The request for proposal (RFP) is two envelope procurement method that can be used for goods, services or works. It is used when suppliers, contractors or services providers are expected to propose a specific solution (methodology and work plan) to fulfilling a specific requirement.
Firms are required to submit technical and financial proposals in two separate envelopes. The technical proposal is evaluated first and ranked according to pre-established evaluation criteria, and only the financial proposals of those firms that achieved the minimum qualifying mark (score), indicated in the RFP, are opened and evaluated.
RFP method differs from open tendering in six fundamental aspects:
- Proposals are submitted in two sealed envelopes.
- At the opening event, the financial proposals are left unopened and are safeguarded.
- Financial proposals are opened only after completion of the evaluation of technical proposals.
- Only the financial proposals of the firms achieving the minimum qualifying mark or more are opened.
- Selection is based on a proposed solution and not on price.
- The sum of the combined weighted score of the technical and financial proposals determine the winning firm with the contract is negotiated.
There are some differences in addition to the above, on the application of the request for proposal that introduce a bit of confusion with respect to this method. As with other methods, the use of this one must strictly adhere to the stipulations of the governing procurement legal framework.
An RFP may be issued for a number of reasons. In some cases, the complexity of an IT project calls for a formal RFP. An organisation can benefit from multiple bidders and perspectives when seeking an integrated solution calling for a mix of technologies, vendors and potential configurations. A business moving from a paper-based system to a computer-based system, for example, might request proposals for all the hardware, software and user training required to establish and integrate the new system into the organisation. A simple hardware upgrade, in contrast, may only involve issuing a request for quotation to a single vendor. Some entities such as government agencies may be required to issue RFPs to provide full and open competition. An organisation may also release an RFP to boost competition to drive down the cost of a solution. That said, a proposal accepted on the basis of being the most responsive to
and RFP‘s specification may not always be the lowest-priced bid.