Are you one of the 77% of procurement professionals who think that their RFP process isn’t ideal?
When you consider that, on average, RFPs generate 35% of a company’s sales revenue, this figure suggests a major loss in company income.
The success of your company may very well depend on your RFP process – particularly on how refined and specific it is. Without an effective request for proposal process in place, you are likely to lose both money and time looking for the right service vendor.
In the previous article, we looked into the RFP meaning. This one outlines an efficient RFP process that will give you an edge over your competitors and attract suppliers that are right for your project.
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What Is an RFP Process?
The RFP process is a series of steps an organization needs to take to prepare, draft and issue a request for proposal: an open request document for bids to complete a project for the organization.
The purpose of an RFP process is to collect, articulate and specify the business requirements, open up the competition between vendors and encourage a variety of service or solution proposals the company requires.
The 6 Essential RFP Process Steps
Although there is no formula set in stone for an RFP process, following the steps below can set your organization on the right track.
1. Assemble Your Team
The first step in your RFP process should be putting together a team that will be responsible for all RFP stages. This team should consist of all the relevant people in your organization who can contribute – from stakeholders, the person(s) who will draft the RFP, the approvers and so on.
Assigning a project manager is vital in this process as they make sure the RPF process is on track and meets the set deadlines.
2. Collect Business and Solution Requirements
When your company is looking for a service or solution provider, it is essential to provide prospective vendors with the background and the context to understand your business and its needs.
Knowing the exact issues you wish to address will empower vendors to respond adequately. Therefore, it is in your best interest to make the RFP document as clear as possible and for that, you need to provide crucial information about your business.
Below are the four vital areas of discovery that you should consider when gathering your business and solution requirements.
All stakeholders must be on the same page about your organization’s needs:
- What solution are you looking for?
- What issue or challenge do you need to solve?
- Are you looking for a one-time project or permanent support?
Use the answers to these questions to detail the purpose of your RFP, set the expectations and ensure you get proposals from the most qualified vendors.
In your RFP, explain what your business is trying to achieve. What would the successful outcome be? Ask your stakeholders how they expect the vendor to help you reach your goals. What will be the role a vendor will play in helping you achieve success?
Criteria For Evaluation
How will you rank and score the received proposals? What is the most important information that will help you make the decision? Price, the estimated timeline, customer experience or something else? During the collection of requirements, discuss the most important ranking factors with your team.
Any additional notes about the solution or service you are procuring should not necessarily be the requirements but rather a list of “nice to haves” that would improve your view of the vendor’s offering. This will encourage vendors to highlight these if they offer additional solutions while not discouraging vendors that don’t offer them.
3. Draft the RFP
At this stage, the team in charge of writing the request for proposal drafts the document following the structure below to successfully illustrate vendor expectations.
An RFP document must have an introduction that is the basis for the request and also a summary of what the vendor will find within the document.
In this introduction, offer a summary of the project for which you are looking to procure a vendor. Make it brief, in a few main points and explain who you are as an organization – what you do, what your industry is, etc. Make sure you also include the proposal due date.
In this part of your RFP document, provide detailed information about your organization – your objectives, your mission, similar projects you had in the past, info about the people in your company who will review the proposals, etc.
Again, it’s very important to go into details when explaining what the vendor needs to provide, what tasks you need to be completed or the products you need to obtain. In this part, you can include the entire scope of work detailing specific duties that you need them to perform.
In this section, list all the information you want vendors to provide in proposals they submit. Think of it as an instruction manual for suppliers responding to your request for proposal.
Expectations From Vendors
Here, outline what you, as an organization, expect from vendors in terms of price, deadlines, communication and other factors that can help you identify the best proposals. Including information such as the budget would help you narrow down your search to companies that work at suitable rates.
The Selection Criteria
Your RFP document is not complete without a section explaining the criteria you will use to choose the winning vendor, once they all send their RFP response. If you include this explanation, suppliers will be able to provide more targeted proposals and will make your decision easier.
Timelines and Deadlines
The final part of your RFP should be reserved for necessary timelines such as the due date for proposals, payment schedule, due dates by which you must sign a contract with the vendor or a date by which a vendor must supply the service or solution.
4. Distribute Your RFP
Once the RFP is completed and reviewed, you should distribute it to potential vendors. One way to do it is to create an RFP web page with an online form that requests all relevant vendor information, as well as a downloadable, editable version of the document.
Also, it is advisable to send an email to potential suppliers with a broad overview of the process and include a link to the RFP webpage that contains the info in more detail. Don’t forget to mention major deadlines and direct contact info in your initial communication.
5. Review Vendor Responses
At this point, vendor responses should be flooding in. With the criteria you set in your RFP, review the proposals to find the most qualified service provider.
To better evaluate each of them, you may ask yourself these questions:
- Did they provide a timely and adequate proposal?
- How long have they been in business?
- Will the vendor be able to scale as your business grows to meet your future needs?
- Are they a member of a trusted organization, trade association or certified by a government agency?
- Do they have experience working with your market or with other businesses in a similar industry?
Next, narrow down your list of preferred vendors to two to five and set up virtual or live interviews with them to ask them specific questions about the team and their processes.
To help you shortlist the preferred suppliers, consider the following steps:
- Compare critical factors to vendor strengths
- Identify differentiation factors for an in-depth comparison
6. Negotiate and Sign the Contract
After you have identified the best fit for your project, you need to negotiate the terms and by that, we don’t just refer to the rates, but just as importantly – the deadlines and deliverables. The request for proposal process is only finished once both parties have agreed on the contract’s terms.
Once these are agreed upon and the contract is signed, the RFP process is concluded and the vendor begins work on delivering the services for the realization of your project.
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Who Are the Key Figures in the RFP Process Flow?
As we’ve pointed out in the previous section, the first step in creating an RFP flow that yields results is to put together a dependable team. Approximately 37% of organizations have a dedicated person or team in charge of the RFP process.
This team should consist of these people and roles:
- RFP consultant: A person responsible for understanding the needs of their client (a company procuring services and drafting an RFP). Their role is to articulate and explain these requirements in the RFP and to help select the most qualified vendors. They also may assess vendor qualifications and facilitate communication with them.
- Procurement professionals: Individuals responsible for coordinating the RFP creation by working with internal teams to establish the organization’s pain points and what would solve them. They communicate your initial request with the vendor, oversee the progress and evaluate vendor responses.
- Chief Financial Officer: A CFO evaluates the cost and ROI of the RFP to decide if the requested solution is financially viable.
- Company stakeholders: A business unit that requests the product or service and determines what it should accomplish and what results it should generate. They also take part in evaluating and scoring an RFP response.
How Long Does an RFP Process Take?
Although there is no definite answer regarding the duration of the RFP process (each procurement project is unique and looks to solve specific challenges), you can brainstorm and establish an approximate timeline for your RFP process based on:
- Any research that needs to be done
- The first RFP draft
- Stakeholders reviewing the draft
- The document being sent to vendors
- Deadline of RFP responses
When you have an idea of how long each of these RFP stages will take, then you are close to estimating the total duration of your RFP process, from gathering requirements to signing a contract with the vendor.
RFP Process Takeaways
An efficient and well-structured RFP process is essential for a successful procurement process.
It can be used to produce:
It can make the difference between losing and making money for the organization and is a sure-proof way of attaining the quality service or solution needed for the realization of any project.
The fundamental steps of any RFP process include:
- Assembling a team in charge of the RFP process
- Collecting business requirements
- Drafting the RFP document
- Sending out RFP to vendors
- Reviewing vendor responses
- Negotiating and signing the contract
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