Sourcing Event Process: RFP and RFQ

Executive summary

A sourcing event is a defined process for asking suppliers to compete for a scope of business and selecting one or more of them on stated criteria. The two common formats are the request for quotation (RFQ), used when what you want is well specified and price is the main variable, and the request for proposal (RFP), used when the supplier's approach, capability, or solution matters as much as price.

Most poor outcomes trace to three decisions made before the event starts. The scope is unclear, so bids cannot be compared. The evaluation criteria are set after the bids arrive, so they drift toward a preferred supplier. And the cost comparison uses quoted unit price, not the total cost of owning the supply, so a bid that looks cheapest loses its advantage once freight, payment terms, and switching costs are counted.

This guide gives the decision between RFQ, RFP, and RFI, a 12-step process with owners and outputs, templates for the request, the scoring model, and the decision memo, and a worked example. It is a companion to the Procurement Playbook.

When to use this

Use a formal sourcing event when:

• Spend in a category is large enough that a small price or terms change matters.
• A contract is approaching expiry and you have decided to compete it rather than renegotiate. If you are renegotiating with the incumbent, use the supplier negotiation prep pack.
• You are consolidating suppliers and need to pick which ones remain. See vendor consolidation.
• The spend cube shows fragmented buying in a category with no clear competitive process. See spend analysis.
• A new product, site, or service line needs a supplier and there is no incumbent.

Do not run an event when the outcome is already decided. Suppliers notice, and a sham process damages trust and your ability to run real ones. Do not run an event when switching is practically impossible in the time available. If the alternative cannot be executed, the competitive pressure is not real.

Procurement rules, public-sector requirements, and confidentiality obligations vary. Follow your own policies and agreements, and involve counsel for contract terms, intellectual property, and anything binding.

Diagnostic questions

Answer these to decide whether to run an event and what kind.

1. What exactly are we buying, and can we describe it in a specification a supplier could quote against?
2. What is the annual spend and volume, and how confident are we in the forecast?
3. Is price the main variable, or do quality, capability, and service differ materially among suppliers?
4. Who are the incumbent and the realistic alternatives, and how do we know they are qualified?
5. What would it cost and how long would it take to switch (qualification, tooling, transition, risk)?
6. What is the contract's end date and notice deadline, and how many weeks does an event take us? (See contract management.)
7. Who in the business must agree on the criteria and the final decision?
8. Which requirements are mandatory (must pass), and which are scored?
9. What data can we share with suppliers, and what must be protected?
10. What are the minimum terms we will not accept (payment terms, liability, exclusivity)?
11. How will we compare bids on a total cost basis?
12. What is our fallback if no bid is acceptable?

If questions 1, 5, and 11 cannot be answered, the event is premature.

The framework: choosing the format

The key distinction between RFP and RFQ is whether you are asking suppliers to price your answer or to bring their own. In an RFQ you know what you want. In an RFP you want to see what they would do. Many events combine both: an RFP with a priced RFQ-style schedule in the response.

Step-by-step: a 12-step sourcing event

Timings below are typical shapes, not standards. Set yours from your own last event.

Phase 1: Prepare (weeks 1-3)

1. Define scope and objective. State what is in and out, volume ranges, contract length, and the business goal (cost, quality, risk, capacity). Owner: category manager with the budget owner. Output: scope statement.
2. Gather the fact base. Spend history, current contract terms, performance data, volume forecast. Owner: category manager with AP. Output: fact base.
3. Set the evaluation model before you write the request. Define mandatory requirements, weighted criteria, the cost model, and who scores. Get sign-off. Owner: category manager with stakeholders. Output: scoring model approved in writing.
4. Build the supplier list. Include the incumbent, qualified alternatives, and at least one or two you must qualify. Owner: category manager. Output: invitation list.

Phase 2: Issue (weeks 3-5)

5. Write the request. Use the template below. Include the specification, volumes, timeline, response format, evaluation criteria, and rules (single point of contact, question deadline, confidentiality). Owner: category manager. Output: RFQ or RFP document, reviewed by Legal for terms.
6. Hold a bidder briefing or issue written Q&A to all bidders at once. Never give an answer to one bidder that others do not receive. Owner: category manager. Output: Q&A log shared with all.

Phase 3: Evaluate (weeks 5-8)

7. Check compliance. Verify each response against mandatory requirements. Disqualify only on criteria stated in the request. Owner: category manager. Output: compliance checklist.
8. Normalize the bids. Put every price on the same basis: same volumes, same specification, same delivery point, same payment terms or adjusted for them. Compute total cost (see worked example). Owner: category manager with Finance. Output: normalized cost comparison.
9. Score independently. Each evaluator scores the non-price criteria alone, then the group meets to discuss differences. Record reasons for any change. Owner: evaluation team. Output: scorecard.
10. Clarify and, if used, run a best-and-final round. Give each shortlisted bidder the same chance to improve. Owner: category manager. Output: updated bids.

Phase 4: Decide and transition (weeks 8-12)

11. Write the decision memo with scores, total cost, risks, and recommendation. Get approval from the named decision-maker. Owner: Procurement lead. Output: signed memo.
12. Negotiate, contract, and transition. Document the agreement with counsel, load prices and terms, brief the unsuccessful bidders, and track realized savings in the first quarters. Owner: category manager with Legal and Operations. Output: signed contract, transition plan, tracker.

