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What’s the Difference Between RFT RFQ RFP RFI?

RFQ

Summary

Detailed explanations to RFT, RFP, RFQ, RFI. Expert advice for both buyers and sellers on how to get the most from these procurement and purchasing processes.

by Suki Mhay & Calum Coburn

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Clients and newsletter readers have asked that we demystify the meaning behind each of the following procurement terms: RFI, RFQ, RFT and RFP. These processes have steadily grown in popularity in procurement and purchasing, especially amongst larger buying organisations. Sadly proper negotiation training is often not given on choosing the best process, and in how to effectively use each process. As a result, in practice you will find these phrases used interchangeably, as many organisations don’t understand the differences sufficiently, resulting in the buyers missing negotiation advantages. We hear procurement or purchasing clients talk about how their departments use these purchasing processes on our contract purchasing training for buyers to ‘write the rules’ of the buying game, to successfully side-step negotiation. There is a great deal that suppliers can do to improve their position. As a starting point, we encourage both our procurement and even well trained sales professionals to get to grips with the differences between these processes:

RFI – Request for Information
An open enquiry that spans the market seeking broad data and understanding.

RFQ – Request for Quotation
An opportunity for potential suppliers to competitively cost the final chosen solution(s).

RFT – Request for Tender
An opportunity for potential suppliers to submit an offer to supply goods or services against a detailed tender.

RFP – Request for Proposal
Sometimes based on a prior RFI; a business requirements-based request for specific solutions to the sourcing problem.

Request for Information (RFI)

As the name suggests, procurement uses RFI’s to gather information to help decide what step to take next before embarking on negotiations. RFI’s are therefore seldom the final stage, but instead are often used in conjunction with the other three requests detailed in this article.

An RFI is a solicitation sent to a broad base of potential suppliers for the purpose of conditioning, gathering information, preparing for an RFP or RFQ, developing strategy, or building a database which will all be useful in later supplier negotiations about:

  • The suppliers, including: facilities, finances, attitudes, and motivations
  • The state of the supply market
  • Supply market dynamics
  • Trends and factors driving change
  • Alternative pricing strategies
  • Supplier competition
  • Breadth and width of product/service offerings, by supplier
  • Supplier strategic focus, business, and product plans

Procurement may use RFIs to include a detailed list of products/services for which pricing is requested. The pricing should be used for comparative purposes for later negotiation, not as the basis of negotiators buying decisions. Through analysis of RFI responses, strategic options, lower cost alternatives, and cost reduction opportunities may be identified.

Request for Quotation (RFQ)

RFQ’s are best suited to products and services that are as standardised and as commoditised as possible. Why? Procurement want to make the suppliers’ quotes comparable before negotiations begin.

An RFQ is a solicitation sent to potential suppliers containing in exacting detail a list or description of all relevant parameters of the intended purchase, such as:

  • Personnel skills, training level or competencies
  • Part descriptions/specifications or numbers
  • Quantities/Volumes
  • Description or drawings
  • Quality levels
  • Delivery requirements
  • Term of contract
  • Terms and conditions
  • Other value added requirements or terms
  • Draft contract

Price per item or per unit of service is the bottom-line with RFQ’s, with other dimensions of the negotiation deal impacting the analysis process as determined by the buyer. Supplier decisions are typically made by the procurement department following a comparison and analysis of the RFQ responses for negotiation benchmarking advantage.

RFQs are typically used as supporting documentation for sealed bids (either single-round or multi-round) and may be a logical pre-cursor to an electronic reverse auction.

Request for Tender (RFT)

An RFT is a procurement open invitation for suppliers to respond to a defined need as opposed to a request being sent to potential suppliers. The RFT usually requests information required from a RFI. This will usually cover not only product and service offerings, but will also include information about the suitability of the business.

It is not unusual for a buyer to put out unclear or vague business requirements for an RFT. This lack of clarity on behalf of the procurement department can make it challenging for the supplier to propose a solution. This is not the best use of a RFT. RFT’s should only be used when the buyer is clear on their requirements, and is also clear on the range of possible procurement solutions that might fit the buyer’s needs, giving the buyer a negotiation advantage.

A RFT is often not a very time or cost efficient method for procurement to source supply due to its lack of defined business requirements and open invitation for suppliers to respond. Without proper procurement training however, too many buyers issue RFQ’s that are in reality RFT’s.

Request for Proposal (RFP)

An RFP is procurement’s solicitation sent to potential suppliers with whom a creative relationship or partnership is being considered. Typically, the RFP leaves all or part of the precise structure and format of the response to the discretion of the suppliers. In fact, the creativity and innovation that suppliers choose to build into their proposals may be used to distinguish one from another. Later negotiations tend to take more time and be more wide reaching in their impact on the buyer’s business.

Effective RFPs typically reflect the negotiation strategy and short/long-term business objectives, providing detailed insight upon which suppliers will be able to offer a perspective. If there are specific problems to be addressed in the RFP response, those are described along with whatever root cause assessment is available.

