The request for proposal (RFP) process is critical to making successful investments. In fact, many organizations already use RFPs without even knowing what they are. Whether they call it spreadsheeting, procurement, vetting or projects, RFPs empower buyers to evaluate vendors and make the right selection. So, what exactly is the RFP meaning and what goes into the RFP process?

Below, we’ll cover:

RFP meaning

So, what does RFP mean? RFP stands for request for proposal. An RFP is defined as a formal request in which the issuer asks vendors to submit proposals demonstrating how a product or service they offer can address one or more of the issuer’s key business needs.

Techopedia offers another explanation of the RFP meaning, saying an RFP is “a document issued by a business or an organization to request vendor bids for products, solutions and services.”

The RFP process allows issuers to determine which vendors are best qualified to help them overcome a challenge or achieve a strategic business objective.

Related RFP terms

To better understand what it the RFP meaning, we’ve compiled a list of related terms you should also know.

RFx and other document definitions

  • RFI – A request for information (RFI) is a document that solicits general information about the solutions and/or services vendors provide. Organizations generally issue an RFI prior to the RFP process.
  • RFQ – A request for quotation (RFQ) is a document that solicits pricing and payment information. Organizations often use this type of request when they know what type of solution they want and are only evaluating vendors based on price. Note: Some industries, like architecture, engineering and constructions (AEC) define RFQ as a Request of Qualifications. This is entirely different and pricing cannot be included.
  • BRD – A business requirements document (BRD) is a formal document that outlines the goals and expectations an organization hopes to achieve by partnering with a vendor to complete a specific project.
  • FRD – A functional requirements document (FRD) is a formal document that outlines how an organization expects their vendor to help them achieve a strategic business goal.

Procurement process terms

  • Procurement – Procurement is a term that refers to the process organizations undergo when making a purchase. The RFP process falls under the procurement umbrella.
  • Vetting – Vetting is the process of evaluating vendors to determine which one to purchase from and/or partner with.
  • Vendor scoring – Vendor scoring is the process of objectively evaluating vendors based on values assigned to their responses to a questionnaire.
  • Spreadsheeting – Spreadsheeting is often used to describe the RFP process when the issuing organization manages and scores vendor responses using spreadsheets.
  • Projects – Projects refer to executable plans organizations create to achieve key business goals, often with the help of vendors.
  • Vendor due diligence – Vendor due diligence — also known as buy-side due diligence — is the process of evaluating the risks involved in a partnership with a potential vendor. It helps organizations avoid or mitigate threats.
  • Sourcing – Sourcing is the process in which organizations identify and select vendors. (See also: Procurement)
  • Vendor management – Vendor management is the process of optimizing relationships with vendors and suppliers to receive better products, services and support, while reducing costs. It’s also known as supplier relationship management.
  • Vendor selection – Vendor selection is the process in which organizations determine which vendor to purchase from and/or partner with.

How the RFP process works

Broken down into its basic components, the RFP process consists of nine steps:

1. Brainstorming

First, the RFP team must come together to decide exactly what they’re looking for. Organizations should gather end-users, IT, finance, any other teams who will be impacted by the procurement decision or need to sign off on it.

Together, they should define the RFP, meaning the challenge they want to overcome or goal they want to achieve, as well as what success will look like.

2. Creating a meaningful RFP

Next, it’s time to write the RFP. While you’ll want to craft questions that speak to your specific needs and situation, the following RFP questions can help in almost every case.

  • Do you offer a trial? Free trials can give issuers a clear picture of what the vendor has to offer with no risk to their organization.
  • Who are your competitors? Asking this question can help issuers determine a vendor’s integrity. It lets issuers know whether the vendors are honest about who their competitors are and why they lose to them. It can also help issuers determine if there are other options they should explore.
  • What is your implementation process like? When purchasing software, setting it up correctly is crucial to maximizing its effectiveness. RFP issuers should determine how long the process will take and how involved the vendor will be.
  • What kind of training do you offer? The more complex the solution, the more important this question is. If you don’t understand how to use all the solution’s features and functionality, you may miss out on key benefits. RFP issuers should inquire about the scope of training vendors offer, as well as the formats (online, in-person, etc.).
  • How do you handle customer support? Almost all software users encounter an issue at some point in time. Issuers should determine how long vendors take to respond to customer support requests, as well as how they can submit those requests (by phone, email, live chat, etc.).
  • Can you provide references, reviews or case studies? In the absence of a trial, there’s no better way to determine the effectiveness of a solution than by learning about the experiences of those who already use it.

3. Soliciting responses

Now that you have your RFP written, it’s time to gather vendor proposals. In most cases, you’ll develop a list of vendors and ask them for responses directly, but some organizations also use bid services that post their RFPs publicly. This option can increase your responses, but it will likely lead to several irrelevant responses. You’ll also have to invest more time in scoring.

4. Initial evaluation

Once you’ve gathered vendor responses, you’ll want to score their answers. We recommend taking a weighted scoring approach, where you set weights (or point values) for sections and individual questions in the RFP. This allows you to objectively determine which vendor best fits your needs based on the criteria that are most important to you.

5. Shortlisting

Based on your initial evaluation, you can create a vendor shortlist — a list of five or so vendors who you will move on to the final stages of the RFP process. All the vendors in your shortlist should be serious contenders that you can picture your organization partnering with.

