Outsourcing is not easy and it’s easy to get over-whelmed with various legal terms and jargons. Enterprises that are new to Outsourcing are often confused with various acronyms like RFI, RFP and RFQ. Knowing the difference helps in crafting a good Sourcing Strategy and thereby execute Sourcing engagements well.
RFI – Request for Information
In many cases, e.g. in a market with many service providers, it may be useful to carry out a Request For Information (RFI) process prior to the RFP submission. An RFI is designed to collect information from a supplier or vendor with no commitment to engage in any particular project. Many a times, in an RFI no project details would be provided. Instead the document would focus on the vendor capabilities, skills and experience. This will enable the client organization to pre-select service providers who have the appropriate abilities for submitting a proposal. RFI also helps vendors eliminate themselves if they cannot fulfill the stated needs of Client.
RFP – Request for Proposal
The Request For Proposal (RFP) are detailed specifications on the services to be rendered by the service provider. RFP should include, among other things, the following items:
- Requirements (Business, Technical, Operational, Security, Compliance, legal, Quality requirements etc)
- Service Level Agreements
- Change Management Procedures
- Acceptance Criteria
- Pricing Models
- Evaluation Criteria
- Penalty
- Working Environment
The next step after RFP is “Contract”.
RFQ – Request for Quote
Usually based strictly on Price. The RFQ focuses on a quote that has a certain valid period. RFQ is much more likely when the primary terms of the deal are financial, and other elements of performance are not significant.
You always start off with RFI, short-list vendors and then issue RFP, seeking RFP-response from vendors. Many state and Federal agencies issue RFP (skipping RFI) only to known vendors with whom they have worked before. Still it’s a good idea to issue an RFI during initial stages of Sourcing (while the scope may not be that clear) to atleast understand what they might be dealing with from Financial perspective.
Procurement – is the process of contracting and executing the contract.
Contracting – is the creation of binding agreements between client and service provider, bound by law.
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