From Design Thinking point of view all these procurement terms – RFI, RFP, RFQ, and OT - describe the roadmap of the customer experience growth besides acquiring some goods. Unlike the latter, the experience changes the customer. Understanding the customer evolution may turn the supplier from an occasional milestone to a roadmap keeper.
Request for Information (RFI)
RFI is an indication that the customer needs a product which, as intensive googling shows, does not exactly match any in the market. RFI is what drives innovations today.
RFI is a beginning of the customer learning curve; those suppliers who share experience fast and educate the customer may win her/him before supplying any real product.
For suppliers, RFI is an "elevator pitch" less about the product in question and more about demonstration of her/his ingenuity, resourcefulness, and out-of-the-box thinking. RFI is not for the companies driven by the core product philosophy.
For customer, RFI is an initial and the lengthiest step used additionally to collect information enough to rank the suppliers capabilities and move forward to an RFP.
Request for Proposal (RFP)
RFP is a big jump from vague abstract demand to a virtual product wrapped into functional requirements compiled by the customer from the RFI responses.
RFP is still part of the learning curve as its primary goal is to collect the implementation details from suppliers in the volume enough to feel at no risk with the purchase and to get the MVP – the Most Value Possible.
The RFP round expects a lot of clarifications. Notorious example is the Nammeli tender for desalination plant of 150 MLD (India, 2017). Its progress has been plagued to a crawl after the committee got 1400 clarification requests!
To cut short the questions number, some customers select smaller group of bidders instead of investing more time in RFP preparation. This strategy never pays off.
By far the most important task of RFP for the customer is to build the Proposals Comparison Framework (PCF) - the final destination of the learning curve.
PCF establishes a set of evaluation criteria to allow a measure of uniformity and homogeneity among the engineering solutions proposed by the bidders. PCF opens a door to RFQ.
Request for Quotation (RFQ)
PCF-centered RFQ is a rigid process without much room for innovations or clarifications. RFQ is pivoted around the product detail technical specification and some legal requirements (like purchase terms and conditions and warranty, service agreement, etc.)
Comparing to RFI and RFP, RFQ is the shortest; hence it is natural to extend the bid invitation list to more suppliers. The latter and the RFQ clarity yield much lower prices than those obtained during RFI and RFP.
Open Tender (OT)
OT is not an improved RFQ but rather enhanced PCF. It is intended to solve two basic tasks. First is to attract more suppliers through the bidding transparency to further lower the price. In OT, any potential supplier is allowed to view the OT documents and submit a response. OT transparency ensures that purchases decisions are unbiased.
The second task has nothing to do with bidding; it addresses the knowledge gained by the customer during all the rounds of RFI, RFP, and RFQ. The chances that the customer may re-use this knowledge are often next to zero in multi-million-dollar projects.
On the other hand, this knowledge is of great value to novice customers embarking on "Request" journey and to new suppliers wanting to conquer the market and create competitive businesses.
These suppliers are customers of the former customers. Chain of customers is a condition for uninterrupted evolution of "Requests". The simplest way of knowledge sharing is providing web access to closed tenders – a perfect knowledge base for suppliers to learn and analyze, make predictions and assess competitors' strengths.
Digital Procurement Platform
Digital procurement platform shall focus on matching the customer expectations with the scope and quality of supplied products and services. But it shall be more than a matchmaker.
- It shall help the customer generate high-quality product specification online
- It shall help the customer fine-tune the criteria for bids comparison
- It shall select the prequalified bidders and publishes the invitation for bidding
- It shall make bid submission online
- It shall facilitate interactions between customers and suppliers by tracking RFQ questions, deviations and rejections online
- It shall make bids evaluation and ranking totally transparent and in real time
- It shall allow tapping into boundless pool of engineering consultants and freelancers for the exchanged data validation
- It shall monitor risk and performance of the OEMs and engineering services providers
- It shall predict future prices and demand changes, and identify technological trends