Business-to-business transactions or B2B involve generating different types of documents to formalize and standardize the process of communication and negotiation. To be specific, a business seeking to attract and contract the services of another business needs to generate different types of B2B procurement documents to include a request for information, request for proposal, and a statement of work, among others.
This article provides an overview of the different types of procurement documents used for obtaining relevant market information and drawing the interest of possible B2B contractors.
Main types of procurement documents: RFI, RFP, and SOW
1. Request for Information: A Request for Information or RFI is both a business process and a document issued prematurely to survey the market and explore options or opportunities. The purpose of an RFI is to gather information about the capabilities of possible contractors and benchmarks or standards in the industry. Responses to an RFI can help the contracting or prospective client adjust its requirements and scope of work before generating a request for proposal.
2. Request for Proposal: A Request for Proposal or RFP is a procurement document generated and issued to solicit proposals from possible contractors. A typical RFP specifies what the prospective client is looking for. It also sets expectations by establishing criteria for evaluating the proposals provided by interested contractors or bidders. Hence, an RFP may also include a Statement of Work and Request for Quotation, as well as Terms and Agreements.
3. Statement of Work: A Statement of Work or SOW is a document that provides a detailed description of the requirements of the prospective client. It essentially discusses the roles and responsibilities of the contractor by listing and defining involved activities, deliverables, and timelines. A SOW can be a legal and binding contract that is used alongside a Master Service Agreement.
Note that an RFP may be a standalone document or may be issued alongside a SOW. It is also common to encounter any combination of an RFI, RFP, and SOW. Note that the primary purpose of these procurement documents is to understand the market and the capabilities of contractors.
Other types of procurement documents: RFP vs. RFT vs. RFQ
1. Request for Tender: A Request for Tenders or RFT is similar to a request for proposal in terms of its general purpose. However, an RFT is used widely in the public sector in which a government office or agency generates and issue this procurement document containing very specific details of its requirements to solicit proposals. In many cases, an RFT follows a legally standardized structure while an RFP provides greater flexibility.
2. Request for Quotation: A Request for Quotation or RFQ is also similar to an RFP and RFT. Also known as an Invitation For Bid or IFB and an Invitation To Bid or ITB, an RFQ is focused more on pricing rather than ideas or concepts. More than soliciting for price quotation of each item or service to be contracted, this procurement document also solicits information about payment terms, product or service quality, and after-sales information.
3. Request for Qualifications: A Request for Qualifications is another type of a procurement document generated and issued as part of a two-step process. To be specific, a prospective client will use a Request for Quotation as a preliminary screening process to determine the qualification and eligibility of interested contractors. Those that have passed this first screening process are eligible to submit an RFP or RFT.
The difference between an RFP and RFT or RFP and RFQ are very minimal. There is actually an absence of universal consensus as regards the standard structure and design of these procurement documents. Nonetheless, an RFP is universal and flexible while RFT is commonly used in government projects. On the other hand, an RFQ is used to get information about standardized and commoditized products and services.