Invitation for Bid (IFB), Request for Proposal (RFP) and Request for Quotation (RFQ) are there different solicitation methods adopted by procurement professionals. The decision on solicitation process best effective for each procurement activity takes into consideration key parameters such as price, techno-functional requirement and negotiation.
The procurement organization has a clear understanding of the material/service requirements vis-à-vis product/service specifications, quantity/duration, delivery method, etc. In such a case the primary consideration is on price, and hence the contract/purchase order will be awarded to the lowest price bidder an IFB is used. Under this solicitation process there is no negotiation of prices.
The procurement organization adopts a different solicitation approach when it lacks the clarity and understanding required for satisfying the material/service requirement or when the requirement cannot be met with generally available standard products/services. An RFP is floated to identify the vendors that can provide the products/services as per the material/service requirement. RFP is not only a request for pricing, but it also seeks suggestions and ideas on how the product/service can be delivered. In such a case the consideration of certain other factors, such as technical and functional expertise will also be involved along with price. The response to RFPs can many a times voluminous because of the uniqueness of the enquiry and the detailed response required to meet the material/service requirement. Except in case of construction contracts where an IFB is more commonly used under these conditions.
Purchasing organizations also use RFQs when the consideration is not only price but other factors. But, unlike RFPs where the products/services are not non-standard, RFPs are issued for standard products/services or commodities. RFQs are issued for small as well as large purchases where price is not the only consideration, but factors such as availability, delivery, payment terms, etc are also taken into consideration. This type of solicitation also helps in determining the current market price.
RFP and RFQ would involve negotiation of pricing and other terms and conditions and so can be considered as part of Negotiated Procurement.