6. Negotiations

This is the stage where you ensure your organization is getting the best deal possible. Is there a vendor on your shortlist that would be well ahead of the rest of the pack if they just came down on price? Let them know. Most vendors will be happy to negotiate a bit — especially if they know how close you are to a purchasing decision.

7. Selection

Now to the fun part: Making your actual selection. Make sure to inform the vendor you’ve selected, as well as the vendors you didn’t. Remember to be respectful and consider offering feedback. Just because you didn’t select a vendor today doesn’t mean they won’t be a viable option for your organization in the future.

8. Signing the contract

It’s time to make it official. Be sure to have a lawyer review all contract language before you sign anything. You want to make sure everything is set up according to your expectations.

9. Ongoing review

Finally, you’ll want to continue reviewing your relationship with the vendor over time to ensure it’s meeting your needs and delivering the results you want to achieve. Make sure to let the vendor know about any areas where you feel they’re falling short so they have an opportunity to correct and meet your expectations.

Who is involved in the RFP process?

The RFP process involves several key stakeholders, such as:

  • Consultant – The consultant is responsible for understanding the needs of their client and properly explaining those needs within the RFP. They are also responsible for finding vendors to submit proposals and helping assess their qualifications.
  • Procurement professional– The procurement professional coordinates the creation of the RFP. They must work with several internal team members to determine exactly what the organizational pain is and what solutions they’re most open to.
  • CFO– The CFO will evaluate costs and return on investment (ROI) to determine whether a solution is financially viable.
  • Vendors — The vendors are the organizations who respond to the RFP and who the RFP issuers ultimately purchase from and/or partner with.

When to use an RFP

One of the biggest mistakes we see with RFPs is that organizations often use them at the wrong time.

That’s why it’s critical to understand when you should issue an RFP versus an RFI or an RFQ.

Use this infographic to help you select the right RFx document for your project.

Issuing an RFP

Use an RFP when:

  • You’re certain you want to make a purchase.
  • You have specific questions you want to address.
  • You have a good idea what you want, but you need more details.

Remember, issuing an RFP is a formal process and it requires a great deal of effort for vendors to create their proposals in response.

You should know what you’re trying to solve and be close to making a purchase but still open to suggestions from potential vendors.

Issuing an RFI

Use an RFI when:

  • You’re seeking general information.
  • You only have broad questions.
  • You’re not sure what you’re look for.

The RFI process is much less formal than issuing an RFP.

If you have a challenge you want to overcome or a goal you want to achieve, but you’re not 100 percent sure you’re going to make a purchase, this is a much better option. It helps you quickly get the information you’re looking for without asking for a major commitment from potential vendors.

Issuing an RFQ

Use an RFQ when:

  • You know exactly what you want.
  • All available solutions are extremely similar.
  • You only want to compare vendors based on price.

Because RFQs focus solely on pricing and payment terms, you only want to use this option when you don’t need additional information.

If you’re open to suggestions on how to achieve your goals or overcome your challenges, you’re better off issuing an RFI or RFP.

The role of technology in the RFP process

The RFP process involves a lot of moving parts and can easily become very cumbersome and time-consuming. That’s why organizations often use technology to streamline the process.

Unfortunately, many organizations turn to manual tools like Excel, Outlook and Word to manage their RFPs — which can be risky.

“There’s a lot of workarounds for not having RFP management software, but they’re just not the right tool for the job,” explained Brandon Fyffe, business development associate at CareHere.

Fortunately, Brandon and his team now use RFP360’s RFP management solution to manage their RFPs.

Here’s how it helps:

Creating the RFP

If you start issuing RFPs regularly, you’ll quickly notice you include a lot of the same information and ask a lot of the same questions.

RFP360 can help you create and store proven templates so you can craft an effective RFP in less time.

This helps organizations like Lockton — which issues RFPs on behalf of its clients to help them identify property and casualty, employee benefits and retirement solutions providers — deliver an improved procurement experience for everyone involved.

“We had templates in Excel, but we’d always have to add customizations. Then, we’d send multiple copies of those spreadsheets via email, and we’d have to track those emails individually,” said Eric Hollenbach, HR technology consultant at Lockton. “RFP360 helped us streamline our templates so we don’t have to add as much. We’re a billable-hour practice, so that reduction in time is great for clients. Additionally, we now have time to ensure our vendors understand the questions.”

Gathering responses

RFP360 also delivers enhanced visibility into the vendor response process so you can keep everything on schedule. This capability helps users at NFP — a leading insurance brokerage and consulting firm — save time and avoid unnecessary emails.

“Now, we know exactly when they open their RFP invite and if they’re working on their response,” said Mark Rieder, SVP of HR technologies and benefits administration at NFP. “It doesn’t take six emails to see their completion status.”

Scoring responses

Finally, RFP360 makes it easy to score RFP responses so you can find and select the right vendor — which is, after all, the entire point of engaging in the RFP process in the first place.

At ihouse — a consulting firm specializing in HRIS analysis and system selection, project management and systems consulting — users find this feature particularly helpful.

“What’s been most helpful about using RFP360 is the automated scoring,” said Ronni Beckwith, principal, HR technology consulting practice leader. “Before, when using an Excel template, we would have to go through each category to ensure there were no errors from all the copy and pasting. The Excel formulas would often break in the process. It took a lot of time to reconcile.”

Request a personalized demo to learn how RFP360 can streamline the RFP process at your organization.