What is the difference between an RFP, RFQ and invitation to tender?
In the world of contract management and procurement, there are a variety of ways the tendering stage can work. Owners and clients require a way to determine which subcontractor or supplier will provide the best value; and so understanding the difference between an RFP, RFQ and invitation to tender can determine the best procurement option to find the right vendor. Of course, ensuring you are using RFP Management Software makes the process easy. (Want to skip the reading and dive into a software demo? Click here to get started!)
In the private sector, choosing a vendor doesn’t always require a bidding process at all. Often a sole-sourced vendor is chosen and a purchase order contract awarded directly. When this isn’t the case, it is important for the owner/client to understand the types of tendering available, including; RFP, RFQ, and invitation to tender, when soliciting a competitive bid.
A key part of planning any piece of work to be done is determining who is going to do that work, and setting out the terms of reference and evaluation criteria for awarding the contract to the winning bidder.
While each company (or government) has their own policies and contract rules around tendering bids, there are generally three methods of competitive bid solicitation to choose from:
- Invitation to Tender
- Request for Quotation
- Request for Proposals
Invitations to Tender: These are typically used in major construction projects where the Owner knows in detail what they want. The invitation to tender document contains detailed specifications for the performance of the work as well as detailed qualifications and requirements for the Bidders to meet.
Requests For Quote (RFQ): The RFQ is a lot like the Tender, however typically smaller in size and scope. They’re often more geared towards clients who are seeking pricing information for a defined scope of work or supply of materials or equipment. Like the Tender, the specifications, terms and expectations are well laid-out and the vendor has fewer obligations for defining the scope themselves.
Requests For Proposals (RFP): These are typically more openly written so as to push the definition of work down to the vendor. RFPs are used in situations where the client either can’t – or doesn’t want to – define the Scope of Work upfront to an adequate level of detail. Often clients are faced with situations where they know what they want to achieve, but they don’t have the expertise or time to figure out how to get there. They need to rely on the experience and creativity of subcontractors to define the best path to success.
How much does the name matter?
From a legal context, the client can use whatever name they want for the contract they use. In other words, in practice, you can call it an RFQ when what you’re really creating is an RFP. The most important thing to ensure is to be clear to the vendors what the expectations are. Ultimately, the client needs to be certain about the legally binding aspects of these contracts, regardless of the name.
Planning and executing the bidding process
Competitive bidding needs to be carefully planned and executed to minimize any potential legal issues. Once you start the tender process, it is not easy to stop! So make sure you have a good plan in place as to what you want and what you don’t want. Whatever procurement management software you use, you should also be sure that there are good controls and visibility into the tendering, bid evaluation and awarding processes.
At 4castplus, our construction procurement software has been designed to manage the heavy demands of large and complex projects. With powerful features and intelligent workflows, you can streamline project purchasing, subcontracting and the tendering of vendor bids giving your teams greater visibility and control. If you want to maximize the liklihood of winning your next project Request a Demo to see how 4castplus can make your organization the clear choice.
Updated on September 12, 2022 by Cherelle Payne