Step Three of Vendor Selection: How to write RFPs and RFQs

A Request for Proposal (RFP) is used for services or complex products where the quality, service or final product will be different from each vendor. Negotiation points will depend on these differences.

A request for Quotation (RFQ) is used for commodities, simple services or straightforward parts with little room for differentiation between vendors. Negotiation points will depend on it things beyond the actual product or service such as delivery charges or schedules, packaging, or after-sale support.

The purpose of RFPs and RFQs is to evaluate each vendors ability to meet your company's interests.  They can also be used to leverage the competition between vendors to arrive at the best deal for all stakeholders within your company.  Most importantly, they start building the relationship between your company and the vendor.

RFPs and RFQs should contain the following:

1. Submission Details This should include items such as company address, contact name and deadlines.
2. Introduction and Executive Summary This should include a brief introduction of your company and the requirements of the product or service desired.
3. Business Overview and Background This should include an overview of your company's business, products, and market sector, which will help vendors understand your business needs, and provide background information.
4. Detailed Specifications For an RFP, detailed specifications that are qualitative are needed to drive the vendor selection process.  For an RFQ, quantitative specifications in the form of an explicit set of technical requirements including such things as measurements, minimum tolerances, and quality standards should be included. Other items that should be included include schedules, deliverables and milestones, including penalties and rewards if appropriate.  This list is not exhaustive; it is important not to miss anything.
5. Assumptions and Constraints This includes items such as expenses, upgrade modification allowances, licensing rights among other things.
6. Terms and Conditions These may include financing options delivery penalties, and service levels among other things.
7. Selection Criteria This information may be kept confidential, or it may be shared with prospective vendors to better help them to meet your company's needs.

Adapted from Request for Proposal (RFP) and Request for Quotation (RFQ), Step #3 in the Vendor Selection Process, about.com http://bit.ly/bZ3Brv