Which RFx Sourcing Event Should Be Used?
Updated: Sep 24, 2022
When businesses have to source products and services from the market, they will issue an RFx document to solicit information for what is required from potential vendors. This process is essentially the business version of shopping. These documents may be issued to one business, multiple businesses, or posted publicly for anyone to respond to.
Here are the most common types of RFx documents:
Request for Information (RFI) is used if a buyer is interested in finding out information about the products and services that they require, they can issue an RFI to solicit information from potential vendor(s). It is an opportunity for vendors to showcase the capabilities of their offerings. Neither party is bound contractually by the RFI or its response. An Expression of Interest (EOI) is a type of RFI where a buyer would like to gauge the market interest in providing a product or service at a particular time.
Request for Quote (RFQ) is used if a buyer has identified a current need for products and services and these requirements are already well understood, they will issue an RFQ to obtain pricing and some other basic information like delivery details with the intention to issue a purchase order (PO).
Request for Tender (RFT) is sometimes referred to as Invitation to Tender, RFTs are used when the product and services are more complex and multiple dimensions must be considered. There may be technical specifications, service, safety, and environment requirements along with commercial requirements. Vendors will provide a bid that meet these stated requirements to the best of their businesses’ capability. The buyer will evaluate the bids and if the best bid meets the minimum requirements of the RFT, the buyer is obligated to award the business and the bidder is obligated to provide as stated in the bid.
Request for Proposal (RFP) is often a procurement professional's preferred tool to go out to market. Unlike the RFT, it does not bind either party to a contract. It is best for situations where you are looking for a solution to a business problem or need but do not have narrowly defined RFPs requirements to achieve this objective. Vendors can be more creative in their proposals. Also, there is potentially a wider range of vendors that can provide a proposal to the issuer. RFPs can provide a superior outcome but also has higher risks. You may have a contract with a previously unproven solution or not end up with a contract at all.
Each of these sourcing documents has its advantages and disadvantages. I briefly provided the general conditions for which each RFx document is intended but there are no hard rules as to which one must be used nor exact fit in the real world. Thoughtful selection and then the development of the documents will give your business the best chance of procurement success. As you better understand the specific business needs, the choice should become clearer. It is also in the interest of vendors to understand the process well to increase their chances of winning business. Bidders can and should request clarifications when something is unclear in the sourcing documents.