The Request for Proposal (RFP) is a document used by an organization (generally, a government agency) to implement a "strategic procurement" initiative. The document requests a proposal from multiple vendors to provide either a product or service to the organization, and sets the guidelines that suppliers or vendors must follow in responding. The proposals are then evaluated, and a contract negotiated accordingly.
With an RFP, the purchaser attempts to leverage organizational purchasing power and the number of bidding vendors to obtain the lowest possible price for the best value: information which is then used to negotiate a contract with the chosen bidder. An RFP creates a competitive situation for vendors, ensures compliance with a vendor's requirements, and puts the burden on a vendor (or vendors) to show that they can deliver a product effectively, on time, at a low cost, and maintain and service that product (if necessary).
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A successfully negotiated contract benefits the winning bidder by bringing in either a substantial piece of revenue (as in the one-time supplying of many products, like a fleet of trucks), or by guaranteeing a long-term revenue stream, such as supplying products or services over a period of time. (For example, a 10 year contract for elevator supply and maintenance.)
RFPs are laborious, to say the least. Responding to an RFP requires a substantial investment of time and energy, facing thick competition, and often doesn't result in a successful bid, leaving vendors frustrated. Given that the deck appears stacked against most vendors, why bother? Failing to respond to RFPs can negatively impact future business with organizations, as well as mean losing out on one or more valuable revenue streams. It's not a lottery, though, and your first goal in drafting a proposal should be to ensure your company stands out in its ability to deliver your profit or service in a profitable and timely manner.
Respond Directly _ In Detail
An RFP is at its essence a company's request for a very specific kind of assistance. Any suggestions outside of the range of the guidelines of the RFP document will immediately disqualify your company. There's no use in offering solutions that haven't been requested or don't directly respond to the supplier's business issues and specifications. Respond in kind to the request.
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Ensure your cost estimates are accurate. While minimizing future cost creep, such as hardware support, or training for staff, will reduce your estimate keep in mind that most RFPs originate with government agencies or organizations with substantial bureaucracies well aware of "budget bloat" who are approaching vendors because of organizational efficiency and cost effectiveness.
Ensure Staffing Solutions _ Quality Assurance
Confident that your company will respond to concerns immediately. Your company should have a full-time account manager position to liaison with the organization, as part of the broader framework of a quality assurance strategy. Consultants should be included in this strategy, and make note of them in your corporate profile.
Your Competitive Advantage
What is your "point of differentiation?" Take the time to articulate what sets your company apart from the competition, your business vision, and other relevant and distinguishing characteristics. Boasting about your strategic advantage is useless without proving to the supplier previous instances where your company has performed when required, or even out-performed. Make sure you list past clients that will attest to your company's abilities.
Responding to RFPs requires hard and intelligent labor on the part of your organization, but they represent unique opportunities to tap into lucrative revenue streams and to increase your company's profile within the market. Treat a proposal with the respect afforded your business plan or annual report, and you will find it pays dividends.