RFP in Project Management - Overview and Explanation

What would it feel like when you are solving a puzzle being blindfolded? Sometimes, you will feel like you do not know what you are building. 

This is exactly what it feels like when you are jumping into a project without clearly understanding the offerings by the vendors. Thus, RFP in project management is a documentation sent to different vendors by the client requesting details of their services, costs and more.

Let me explain it further in detail here. 

What is an RFP in Project Management?

In project management, RFP stands for 'Request for Proposal', which is a formal document that organizations use to outline their requirements and get the best bids from different vendors.

When I worked as a project manager, we used RFPs to outline the project requirements, expectations, and selection criteria. This documentation helped potential vendors understand the scope of work, present solutions, and pricing. Therefore, when issuing an RFP, I ensured that all parties understood my expectations. This became particularly useful for bigger projects that needed many subcontractors.

RFP in project management begins with outlining the project's background and objectives. It is important to be detailed in this section to provide vendors with a solid foundation for their proposals. After that, I describe the specific tasks and deliverables that my vendor needs to complete the project. Additionally, I outline any technical requirements, qualifications, and resources that are necessary for the project. 

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Steps Involved in an RFP Process

Reading the above description it may seem that RFP creation is quite a hectic process, but let me show you that it is not. Creating an RFP in project management generally involves three basic steps:

1. Creation

2. Administration

3. Evaluation

Let us see each of the steps in detail and what the steps specifically consist of:

Step 1. Creation

This is the first step in creating the RFP in project management including a lot of details. Some of the essential details that need to be covered are, planning, interviewing stakeholders, research, and documentation. As far as my experience this is by far the most important and difficult part of the process. Let me list some of the questions that you may answer in your RFP documentation:

1. What do you want to accomplish with your purchase?

2. Requirements and the overall scope of your project.

3. Clearly outline the budget of the project.

4. Define the submission requirements that need to be followed.

Additionally, design some questions that you need to ask your vendors, it might be related to vendor experience in the industry, etc. Finally, as you are making an RFP ensure to keep it as a template to review later. 

Let me also help you out with some of the sample questions to be asked for RFP documentation:

1. Who are your competitors?

2. What is the outline of your implementation process?

3. Do you handle customer support, if yes, how?

4. Do you offer trials?

With these, your RFP review and approval ends and now it is time to start with the next phase of RFP in project management. 

Step 2. Administration

Fortunately, this step is slightly less intensive than the other steps. Here we select vendors, issue RFPs, answer questions from vendors and send reminders. So, let me start my discussion with the first step which is selecting appropriate vendors. You need to conduct some research and then choose three qualified vendors based on their profiles. 

After the vendors receive RFP questions and invites, it is not uncommon for them to have some questions. In that case, you must gather the questions and sort them by list. Answer the questions and send the replies back to them through mail. Ensure that your replies are crisp and it does not promote any partiality over one vendor from the group. 

Step 3. Evaluation

This is the last stage for RFP in project management where you need to review the vendor proposals. In my opinion, it is just like selecting a winner in any competition, based on their performance. We can divide this stage into multiple phases, which are reviewing, scoring proposals, comparing your options, and gathering information. 

After the whole process, you can average the scores distributed to the vendors and create an RFP-weighted scoring. Compare the vendors and their offerings and try to narrow down your selection in this process. 

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Advantages of Using RFP in Project Management

Now that I have made your basic idea about the RFP design and implementation clear, time to see the advantages. Some advantages that are there in the RFP process are:

1. Receive Multiple Bids From Many Vendors 

One of the primary benefits of using an RFP in project management is its ability to attract a variety of bids. The bid issuer can get a variety of options for the project requirements by simply publicizing the bids. A competitive framework also helps to compare different vendors, their offerings, and even prices. To attract the bid issuer, in many instances may be there that vendors reduce the inflated prices of their offerings. 

2. Learn About What Choices You Have

One of the advantages of using RFP in project management is insights gathering about the industry. A company or a bid-issuer easily understands the trends and the new products that they may expect from their vendors. 

The proposals that are sent by the vendors over time might hook fresh perspectives that were not initially identified. One of the primary advantages that a bid-issuer has is that proposals containing ideas are sent without any costs for the company to bear. This is almost a free exchange of ideas. 

