People often ask what the difference is between the Expression of Interest, Request for Proposal and Request for Tender approaches to procurement of goods or services. These methods are ways that a company (quite often a public/ civil service or government body) requests offers or proposals for the provision of service or products. The differences between these three approaches are outlined in this article.
Expression of Interest (EOI)
Calls for Expression of Interest (EOI) are used mainly when the requesting company does not have a solid idea on the type of product or service required. The company releasing the EOI may have a high level understanding of their business problem or requirements, or type of product they require, but they are unsure of the market's ability or desire to meet their need. The company releasing the EOI may need to collect some additional information before they are able to make some procurement decisions.
Examples of useful information gained from an EOI include identifying:
- available technologies, products or service available in the market place to meet their business need
- the willing and interested parties or vendors offering the potential products or services
- whether any of these potential companies will accept the terms and conditions imposed by a contract or deliverable expectations
- the maturity and experience of the companies offering those products or services, and their abilities to deliver similar products or services
- the likely indication of costs associated with delivering the product or service
- a shortlisted number of providers, which can be used to progress to an RFT or RFP
It is unlikely that an organisation will directly purchase from performing an EOI. Given the cost and effort involved in preparing a response to an EOI, requesting companies quite often engage specialist consultants to perform market surveys to scope out the available products and services and their providers without actually doing a formal EOI. This method ensures that there are no costs incurred by potential providers. This also assists if the requesting company does not want to highlight to the market that they are on the verge of making a purchase, or have not actually secured the funding for the project.
If an EOI is made, due to the costs involved, many potential respondents may have second thoughts about submitting a response. However, the last point (6) mentioned above is the key issue needed to be balanced by prospective responders when determining when to respond. If a company doesn't respond, there is the potential risk that they will not be able to enter into the RFP or RFT stage of the procurement process. This decision to respond can only be made by that company when weighing up the benefits and disadvantages.
Request for Proposal (RFP)
Requests for Proposals (RFP) are used to directly purchase goods or services. The requesting company clearly understands their business problem or need and is aware that there are potential options available in the market place, but is open to suggestions for solutions to their problem. This is quite often requested for consulting services, where the exact physical deliverables cannot be defined, or in information and communication technologies (ICT) projects where there are multiple solutions to a business problem.
The RFP gives the purchasing company with the most flexibility in purchasing, as although the requirements may be defined, the solution is not. The requirements stipulated by the RFP may range from being quite specific or be broad, high level business requirements. However, by nature, an RFP will allow an offer to suggest the best way to solve the problem. RFP's provides responding companies the best opportunity to demonstrate the way in which they would solve a company's business problems or needs.
Once an RFP has been evaluated, the requesting company may end up in a number of situations such as:
- deciding on a preferred solution or service provider, and negotiate a contract with them
- shortlisting some preferred candidates, and enter into negotiations with all of them, as a tactic to find the best option
- deciding to accept part of a solution from one or more vendors, if they are not convinced that any one solution is acceptable
- deciding that there is no acceptable solution and changing their requirements, and either asking for further submissions from companies that have responded to the RFP, or closing this particular RFP and starting again
Request for Tender (RFT)
Requests for Tender are often using in the building and construction industry where the solutions to a problem are very specific, and have been designed and specified. An example is a tender for construction of a house or bridge, where the designers have drawn up the plans with measurements, and all materials have been clearly specified. I can't imaging many people requesting a tender for a "four bedroom house" and not telling the prospective builder what they want it to look like!
For a tenderer responding to a RFT, there are not many variables or options to offer different solutions. Tenders are not normally used for this reason. It could limit flexibility and creativity, which is an issue if a requesting company has not done much investigation into available solution. On the other hand, if you know your specific requirements, and don't want any deviation from these specifications, then you use a RFT.
In summary, the best option for most purposes and flexibility in procurement is a RFP. If requirements for a project are very specific, and any deviations from your specifications are not acceptable, then use a RFT. However, if a company has limited information as to options available in the market, an EOI could be a good start.