Tuesday, February 24, 2015

Is It a Bid or An RFP?

What's the difference between a Bid and a Proposal, or between an Invitation to Bid and a Request for Proposals (RFP)? 

Invitation to Bid:  Public agencies that issue an Invitation to Bid (or a Request for a Quote) have defined a specific scope of work for which they are requesting bid prices.  Making the decision of award will be based on price alone.  In other words, the bidder with the lowest price, who has submitted a responsive bid (on time, signed, bid on all items, bid guaranty included if required, etc.) will be awarded the contract. 

Request for Proposal:  On the other hand, in an RFP price is part of the evaluation criteria that will determine which firm is awarded the contract, but the evaluation criteria also include experience, qualifications, and approach to the work.  The firm submitting the lowest price may not have the highest number of overall points and may not be the one awarded the contract.  Conversely, in an RFP a firm submitting a high price may end up being awarded the contract based on receiving more points for the evaluation criteria for experience, qualifications, and approach.  

How much is price worth?  In an Invitation to Bid, price is the only factor considered in making an award decision, while with an RFP price is one of many factors.  To the extent that the scope of work in an RFP is very clearly defined, price should be worth a higher percentage of the overall points available as this begins to look more like a bid.  To the extent that the scope of work in an RFP is less clearly defined and the public agency is relying more heavily on the judgment of the firm selected, it becomes more important that qualification, experience, and approach have more evaluation points assigned to them.  Click here for a blog that I wrote explaining this in more detail.  Click here to read about the misguided efforts of Jefferson Parish, Louisiana setting price at 25% on all RFPs. 

Evaluation criteria: It takes time to develop appropriate evaluation criteria that reflect the actual values and concerns of a public agency and that will result in the most qualified firm being selected.  Evaluation criteria must be clear to firms submitting a proposal so they understand what the expectations are for what is most important to the public agency.  In establishing evaluation criteria for an RFP, the following should be part of what is published in the RFP:
  • Title for the criteria
  • Detailed description of the criteria
  • Number of points possible for each criterion
  • Documentation that should be submitted to demonstrate compliance with the criteria
Transparency is important:  If a public agency issues an Invitation to Bid (or a Request for a Quote), and price is the only thing requested, the expectation is that the agency will make an award decision based only on price.  An agency may not, after bids have been received, then disclose subjective evaluation criteria they will use to make an award decision.  If this seems obvious to many of you, it's important to bring this up because I have seen this improper practice occur.

Presidential History:
  • Presidential History Blog:   While I will discontinue writing this Public Contracting Blog on March 5, 2015, you can sign up for a free email subscription to my Presidential History Blog at www.PresidentialHistory.comOn a case-by-case basis, I will only be accepting limited consulting and training opportunities after March 5, 2015.
Mike Purdy's Public Contracting Blog
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1 comment:

Alex said...

It's too funny that this discussion just came up about an hour ago in a business process review discussion.

Thanks for posting. Good luck on your new ventures!