Request for Proposal (RFP)
Definition
A formal document asking suppliers to propose how they would meet a business need, evaluated on solution quality, capability, and total value as well as price.
In Practice
An RFP is used when the buying organization knows the problem but is open to different solutions. Instead of quoting against a fixed specification, suppliers describe their approach, capabilities, implementation plan, and commercial terms. Responses are scored against weighted criteria such as technical fit, quality systems, capacity, financial stability, and cost.
RFPs take longer than RFQs but reduce the risk of locking into a supplier that is cheap on paper and weak in execution. The scoring matrix also creates an auditable record of why a supplier was chosen, which matters in regulated industries and public procurement.
Example: a retailer outsourcing its co-packing operation issues an RFP describing volumes, seasonality, and service expectations. Five providers propose different automation levels and pricing models; the award goes to the second-cheapest bidder because its capacity and quality record score far higher.
Related Terms
A formal invitation asking suppliers to submit prices for clearly specified goods or services, used when requirements are well defined and price is the main decision factor.
Request for Information (RFI)A preliminary questionnaire sent to potential suppliers to gather facts about their capabilities, capacity, and offerings before running a formal RFQ or RFP.
Strategic SourcingA structured, data-driven approach to selecting suppliers that optimizes total value over time rather than just chasing the lowest unit price on each transaction.
Supplier QualificationThe formal process of verifying that a prospective supplier can reliably meet quality, capacity, financial, and compliance requirements before awarding them business.