If you’ve worked for any length of time on the vendor side of a B2B business, you’re likely accustomed to receiving RFPs from clients interested in your products and services. Short for “request for proposal,” an RFP is a document that a company searching for enterprise-level services can use to get an overview of offerings and costs from several vendors at once. If a vendor participates in an RFP, it answers a series of questions about the products, services, methodology, and costs that will go into fulfilling the company’s needs.
Given how large a role the RFP plays in enterprise software, it shouldn’t be surprising that many of us have strong feelings on how they should be structured. My colleague Chris wrote an article arguing that many companies are “getting the RFP process wrong.” By not performing enough due diligence prior to sending out the RFP, he wrote, a company is alienating the very vendors that could best serve its needs.
Another problem plaguing the modern RFP is that, in many cases, it isn’t an RFP at all. It’s become an umbrella term that’s applied to RFPs, RFIs, and RFQs. All three have certain features in common, but each has clear distinctions, and understanding those distinctions will vastly improve your selection process as you search for a vendor. Here’s a rundown of each document’s distinctions and guidance on when you should use it:
Short for “request for information,” the RFI is really a preliminary document used by companies that don’t understand the marketplace they’re about to enter. In the case of a company searching for a customer relationship management (CRM) solution, for instance, it would use an RFI if it had no prior experience with CRM and wanted to gain an understanding on the range of options in the CRM space.
Because the RFI is more of a fact-finding document, you’ll want to ask open-ended questions, ones that allow the vendor to talk about its full range of offerings. Typically, the RFI will state the broad business challenges you’re having, and then the vendor can tailor its response within the context of those challenges. Oftentimes, the vendor will explain its position in the marketplace (for instance, what industries it specializes in), how it licenses its product, and what other fees you can expect.
An RFP, “Request for Proposal,” is a document that asks vendors to propose solutions to a customer’s problems or business requirements. An RFP is usually what follows an RFI; in fact, it’s rare that a company will go from an RFI to an RFQ (for reasons that will become clear below). An RFP should contain much more specificity in terms of what a company’s needs are by outlining the business goals for the project and identifying specific requirements that are necessary for the work being requested. The key to this document is that there is sufficient detail to give vendors the context they need in order to propose a valid solution, yet it still needs to allow enough leeway for the vendors to apply creativity and best practices to fulfill those needs.
Short for “request for quotation,” the RFQ is an even more detailed document that drills down to the exact specifications required by the company. In a situation where an RFQ is used for a B2B software project, the company knows enough about its current system and exactly how it wants to change or improve it in the future.
Unlike the RFP, which allows for the flexibility of the vendor to suggest creative solutions to the problem, a company deploying an RFQ isn’t looking for creativity, but rather for the vendor to deploy the software using predetermined specifications. Typically, the RFQ contains a table that lists each requirement and then asks the vendor to assess its ability to meet that requirement. The vendor then will specify whether it can meet the requirement out of the box, whether it will require some configuration, whether it will require some custom code, or whether it will require leveraging a third-party vendor.
As a business owner or procurement manager, you’ve likely encountered the terms Request for Proposal (RFP) and Request for Quote (RFQ) when engaging with vendors and suppliers While they may sound similar at first glance, these two documents serve very different purposes in the sourcing process Understanding when to use an RFP vs an RFQ is critical for maximizing value and choosing the right partners.
In this comprehensive guide we’ll break down the key differences between requests for proposals and requests for quotes including
- Definitions and purposes of each
- When to use RFPs vs RFQs
- Structure and contents
- Key questions to ask
- How to create effective RFPs and RFQs
Let’s dive in!
RFPs and RFQs Defined
First, let’s clearly define what these two acronyms mean:
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Request for Proposal (RFP) – A document that solicits proposal plans from potential vendors that explain how they would approach a specific project or problem.
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Request for Quote (RFQ) – A document that solicits price quotes from vendors to supply specific goods or services.
Now let’s explore the purposes and key differences between RFPs and RFQs in more detail:
Purpose and Use Cases
RFPs
A request for proposal is used when an organization wants to research multiple potential solutions for a project need. The buyer is looking for expertise from vendors on how best to execute the project, not just competitive pricing.
RFPs are commonly required for public sector or nonprofit projects to ensure a fair, unbiased vendor selection process. They may also be used by private companies exploring new initiatives outside their core competencies.
Examples of when to use RFPs:
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A city wants to install a new public transit system and issues an RFP so vendors can propose solutions.
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A nonprofit needs to select a new CRM system and sends an RFP to software vendors to suggest the best platform and implementation plan.
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A retailer opening stores in a new country uses an RFP to get localization and logistics expertise from global suppliers.
RFQs
A request for quote is used when an organization knows exactly what goods or services they need and wants competitive price quotes from vendors. The specifics are defined upfront by the buyer.
RFQs work well for simple, straightforward purchases where the quality and specifications are already decided. Price becomes the primary evaluation criterion.
Examples of when to use RFQs:
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A factory buys a specific part regularly and sends an RFQ to machine shops to compare quotes.
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A business needs standard laptops for new hires and collects RFQs from electronics suppliers.
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A marketing team needs event T-shirts and gets RFQs for the same design from various printing vendors.
Structure and Contents
The structure of RFPs and RFQs is similar, but the contents and questions vary significantly.
RFP Structure
A request for proposal often follows this basic structure:
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Introduction – Overview of the project background, goals, and timeline
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Scope of Work – High-level description of project deliverables and requirements
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Proposal Guidelines – Instructions and requirements for submitting a proposal
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Evaluation Criteria – How proposals will be assessed and weighted
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Company Overview – Questions about the vendor’s experience and qualifications
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Proposed Solution – Requests details on the vendor’s approach, methodology, deliverables, timeline, and pricing
RFQ Structure
A request for quote has a simpler structure focused only on the product or service details:
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Introduction – Brief background on needs and timeline
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Specifications – Detailed requirements including quantities, sizes, materials, colors, features, etc.
