RFI vs. RFP vs. RFQ: What's the difference?
The acronyms for a request for information (RFI), a request for proposal (RFP), and a request for quotation (RFQ) are similar enough to be easily confused. Yet they each serve a distinctly different purpose.
It is easy to mix up the acronyms RFI (Request for Information), RFP (Request for Proposal), and RFQ (Request for Quotation). Yet they each serve a distinctly different purpose.
When sourcing possible suppliers, how do you know whether to use RFI, RFP, or RFQ? This guide identifies the definition for each, what they’re best for, and the challenges associated with each method.
To begin, let’s look at a definition for each.
What's a request for information (RFI)?
A request for information is a standard business practice that collects written data on the capacity of various suppliers. It’s formatted to make it easy to compare suppliers and find the optimal option.
RFI definition: An RFI is a document companies use to gather information about a product or service they are considering purchasing. They also use it for record-keeping, such as storing responses in an internal database for future projects.
The benefits of RFIs
RFIs help a company stay organized by:
- Adding a layer of formality to the bidding process
- Vetting their options
- Gathering updated information on the current market
What's a request for proposal (RFP)?
A request for proposal is a document asking contractors to submit bids and ideas for a project.
It’s a valuable way for companies to lay out the issues or projects they are trying to solve. In addition, creating RFPs to manage the execution of new projects is standard practice for most organizations.
RFP definition: An RFP is a document companies use to ask potential suppliers for detailed proposals for a specific product or service they are considering purchasing. It includes information about the work, how the company will evaluate proposals, and the proposed contract terms.
The organization posts its RFP announcement publicly to connect with contractors and receive competitive bids. An RFP doesn’t just describe the project. It also includes the specific company goals associated with the project and bidder and contract terms.
The benefits of RFPs
It helps to think of an RFP as an advertisement you might post on a community bulletin board. Vetting the best supplier offers provides a few significant benefits:
- RFPs keep project costs low (because of supplier competition for projects)
- RFPs provide visibility across all their supplier options
- RFPs add a layer of formality when dealing with suppliers
What's a request for quotation (RFQ)?
A request for quotation is a process businesses use to gather quotes from potential vendors to complete a task or project. An RFQ is helpful when production runs on a schedule and an organization has a predictable project lifecycle.
RFQ definition: An RFQ is a document companies use to ask potential suppliers for price quotes for a specific product or service they are considering purchasing.
When organizations request a quotation from a supplier, it is because they’re likely to work with them. The company hiring the supplier wants to know specifics on payments and pricing.
An RFQ includes highly detailed specifications on what the vendor needs to deliver. Suppliers that provide the lowest price generally win the contract.
Remember that price isn’t always the defining factor in a company’s preference for a specific supplier. Factors beyond price — like reliability, quality, and capacity — also play a vital role in the decisions made at this stage.
The benefits of RFQs
Requests for quotations come with their own set of benefits, including
- Targeted quotes from suppliers organizations want to hear from
- Insight into the potential costs of a project for future planning
- Effective cost-savings management
RFP vs. RFI vs. RFQ: Purposes
Each motion serves a different purpose. For example, an RFI (request for information) informs an organization of its options. Then, as suppliers enter bids and open that line of communication, businesses can make optimal decisions driven by data.
Next comes the comparison stage with a request for a proposal. A firm’s general operation approach is maximizing value and lowering costs. With a request for a proposal, businesses can carefully explore their options and gauge the value a supplier offers.
But what if companies want a breakdown of the cost of a specific task? That’s what a request for quotation accomplishes. Companies can get an estimate from certain suppliers to determine a project's cost and benefits.
When to use an RFI vs. RFP vs. RFQ
Here’s a general overview of when it’s best to use each method regardless of your industry.
RFIs—At the beginning stages of completing a project, start with an RFI template. RFIs come before RFPs because you have to know the capacity of the current market to fulfill a task. With an RFI, you're informed well enough to request a proposal as the second phase of the supplier vetting process.
