Paul Rogers claims to have written the world’s largest glossary of procurement terms, with clear definitions for RFQ, RFP and RFT. But if the definitions are clear, why do procurement people still use the labels as if they mean the same thing?
Procurement is a function without standards. We have frameworks, templates and audit manuals. What we do not have is a shared habit of matching the document to the job.
The legal reality is that an RFQ, RFP and RFT are usually invitations to treat. The buyer is inviting suppliers to make an offer. The supplier’s response is the offer, and a contract forms only when that offer is accepted.
A better way to understand the labels is to ignore the acronym and ask what commercial conversation the buyer is trying to start:
- Price a defined requirement: The requirement is known, the specification is definitive, the terms are standard. The rigour of the process needs to be commensurately simple and straightforward. This is a commercial conversation about value, regardless of how pricing and non-price criteria are reconciled. As an example, a hospital buying paracetamol 500mg tablets could use an RFQ. That is because the drug specification is regulated, and the Therapeutic Goods Administration (TGA) lists medicines that may be lawfully supplied in Australia. The TGA registration has already done much of the quality work. What remains is price, availability and a handful of supply conditions.
- Solve a problem or design a solution: The buyer knows the outcome they want but not the best approach to achieve it. The buyer seeks a package of methodology, resourcing, risk allocation and commercial terms. This is a design conversation. As an example, suppose a social services department wants to reduce chroming among a particular target group. The problem statement might be: “Reduce chroming in the named cohort by 25 percent over six months. We will not tell you whether that is outreach, housing, clinical treatment, policing liaison or some mix. Propose the intervention, the team, the risk allocation and the price.” The bidders are then free to design the interventions to achieve that goal.
- Tender for a defined requirement: The buyer has finalised the specification, published evaluation criteria, issued a draft contract and now requires a formal, comparable, auditable competition that culminates in an award they can defend. This is a selection conversation. I was once engaged in evaluating whether a road building authority achieved value for money in building roads. The evaluation criteria were 70 percent price and 30 percent non-price. What does that tell you about the intent of the client? It told me that the road was specified. Price would do most of the work. The 30 percent was a quality overlay, not an invitation to propose a different road.
My point is that these are three different conversations, each requiring different documentation, different evaluation methods and different behaviours from all parties.
The problem is not the existence of three labels, but their use as interchangeable by procurement people.
When documents do not match the job
I was invited to respond to an RFT. It was a relatively simple consulting gig, but the client used an RFT template that was appropriate for a much more complex assignment. I wasn’t busy at the time, so I waded through the questions and schedules and probably spent three business days on the proposal.
For the purpose of this example, we’ll assume a gross margin of 30 percent and a daily rate of $2,500 per day.
That means that if the total contract value was $25,000 or less, I would lose money even if I won. I didn’t win, and because my ‘win rate’ is about one in three, it wouldn’t be worth my while to bid for a contract worth less than $75,000.
So, the first consequence of using the wrong template is that some bidders may not respond, reducing competition and impacting value for money.
Using the wrong template drove up bidding costs for the bidders and, of course, evaluation costs for the client.
I have developed a scale to assess buyer sophistication for proposal writers. The polar extremes are “Peter Price” and “Valerie Value”.
The challenge for Peter is that if potential bidders have no insight into Peter’s procurement sophistication beyond an error-ridden, inappropriate bid document, they may decline to bid or submit an AI-developed response with minimal human oversight.
My second example is an RFT that claims to seek innovation, but the tender conditions state that a non-conforming offer will be accepted only if there is also a conforming offer. A creative solution is welcome as long as you double your bid costs and also submit a conforming bid. If you were a bidder, would you bother?
In my first example, it would be appropriate to base the invitation on an RFQ template. In my second example, if you really want creative solutions, maybe use competitive dialogue or base your template on an RFP.
Write the document to match the job
If the job is to price a defined requirement, clearly state this in the first paragraph.
Provide a concise package: specification or scope of works, pricing schedule, standard terms or panel deed, close date and the basis for selection. Don’t request a 2,000-word methodology or design complex evaluation methodologies where the only real variable is value.
If the job is to solve a problem, write down the problem.
Outline outcomes, constraints, desirable outcomes, unacceptable outcomes and sufficient context for a competent bidder to design a solution. Invite alternative approaches and explain how you will compare different solutions. It is a truth universally acknowledged that “Uncertain Scope + Fixed Price = Risk Premium”. So, if your brief is vague, expect bidders to add a risk premium. Maybe a multi-stage process might be warranted?
If the job is to tender a defined requirement, be unapologetic about formality.
Publish the specification, criteria and, if applicable, the weightings. Publish the draft contract and require requested departures to be identified. Set conditions for participation you intend to apply. Then evaluate as advertised.
This approach suits high-value, high-risk, high-scrutiny work, but if RFTs become the default invitation template, they can turn a market into a compliance factory that only the largest players can afford to enter.
Four tests before issuing the invitation package
Test one
Before the documents are sent, complete one sentence in plain English:
“We are going to market to ________.”
If you cannot complete this sentence without using the labels RFQ, RFP or RFT, you may not know what you are doing.
Fill in one of the three roles and then read your pack as a supplier would. Does every schedule, mandatory question and evaluation criterion serve that role?
Test two
I used to amuse myself by counting the number of words in the intellectual property clauses in the contract and comparing them with the number of words in the specification or scope of works.
It was rare for the specification to be more fully developed than the intellectual property clauses.
Could it be that some bid documents are too complex and the administrative effort needed to assemble them distracts from the development of the specification?
Make this calculation and ask yourself, “Is our scope clear and appropriate?”
Remember the formula.
Test three
Next, count the number of questions respondents must complete across non-price schedules and priced schedules. Is the total proportional to the project’s complexity?
The Law of Diminishing Returns applies to bid evaluation. Too few questions and you don’t know enough about the supplier and their solution, but too many questions create bidder costs and drive up evaluation time and cost.
What will you learn from 30 questions that you couldn’t evaluate from 20 questions?
Test four
If you are trying to solve a problem, more detailed questions may be warranted.
In this case, consider developing an elevator speech to a potential bidder explaining how two different solutions will be evaluated.
If you talk vaguely about weighted factor analysis, you may not be prepared for a design conversation.
The importance of language
Proposal writers ignore the last letter. Q, P and T have become decorations. That is because procurement people like you and me are inconsistent about how we use the labels.
If the three labels are legally the same species, the only reason to keep them is that they start three different conversations.
When the cover says one thing and the schedules say another, the acronyms are cargo cult.
Name the job, then write the document. The market is not confused by the law. It is confused by us.
Paul Rogers is Practice Manager at Landell. The opinions expressed in this article are the author’s alone and are not necessarily the opinions of Landell.