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Submission Guidelines – Instructions for submitting quotes and timeline
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Pricing – Requests itemized quotes and cost breakdowns from the vendor
Key Questions
RFPs and RFQs ask very different questions to Procure information from vendors:
RFP Questions
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How would you approach completing this project? What is your methodology?
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What are some unique solutions you can offer based on experience with similar projects?
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What specific deliverables, resources, and timeline do you propose?
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What will the implementation/management process look like?
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How will you ensure high quality outcomes?
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What are the total estimated costs broken down for the proposed solution?
RFQ Questions
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Can you provide the specified materials/products in the quantities and time frame requested?
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What is your unit price for each item requested in the specifications?
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Are there minimum order quantities or volume discounts?
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What are your payment and delivery terms?
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Does your price include shipping/installation costs?
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What is the total quoted price incorporating all costs?
How to Create Effective RFPs and RFQs
Now that you understand the distinct purposes and differences between RFPs and RFQs, here are some tips for creating polished documents that get great vendor responses:
RFP Tips
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Provide as much detail as possible about goals, needs, specifications, and evaluation criteria.
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Ask insightful questions to understand the vendor’s approach, experience, and capabilities.
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Keep an open mind to creative solutions vs dictating all requirements upfront.
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Leave room for back-and-forth dialogue and clarification during the process.
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Use RFP templates to ensure you include all key sections and follow best practices.
RFQ Tips
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Include very detailed specifications so vendors can provide accurate pricing.
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Focus questions on pricing, quantities, terms, and costs.
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Set a defined submission deadline for fair comparison of quotes.
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Use an RFQ template to efficiently create a polished, professional document.
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Leave little room for interpretation or variability between quotes.
Key Takeaways
To recap, the key differences between requests for proposals and requests for quotes include:
RFPs
- Solicit proposed project plans and solutions
- Buyer has a problem to solve and seeks vendor expertise
- Flexibility for vendors to get creative and demonstrate capabilities
- Evaluation based on project approach, solution quality, fit, and cost
RFQs
- Solicit price quotes for defined goods/services
- Buyer knows exactly what they want to buy
- Vendors respond with pricing based on set specifications
- Evaluation heavily weighted on lowest cost
Understanding when to use RFPs versus RFQs will ensure you receive the right information to select the best vendors and partners for your organization’s needs. With this guide, you can confidently create tailored documents that lead to successful outcomes.
Which one is best?
As a vendor, I come to this issue with certain biases, but I prefer the RFI-RFP route as opposed to an RFQ. Why? Typically, clients that come to us with an RFQ tend to be closed-minded in their approach. Because you’re not opening yourself to the creativity and the accumulated institutional knowledge of the vendor, you’re basically signaling that you don’t want to learn anything new, nor do you want to open yourself up to new approaches.
In my experience, many customers mistakenly name their RFQs as RFPs, but when you go to respond you are not allowed to “propose” a variety of solutions and have subsequent conversations about your proposed options, which is the purpose of an RFP. In these cases, you are simply asked to fill out a list of requirements and give detailed costs for each line item, which by its definition is simply an RFQ.
An RFQ is appropriate for a project in which you are adding on to or augmenting an existing system. For instance, Cobalt offers cloud migration services for organizations already using Microsoft Dynamics 365 products and services. If you’re moving from Dynamics CRM on-premises to Dynamics 365 online, an RFQ would be the right thing to send our team in the assessment phase.
However, I believe the RFQ approach is inappropriate for a project in which you are planning on implementing an entirely new system. We also offer CRM implementation packages and Microsoft Dynamics 365 for small business success for companies that want a new, enterprise-level CRM at a price small businesses can afford. In those cases, we would much rather see an RFP, and here’s why.
You can easily fall into the trap of requesting that vendors provide you a system that does exactly what your current system does. If that is the case, then you need to take a hard look at why you are implementing a new system in the first place and make sure your business goals are in line with your project goals.
Typically, you are looking to implement a new system because what you are using today doesn’t meet your needs. If that is truly the case, how can you know what systems out there will meet your needs unless you give the vendors the flexibility to discuss your current business processes in a collaborative manner?
If you simply put out a list of detailed needs based on what you do today, you will get responses in which vendors try to shoehorn their solutions to meet that list and miss the opportunity to truly change your business for the better. The RFQ mentality, in short, undercuts some of the positive changes you can see in your business processes as a whole. And turning a blind eye to change is the quickest path to a company’s obsolescence.
Knowing these 4 terms will make you stand out in I.T. – RFI vs RFP vs RFQ vs SOW
What is the difference between an RFP and a RFQ?
A Request For Proposal (RFP) and a Request For Quote (RFQ) are very similar, and many use the terms interchangeably, but these two processes are not the same. They both serve the same purpose of obtaining bids from vendors, but in very different ways. Construction project managers need to understand the difference between RFPs and RFQs.
What is a request for Quote (RFQ)?
Related: Q&A: What Is an RFP What is a request for quote? A request for quote (RFQ), sometimes also referred to as an invitation for bid (IFB), is a process in which a company or organization chooses contractors or suppliers to submit price bids and quotes for the chance to complete certain projects or tasks.
What is a request for Proposal (RFP)?
A request for proposal, known as an RFP, is a document a company or organization uses to outline the requirements for a specific product, service or project it wants.
What is a request for proposal?
A request for proposal is the documentation used by companies to gather information and build consensus about a product or service they want to procure from potential contractors. The request for proposal is typically more complicated than the RFQ; because it contains information beyond just pricing.
