Understanding The Essential Differences Between RFIs, RFPs, and RFQs
In procurement, there are three types of formal requests one would typically encounter. Namely, Requests for Proposal, Requests for Quotation, and Requests for Information. Depending on which industry you're in, these terms may have slightly disparate meanings, but the primary differences between them would come from the processes engaged and outcomes expected. Within the construction industry, we see these requests as well, but RFIs are employed in a more distinct way.
Requests for Proposals or RFPs are designed, developed, and deployed during the procurement phase of a project and aim to source, select, and retain qualified, experienced, and competent service providers for jobs within relatively large and complex projects. Of the three, RFPs are more extensive and technical in nature. The owner or client requesting the proposal should provide the prospective bidder or respondent with a clear, thorough, and detailed understanding of the work or services to be performed and make allowances for it to distinguish itself from others through pricing, approaches, objectives, organizational structure, and key personnel. Within any well crafted RFP document, the full scope of work should be provided along with any applicable terms and conditions, background information, schedules, drawings or sketches, specifications, standards, requirements, legal or statutory obligations, client expectations, evaluation methodology, notices of preliminary site visits, prequalification criteria, and guidelines for the preparation and submission of each proposal. The form of contract to be used in the event of an award, can also be included.
Requests For Quotation or RFQs are also deployed during the procurement phase and an ideal tool for sourcing and selecting vendors or suppliers who would form part of an overarching contract requiring their particular goods, products, equipment, or materials. An apt example would be a request for quotation by a general contractor for the supply and installation of carpet on a new school or office building. The responses to these requests are often referred to as estimates, tenders, or bids, and essentially are priced summaries of the products or services to be supplied based on the specifications, details, and requirements provided. This summary would typically include any corresponding details, taxes, discounts, terms and conditions of engagement, warranties, time frames for delivery, and periods of validity. Having received two or more quotations, the client may then apply a number of selection criteria such as pricing, experience or history in providing such products or services, availability, capabilities and competences, references, and warranties. With a quotation selected, the client may then proceed to award and negotiate a subcontract.
Requests For Information or RFIs are a common communication tool found in use on almost all construction projects and serve to provide the contractor with a formal mechanism for clarifying unclear project requirements with the project's owner arising from unforeseen or changing site conditions, ambiguous or incomplete construction drawings or specifications, and conflicting information, requirements, or instructions. This differs from the traditional use of RFIs in seeking more information about the prospective bidder and its capabilities. Upon receipt of an RFI, the owner or client through the design team or project manager is required to provide a response to the Contractor's queries in writing. Based on some forms of contract, reasonable response times are clearly established within its special conditions, particularly as RFIs have become a tool for abuse, adverse productivity impacts, and claims of delay by some Contractors.
Notably, RFPs and RFQs are non-binding arrangements in which a client is not obligated to procure or hire the products or services being offered by any given contractor, supplier, consultant, or service provider. Clients should therefore be mindful that prospective bidders would incur some costs in responding to their requests for proposals or quotations. Whilst some might argue this is included in the cost of doing business, one way of not wasting the time or effort of any party involved is through the use of an Expression of Interest or EOI as a preliminary screening tool.
Essentially, the EOI is a form of advertisement which allows suppliers and service providers to confirm their interest in being considered for the works. These advertisements should include some information on the client seeking the procurement, a description of the proposed scope of work, type of contract, terms and conditions, procurement process to be engaged, and instructions for submission of a response.
It is important that both clients and providers clearly understand the different levels involved in the procurement process, as it would allow for all involved to make better and more informed decisions about requesting and competing for work.