With good procurement training your RFP and RFT should seek specific data, offerings and quotations, and also seek specific questions about the following to assist your later negotiations:

  • The specific items on which the suppliers are proposing
  • Business requirements
  • Performance measures
  • Information
  • Ideas
  • Instructions on how to reply
  • Due date
  • Technical and other training
  • How will we evaluate how feedback will work
  • Describe the process for selection
  • Request for cost breakdown (sometimes)
  • Communication: cover letter (sets the stage), calls in advance
  • Who to contact with questions
  • Addressee – chosen carefully

Advice

Buyers: to correctly implement these processes requires a level of negotiation skills and having an organisational infrastructure to support it together with some procurement negotiation training. Else they’ll be used as a token exercise to keep your department happy, and will be circumnavigated in practice. While The Negotiation Experts does offer clients advice in this area, our focus is in sales, procurement negotiation training, and other negotiation courses.

Sellers: how and ‘if’ you participate in these processes is the first question you need to address. If you have a company policy, be sure to examine your and the buyer’s competitive negotiation style, position and power before participating. Not doing this can end up costing you the business, or worse: you could win unprofitable business.

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  • 0
    0
    pet care on

    Way cool! Some very valid points! I appreciate
    you penning this post and the rest of the site is really good.

  • 0
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    Amanda H. on

    Very useful information, easy to use and understand

  • 8
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    John on

    RFP is also know as Request for Purchase which seemingly is equal to RFQ explained here? or is there another view ?

  • 11
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    Praveen Kumar on

    A big thank you to team of this website as it helped me gather and understand basic terms of business and sales related stages.

  • 19
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    M.Muzaffar on

    While browsing searching different words looking for Information Procurement Processes (RFT RFQ RFP RFI) landed to this site… done my search end. Thanks.

  • 7
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    Bonni on

    and straight to the point

  • 3
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    Wahid Ali on

    Impressive information

  • 14
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    ABDULLAH ALAMRI on

    Thank you for valuable information which I feel will help employees in the procurement field.

  • 34
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    D. Azdell on

    While the RFQ abbreviation above is commonly used in business articles and vendor acquisition forms and described as A "Request For Quotation" here, it would not apply to the construction, engineering or architecture industry. The definition in the building industry where it is defined as a "Request for Qualifications". Such a solicitation is sent to gather potential bidders and qualify them on their qualifications (experience, bond-ability, insurance(s), financials and current licenses as applicable). A RFP (Request for proposal) would include any pricing or bid for the proposed work. The definition "Quote" is actually misleading as this would imply a cost is to be connected to the response for which all necessary quoting materials would not necessarily be included. Such terms are widely used in Building Construction and defined in professional practice handbooks such as the AIA (American Institute of Architects) handbook of professional Practice.

    While either can be considered correct depending on the application or industry, it is important to understand that a "Quote" is often associated with a price which can be misinterpreted when a project is bid competitively.

  • 9
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    Jojo - JAL on

    Very good… I am satisfied… Without this may be not good business

  • 12
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    Chuck on

    Excellent info. Glad I found your website.

  • 12
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    Durgesh Joshi on

    A very good and crispy description

  • 8
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    Dilip Dasgupta on

    EXCELLENT, DETAILED EXPLANATION PROVIDED. VERY USEFUL

  • 8
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    Chris Enyan on

    It helps one to sharpen his/ procurement skills

  • 8
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    Gladson Rakesh on

    Excellent Explanation…thanks

  • 5
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    rcp on

    Very helpful

  • 12
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    Mohd. Ehtesham Parve on

    Very good specially for persons new to job

  • 19
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    Arturo Chang on

    This is an excellent explanation of terms that are frequently confused.

  • 13
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    Ketan on

    very good info

  • 9
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    sumit on

    its really very helpful. keep it up

  • 4
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    Chris on

    Great post. For those of us looking to submit RFPs, RFQs, etc. Where are the best places to look? (i.e. on the web or in the U.S.)

  • 20
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    Shafiq Khan on

    Useful explaination, woud also help if a general template is provided

  • 14
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    kranti on

    Very good Explanation

  • 9
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    Kiran Sharma on

    "Extremely helpfull for the freshers in the field".

  • 2
    0
    Sharif Uddin Ahmed on

    yea its really helpfull…. Thanks

  • 9
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    Rakesh Sharma from R on

    Pubish New commercial issue on the same site, really it would be better for the all users.

  • 9
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    WendyAng on

    Thanks..very helpful!!

  • 2
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    Peter on

    This content is very helpful!! Thanks!!

  • -3
    0
    HealthcarePM on

    The content of this article was helpful, although the misspellings caused me to question it.

  • 5
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    E.D Bhudi on

    clearly helpful and useful

  • 1
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    Linda on

    Very Helpful and Easy to Understand

  • 3
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    Rebecca on

    VERY HELPFUL

  • -4
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    Rajesh Jakka on

    Very well explained ..Thanks Much

  • 0
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    Raja S Mohankumar on

    Excellent

  • 0
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    SC on

    Good explanation!

  • 9
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    Gina Giles on

    Excellent comparison for a new person!

  • 6
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    BB on

    Found this extremely useful

  • 54
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    Bridget Naidoo on

    It’s about time someone who knows their Procurement stuff clarified the differences between these most popular procurement processes. As someone who’s worked in the profession for 12 years, and a savvy web user, I’ve been surprised to come up empty handed when searching for articles explaining when to use each procurement process. Now I simply send this url to new recruits and internal clients who want to know more. I expect this to save me a ton of time over the course of a year, and make the questions that come back that much more interesting to answer.

  • 42
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    Sibichan on

    Very clear, liked the layman language used to explain the differences.

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