RFI vs RFP: definition and key differences

– Cisco, the international IT company, regularly wins new business through their Request for Proposals (RFP) response, like the one they issued to the State of Utah. On average, organizations submit 162 RFPs every year; it is part of their growth strategy. But they’re only one step of procurement. RFI vs RFP vs RFQ are the three tools to assist with vendor selection. Keep reading to learn what each is and how they work together.

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What is an RFI?

The first step in looking for new suppliers is issuing a Request for Information (RFI). RFIs are documents that ask general questions to a few different vendors, as a way to start the sourcing process.

It’s a casual way for the purchasing company to access standardized information from a few potential vendors and get a feel of what’s available. It’s used in the early stages of the procurement process to help refine their needs. Learn about the different types of procurement in this article.

The difference between RFI vs RFP is that the former is a more “relaxed” step that can be skipped. At this stage, businesses are simply looking to find out more about the market and potential solutions for their needs.

RFIs happen during a company’s research stage. Procurement professionals use RFIs to gather general information on:

• The goods and services available,
• The marketplace and industry,
• The offers that could potentially meet their needs.

This step is focused on education. Answers to RFIs help companies get a general understanding of their options as well as a first idea for planning their procurement. This information will help with their decision-making further down the line.

Once the company understands what offers exist that can meet their needs, they’ll be able to get more specific and narrow down their search by getting to the next step: an RFP.

What is an RFP?

As mentioned above, the difference between an RFI and an RFP is that they belong to different stages of the procure-to-pay process. Where RFIs indicate casual information-gathering, RFPs are formal documents issued by companies looking for new vendors.

In a request for proposal, a buying company lays out its needs and will ask for vendor proposals (or bids) to meet them. They comprise various elements:

• Background company information,
• Project overview,
• Requirements,
• Any other relevant information for a bid.

Vendors will then come back with a response to the RFP with detailed solutions and strategies that meet their needs.

The goal of a Request for Proposals (RFP) is to compare vendors. RFPs evaluate various suppliers over a few important criteria:

• Good or service characteristics,
• Pricing,
• Timeline for sourcing or strategy for implementation,
• Company ethos and CSG initiatives.

RFPs are used in the supplier vetting process to collect the data needed to make the best decision for the company. It’s considered a best practice in your procure-to-pay to use those tools to:

1. Evaluate vendors,
2. Document the vendor selection process (for management or in case of audit).

In some organizations — especially government agencies — using RFP is mandatory. It creates a standard sourcing process that fosters equality and impartiality for all potential vendors. RFP also helps fight corruption and collusion by ensuring an audit trail to justify the decisions.

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What is an RFQ?

RFQ stands for Request for Quotations (or Quotes). It’s the third document used by companies in the sourcing process. It can be used in conjunction with RFI, RFP, or as a standalone.

Where RFPs aim to evaluate potential suppliers globally, RFQs are purely focused on pricing. A request quotation aims to quantify, so buyers know how many goods they can buy at what price.

A Request for Quotation is issued by a purchasing company to ask for the cost of meeting their needs. It includes:

• Details on their requirements (type of product or service) and
• The deliverable expected.

In turn, vendors answer with a detailed pricing plan. Companies tend to issue RFQs when they try to get the best deal possible on goods or raw materials. It works best for products and services that are standardized or off-the-shelf (for example, a specific type of screw or the hourly rate for an external service provider)

The difference between RFI vs RFP vs RFQ is the intention. When issuing request quote documents, businesses are clear with their intention of purchase: they know exactly what they want, how the market operates, and just need the final numbers to make their decisions.

Why are all three important?

RFIs, RFPs, and RFQs are all part of the procurement process. While they are mandatory in some organizations (especially public ones), they don’t have to be used together. But they each serve an essential purpose in sourcing. or at all

All three help:

• Streamline communication between buyer and vendor,
• Improve supplier risk management,
• Improve vendor management.

It’s useful to use RFIs, RFPs, and RFQs for businesses of all sizes. For big organizations, it helps centralize information and ensure that all departments have their say, so the products services delivered ultimately meet the company’s needs. It’s usually managed by the procurement department.

For smaller businesses, these documents are a way to ensure thoughtful and objective decisions even without a dedicated procurement department or person. For example, a startup CEO can ask his employees to issue an RFQ for large purchases to ensure the best financial decision and prevent maverick spending.

The RFI RFP can also be used here: RFI would inform their research phase, while an RFP can help select the best vendor for a new project.
In general and regardless of an organization’s size, it’s best to adopt a multi-step process for larger and strategic purchases. Using an RFI, RFP, and RFQ helps centralize information and ensure everyone is on the same page, both internally and externally.

For example, if you’re looking for a new vendor to provide computers:

• You can issue an RFI that will help you gather information on the offers and features available.
• Once you’ve learned more, you can issue a proposal RFP request to a few vendors that meet your carefully crafted requirements.
• Lastly, you can issue an RFQ to get the itemized pricing plan before making your purchase.

RFIs, RFPs, and RFPs are standard tools used in the purchase order process. They help customers define their needs, source the best vendor, and connect both parties through a standardized process.

What are their key differences?

The difference between each of these documents is in what they accomplish. Each RFX document has its purpose.

Here is a summary of the main differences between an RFI vs RFP vs RFQ:

In short, deciding to issue an RFI RFP RFQ depends on how informed and ready you are to make a purchase:

• If you know exactly what you want, go for an RFQ.
• If you’re ready to buy but are open to various ideas and strategies, issue an RFP.
• If you’re at the start of your process and want to know what solutions could meet your needs, start with an RFI.

Key Takeaways:

RFI RFP RFQ are tools used during the procurement process to select the best vendor that meets your needs. Each document plays a different role depending on how advanced you are in your decision making process. It’s important to be careful when selecting vendors. Trustpair is an anti-fraud software that helps you secure your procurement process from end to end.