lower cost of the project
- Detect false assumptions or unrealistic expectations through vendors’ feedback
- Determine which part of the plan is best suits 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. 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 payment is made, there is a need to return remaining balance 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.com be acting as both your factoring company and PO financier. This will help you acquire the needed funds to pay your suppliers. Additionally, 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.