I know we aren’t reinventing the wheel here, but often, many of us hear or read about something, superficially, and then we start using the terminology as if it had always been part of our vocabulary.
In the world of public tenders, the acronyms RFI and RFP, as well as some others, are used on a regular basis by government institutions all over the world, as well as their authorised suppliers and, of course, the media. But does everyone really know what they stand for? And what their usage is, or should be?
As most of the readers of Tax Stamp & Traceability News™ know, the main purpose of a tax stamp is, among other things, to protect taxable goods from criminal fraud, to deter illicit activity (counterfeiting, tax evasion), to help countries comply with standards and public health initiatives and, equally importantly, to increase tax revenues.
These reasons alone make the writing of a good tender a long and detailed process. The tender must include a proper introduction explaining the reason for its creation, a full scope of requirements, and all procedural details, such as forms to be filed, dates, schedules, and technical specifications.
Any organisation issuing a tender has a number of options open to it. Specifically, it can issue RFIs, RFPs, RFQs and RTPs prior to the publication of a final tender document.
An RTP (Request for Technical Proposal) is often used when the product/service being tendered is primarily focused on technical aspects above all else. This is usually not the case for tax stamps, so I will focus on the three most common documents for this industry.
An RFI (Request for Information) is primarily used in the first phase of a tender process as part of the planning involved in procurement, market research, identification and sourcing of commercial products or services, identifying potential suppliers, etc. Additionally, if written properly, an RFI can help the tender issuer to better understand current market practises and trends.
There is 6-step process for outlining what is needed to prepare a good RFI.
First, form your team, gathering the most knowledgeable and effective team members available to write the RFI. This is the most important step and key players should include a program manager (PM), program contracting officer (PCO), and RFI manager, who should be responsible for executing the development process. These are not full-time positions, but certainly will take up a large amount of the designated person’s work hours, and this must be taken into consideration.
The second step is the actual development of the plan, which should address how the RFI content should be developed and what the main goals to be achieved will be. Here is where roles for each team member and a timeline with due dates should be fixed.
The next step is to add ‘meat’ to the outline. Using a template will ensure that team members will be less likely to miss important content that should be included in the RFI.
The fourth step is to prepare a rough draft, which is then reviewed by the PM and stakeholders to ensure that it asks the right questions and contains all the information needed for suppliers to appropriately respond, as well as to satisfy market research requirements. This stage can have several iterations, depending on the quality of the initial draft.
The fifth step is to finalise the RFI and submit to the PM for final approval so that the sixth and final step – sending the RFI to potential suppliers – can be taken.
The benefits of an RFI can be summarised as follows:
All potential suppliers understand there is a competition going on and what the timeframe and initial expectations are.
The issuing organisation shows it is acting without prejudice and not with a preferred supplier.
Provider creativity is allowed as long as the parameters used are in line with the objectives sought.
Information is gathered in a less structured, open-ended format.
An appropriate due diligence exercise prior to issuing an RFP or tender can avoid alienating potential providers.
Allows for comparison.
An RFP (Request for Proposal) asks vendors to propose solutions to a customer’s problems or business requirements, and usually follows an RFI. This step is more specific in terms of an organisation’s needs, outlining business goals for the project and identifying specific requirements that are necessary for the work being requested, including potential costs.
If an organisation has already issued an RFI, it is far more likely to create a better RFP, since much of the market research has already been done, and the key to writing and issuing an effective RFP (or RTP, for that matter) is is to have sufficient detail and correct information to hand.
This not only gives vendors the context they need in order to propose a valid solution, but ensures that the RFP addresses itself to only those vendors that are able to present a serious proposal. On the other hand, having sufficient detail in an RFP should not prevent potential vendors from being creative and applying their best practises to fulfill the issuing organisation’s needs.
It should be noted that many people confuse RFPs as a Request for PRICE, when they are really a Request for PROPOSAL, which may or may not include costs, and which should not be considered as offering a definitive price – which would be an RFQ.
The benefits of an RFP can therefore be summarised as follows:
Allows for an organised overview of specific offerings from several vendors at once.
Answers a series of questions about the products, services, methodology, and often, costs, that will go into fulfilling the tender’s specific requirements.
An RFQ (Request for Quotation) is an even more detailed document that drills down to the exact specifications required by the organisation issuing the tender.
For instance, if a tax authority knows exactly what type of tax stamp or tracing technology it wants, and it knows enough about the current system and how it wants to improve it in the future, then it will probably issue an RFQ.
As opposed to an RFP, in an RFQ creativity is not requested. On the contrary, an RFQ is a request to fit specific requirements to an existing need, and as such, asks the potential provider to assess its ability to meet said requirements at an acceptable price.
It is important to compare the benefits of an RFI to an RFQ, so that the organisation can decide what is best suited for its needs for a given project.
Finally, it is also important to ensure that an RFP is really an RFP, as the term has become an umbrella that is often applied to RFPs, RFIs, and RFQs, all of which have certain features in common, but also clear distinctions. Understanding those distinctions will vastly improve an organisation’s selection process as it searches for a vendor.
To conclude, I personally prefer the RFI- RFP route as opposed to an RFQ, as I find that, typically, clients that prefer to issue an RFQ tend to be somewhat closed-minded in their approach. They are not opening themselves to the potential creativity and accumulated institutional knowledge of the vendors, but rather are signalling that there is very little new to learn about a specific issue, and they do not welcome new approaches.
An organisation can easily fall into the trap of issuing an RFP that ask vendors to provide a system that does exactly what the current system does. In these cases, the vendor is simply asked to fill out a list of requirements and give detailed costs for each line item, which by definition, is an RFQ, not an RFP.
Subsequently, when a vendor is asked to respond, they may find that they are not allowed to propose a variety of solutions, nor have subsequent conversations about their proposed options.
If that is the case, then the PM and team members should probably take a long hard look at why they want to implement a new system in the first place and make sure that objectives are in line with the type of request they are issuing, in order to avoid potentially negative optics for the organisation.
Personally, I do not believe the RFQ approach is the best option for implementing a new system. For a new system, at an ‘affordable’ price, it is always best to use an RFI and RFP.