Sales glossaryRFP (Request for Proposal)

What does RFP (request for proposal) mean in sales?

Busy? Here's the short answer:

"RFP" stands for "Request for Proposal." Companies use RFPs to ask potential vendors to submit proposals for their products or services. The RFP includes requirements and criteria and are used to compare bids and choose the best vendor for the company's needs.

What is a Request for Proposal (RFP)?

A Request for Proposal, commonly known as RFP, is a formal document that companies use to invite potential vendors or suppliers to submit detailed proposals for their products or services. The RFP serves as a structured communication tool that outlines the company's requirements, specifications, and evaluation criteria. It allows companies to compare bids from different vendors and select the one that best meets their needs and offers the most value.

Key Takeaways

  • An RFP is a formal document used by companies to solicit proposals from potential vendors.
  • It includes specific requirements, scope of work, timelines, and evaluation criteria.
  • RFPs enable companies to make informed decisions by comparing proposals from different vendors.

Understanding Request for Proposal

In the business world, companies often seek external solutions to meet their specific needs, such as procuring products or services, outsourcing projects, or implementing new systems. When companies decide to explore external options, they issue an RFP to potential vendors.

An RFP typically includes the following key elements:

  1. Background and Scope: The RFP begins with an introduction to the company and a detailed description of the project or services required. It outlines the scope of work, objectives, and specific deliverables.

  2. Requirements and Specifications: The RFP lays out the specific requirements the company is looking for in the vendor's proposal. This may include technical specifications, performance expectations, and any other criteria necessary for the project.

  3. Timeline and Budget: Companies include a timeline for proposal submission, project milestones, and estimated project completion. Additionally, the budget or budget range for the project is often specified.

  4. Evaluation Criteria: The RFP provides information on how the proposals will be evaluated and what factors will be considered in the selection process. This may include criteria such as cost, experience, references, and technical capabilities.

  5. Submission Details: The RFP includes instructions on how vendors should format and submit their proposals. It may also specify any additional documents or references required.

Once the RFP is issued, potential vendors have an opportunity to review the document and prepare their proposals. The vendor's proposal should address all the points outlined in the RFP and demonstrate their ability to meet the company's needs effectively.

Real-Life Example: Issuing an RFP for Software Development

Let's consider a real-life example of how a company might use an RFP in the context of software development. Imagine a growing e-commerce company that wants to enhance its online platform to provide a more seamless shopping experience for customers. They need a software development firm to create a custom e-commerce platform.

To find the right vendor, the company creates an RFP that outlines the project's objectives, technical requirements, budget, and expected timeline. The RFP also includes evaluation criteria such as the vendor's experience with similar projects and client references.

The company issues the RFP to several software development firms, inviting them to submit their proposals. The vendors review the RFP carefully and prepare detailed proposals that showcase their technical expertise and ability to deliver the desired solution.

After receiving the proposals, the company evaluates them based on the criteria outlined in the RFP. They consider factors such as the vendor's track record, cost, and proposed approach. Ultimately, they select the software development firm whose proposal aligns best with their requirements and offers the most value for their investment.


Q1: Why do companies use RFPs instead of directly approaching vendors?

Companies use RFPs to create a fair and structured process for evaluating multiple vendors' proposals. RFPs help companies gather detailed information and compare bids objectively.

Q2: Is responding to an RFP time-consuming for vendors?

Yes, preparing a comprehensive and competitive proposal can be time-consuming for vendors. However, it allows them to showcase their capabilities and stand out from competitors.

Q3: Can a company modify an existing RFP template to suit their needs?

Yes, companies can customize RFP templates to address their specific requirements and project details. Customizing the RFP ensures that it accurately reflects the company's needs.

In conclusion, a Request for Proposal (RFP) is a formal document that enables companies to solicit proposals from potential vendors and make informed decisions. RFPs provide a structured approach to evaluating vendors' offerings and selecting the one that best aligns with the company's needs and objectives.

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