3. Review the Pricing 

The RFP process of documentation in project management helps a company to easily compare prices. Vendors send a pricing structure along with their objectives in a streamlined fashion. Thus, in hindsight, it is a transparent process that helps prevent any hidden prices or surprises in the project. 

4. Competitive Bidding Process 

The RFP documentation helps in ensuring competitive bidding among the vendors. The process simply does not involve any favorites. If the vendor offers the best solutions at a competitive pricing then their proposals get accepted. For the project managers or a company, this ensures some potential cost savings over the inflated price margins that vendors often keep. 

5. Quality Assurance

RFPs set specific quality criteria while their documentation is ongoing. As I have already mentioned, you need to specify all the quality standards beforehand in the first step of the RFP design. 

Once you have distributed them to the vendors, a portion of them who match the standards are in for bids. So, if your project has high-quality deliverables, no matter its deadline, always make sure that standards are maintained while documenting. 

I suggest you research the market beforehand to take into account the average cost of the primary products. Once you are sure, keep the margin a few degrees lesser in your RFP in project management. The slightly inflated prices above vendor profits are normalized using this technique. 

Overall, the RFP documentation is crucial for starting a project and needs to be preserved until project completion. As far as my experience, this is a necessary consideration to make sure that final dues are settled without challenges for vendors. 

Common Challenges in RFP Management

RFP in project management is a streamlined process to attract vendors and assess their proposals. However, it is laborious to create the entire documentation process by oneself.

So here, I have listed some top challenges that I have faced while creating RFP with my team:

1. Manual Process of RFP 

The RFP process done manually is laborious as it needs a lot of processes to be implemented. There are several considerations and even some strategies to get the best quotes from the market. Moreover, countless emails from the suppliers and increased volumes of Excel sheets make it challenging. 

2. Cost of Running 

It is generally seen that the cost of running an RFP is pretty high. Suppose, you are buying a project necessity using RFP costing 25,000 USD, and the product value is 1,25,000 USD. In such a scenario, the RFP process is deemed expensive compared to product procurement.

So my insight will be to make a single RFP and try to sort it by categorization to buy multiple products. This way, the money spent in designing the RFP for multiple use cases is reduced. 

3. Return on Investment for Business

For businesses that are investing in such hefty documentation like RFP in project management, returns are essential. With that being said,67% of businesses are already trying to reduce time resolving supplier queries. Increased time availability helps businesses focus on meeting project objectives rather than going for endless documentation. 

RFP Proposal Writing Example

Here, I will show a short and crisp RFP proposal which you can edit as per your requirements:

1. Background of the Organization

XYZ is a firm that deals with ABC (sector/field) based in DEF Location. Our mission is to (insert a mission statement). 

We have been operational in the field for (X) years, and we excel in ABC services or products. 

2. Project Overview 

The purpose of the Request for Proposal (RFP) is to invite businesses that specialize in XYZ needs. We are currently seeking qualified vendors to support our project in the ABC field requirements. 

Our goal is to (include a short overview of your company or project’s goal). Now include a scope of work, and barriers to completion, and transparently communicate vendor selection criteria. 

Lastly, add submission criteria that vendors accepting the proposals must adhere to. Once completed incorporate your company details and send it via email or RFP management systems. 

To Sum Up

Overall, RFP in project management provides a great scope for companies to assess their vendors. Not only does it create a transparent pricing policy, but also helps to gather the best resources at almost non-inflated prices. 

I would recommend you go for PMP Certification to get greater insights into the project management intricacies. Having such PMP training from renowned educational platforms like StarAgile helps make a difference in careers. To know more about PMP certification training, reach out today! 

Also Read: Activity Based Costing

Frequently Asked Questions 

1. Who prepares RFPs in project management?

Procuring RFP in Project Management often falls as the responsibility of the project managers, procurement teams or departments. They collaborate and ensure that project needs and equipment are ready for use by the teams. 

2. What is the most important section of an RFP?

One of the most important sections of RFP in project management is the project details and scope. Before you can make the right selection, it is important for the vendors to understand what the project entails and what part they need to play in it.