RFPs—After gathering enough information on suppliers and their capacity to complete a job, an RFP is in order. RFPs are necessary if a project is complex enough. A highly technical project benefits from an RFP because businesses can see formula proposals from various vendors and compare them objectively.
Request for quotations is best when exact quantities and requirements for a project are known. An RFQ lets companies see the price for completing their task or project. An RFQ helps make a final data-driven decision.
Challenges managing RFI vs. RFQ vs. RFP
Some organizations find it difficult to manage projects according to their individual needs when using RFP, RFI, and RFQ. Project management becomes increasingly important as a company grows in size.
The best way to manage all your proposals and requests is to:
- Centralize all documents associated with the RFQ, RFI, and RFP
- Establish company guidelines when writing an RFI, RFP, and RFQ
- Keep an accurate database of eligible vendors
- Make quick decisions on future projects
- Improve supplier relationships
Additionally, consider procurement management software. With cloud-based software, you automate many steps within the supplier vetting process. Procurement software makes managing, analyzing, and comparing data more accessible, ensuring you make the best supplier deals.
RFI, RFP, RFQ tips and tricks
Let’s start with some requests for information practices you can integrate into your RFP, RFQ, and RFI processes. During the initial stages, when you’re requesting supplier information, it’s essential to
- Stick with basic information – avoid outlining specifics
- Offer as much background data on the project and its challenges
- Establish the success metrics, or goals, of the RFI, RFP and RFQ
- Summarize your business needs succinctly
- Describe how you want your request for information to be answered in a clear format
Each RFI will ask for general information like
- Company goals and objectives
- Suppliers must provide credentials, capacity, and skills. Questions should cover business, certifications, solutions, and track records.
A request for a proposal includes details that suppliers need to create and submit a proposal to complete the project. A proposal, or bid, can consist of the following:
- A summary of needs
- Buyer introduction and background
- Goals and project scope
- Relevant attachments
- Project price and payment terms
- A general RFP timeline
- RFP sections and questions
- Terms and conditions
- Minimum vendor requirements
Keep in mind this list isn’t exhaustive. Different companies choose to include additional information, as there are no standard guidelines for drafting RFPs.
Generally, the more relevant information you can provide to help suppliers make their most informed offer, the better. During this phase, involving relevant stakeholders is critical. It leads to a more accurate RFP procedure.
Creating a template to standardize your internal procedures will improve the process of vetting vendors through RFI, RFP, and RFQ.
The final stage, RFQ, includes drafting detailed requirements to get an accurate quote from each vendor. Make more accurate decisions by being more precise about the project's complexity, needs, and tasks.
Be sure to include the following within your request for quotation:
- An outline of project requirements and an introduction
- Contact details
- Selection criteria
- Completion dates and contract requirements
- Cost and pricing details
Gather information on potential suppliers before sending an RFQ and making a decision.
You can help track the reasons for procurement decisions over time by organizing this information in a vendor management system.
Moreover, ditch paperwork and consider digitizing your efforts with procurement software to support all your RFQ initiatives.
The more you streamline the quote process, the faster you progress to negotiating contracts, completing projects, and staying ahead.
How Vendr helps with supplier selection and assessment
Vendr works with businesses to streamline their purchasing processes. Vendr partners with your finance team to help manage the RFI, RFP, and RFQ process when buying SaaS.
Vendr leverages relationships with more than 2,000 SaaS suppliers to assist in your RFI, RFP, and RFQ processes. Vendr uses data from 17,000+ software purchases to gather information about a supplier's capabilities, experience, and capacity to deliver the SaaS solution you need.
When buying software, work with Vendr to
- Gather data-driven negotiation and pricing insights for each supplier and prioritize the most significant cost-saving opportunities.
- Achieve successful contract negotiation with expert buyer support
- Expedite internal procurement procedures once you are ready to purchase
Would you give your company's software purchasing process a high grade? If not, our guide, Perfect your SaaS purchasing process, can help you improve it. It covers the top 10 ways to upgrade how you manage and buy software instantly. By implementing these strategies, you will save both time and money in the long run.