Templates

Request document outline (RFQ or RFP)

1. Purpose and background (what we buy and why we are running this event).
2. Scope and specification, with volumes and forecast ranges.
3. Timeline: question deadline, response deadline, evaluation, decision.
4. Instructions: format, contact person, confidentiality, how questions are answered.
5. Mandatory requirements (pass or fail).
6. Evaluation criteria and weights (disclosed to bidders).
7. Pricing schedule: unit price, freight, payment terms, minimums, price validity, escalators.
8. Supplier information: ownership, financial health, references, capacity, certifications.
9. Contract expectations: terms we require, deviations they must list.
10. Rights reserved: no obligation to award, right to negotiate, right to reject.

Evaluation model

Bid normalization sheet

Decision memo

• Recommendation and the next-best alternative.
• Scores by criterion and total cost by bidder.
• Key risks and mitigations.
• Terms to negotiate and what would change the decision.
• Expected savings by type (run-rate, one-time, avoided) and how they will be tracked.
• Approver and date.

Metrics and KPIs

Setting targets without invented benchmarks. Measure your own baseline first: the share of addressable spend that has been competed in the last three to five years, and your current event cycle time. Set targets from those and from the contract calendar, which tells you which categories reach decision points. For savings, the target is the realized difference between old and new total cost, not a percentage quoted by someone else. If you want an external reference, use public information on named peers or published price indices for your commodity.

Common mistakes

1. Writing criteria after seeing bids. Criteria and weights must be approved before the request goes out. Otherwise the scoring can be steered, and a losing bidder can fairly challenge the result.
2. Comparing quoted prices. A lower unit price with higher freight, shorter payment terms, and a one-time switching cost can be the more expensive option. Normalize first.
3. Over-weighting price. If price carries so much weight that quality and risk cannot change the ranking, you have run an RFQ with extra paperwork. Set weights to reflect what the business will actually suffer if each criterion fails.
4. A vague specification. Bidders fill gaps with assumptions, and the assumptions differ. You will get quotes you cannot compare, or a change order after award.
5. Unequal information. Telling one bidder something others do not, especially the incumbent, undermines the process.
6. Using the event only as leverage. If the incumbent will always win, say so, and use the negotiation prep pack instead. Suppliers stop bidding seriously when they learn the process is cosmetic.
7. Ignoring transition cost and risk. The business case should include qualification, tooling, dual-sourcing during transition, and the risk of disruption.
8. Savings declared at award. The saving exists only when the invoice shows it. Load prices into the system and track realization.

Worked example (illustrative)

The numbers below are made up to show the method. They are not benchmarks.

A company is competing the supply of a component. Annual volume is 400,000 units. Three bidders respond. The company uses a cost of capital of 9% (an assumption) to value payment terms, and amortizes one-time switching costs over a 3-year contract.

Normalization:

Bidder B has the lowest quoted price ($9.10) and the lowest total cost, but the margin is small: Bidder C's total is only about $20,400 higher than B's, or about 0.5 percent.

Scoring (100 points): price carries 40, quality 20, delivery 15, risk 10, and service 15. The price score is lowest total cost ÷ bidder total cost × 40. Non-price scores are 1-5 ratings converted by weight × rating ÷ 5.

What this tells the operator:

• On quoted price, B wins. On total cost, B still wins narrowly. On the scored model, C wins clearly (93.8 versus 84.8 for A and 77.0 for B), because the cost spread is about half a percent while the quality, delivery, and risk differences are large.
• The price weight barely separated the bidders, so the decision rests on the non-price ratings. Those ratings need evidence (references, samples, financial review), not opinion. A different reasonable set of ratings could change the order, which is why they are agreed and documented before the bids arrive.
• The next step is not to award. It is to use B's price and C's terms in a best-and-final round, with C's incumbency position and B's risk rating stated honestly. The company should also ask what would raise B's risk and quality ratings.
• The incumbent's zero switching cost is a real advantage and should be visible in the model rather than hidden. It also means that "the incumbent won" is a legitimate outcome of a fair process.

AI prompt assistance

AI can draft documents and check consistency. It cannot know your supplier base. Provide the facts and verify the numbers.

1. Draft the request document from a scope statement.

Here is my scope statement, volumes, specification summary, timeline, and evaluation criteria with weights. Draft an RFQ document using this outline: purpose, scope, timeline, instructions, mandatory requirements, evaluation criteria, pricing schedule, supplier information, contract expectations, rights reserved. Use plain language. List any section where my inputs are missing instead of inventing content.

Check: confirm that every requirement and weight matches what stakeholders approved, and have Legal review contract terms.

2. Normalize bids.

Here are three bids with quoted unit price, freight per unit, payment terms in days, and one-time switching cost. Using annual volume of [volume], a cost of capital of [x]%, and a [n]-year amortization, compute the landed unit cost net of payment-terms value and the annual total cost of ownership for each bid. Show each formula and each intermediate number in a table.

Check: recompute one bidder by hand and confirm that the totals tie to your normalization sheet.

3. Compare evaluator scores.

Here are the scores from four evaluators for three bidders on five criteria. Identify the criteria where evaluators differ by two or more points, and list the questions we should ask the group to resolve each difference. Do not average away the disagreement.

Check: use the output to prepare the scoring discussion, and record any change in scores with its reason.

4. Draft the decision memo.

From this scorecard and normalization table, draft a one-page decision memo with recommendation, total cost by bidder, scores, key risks, and what would change the decision. Use only the numbers I provide.

Check: confirm every figure against the scorecard, and have the decision-maker review the framing.

Implementation guide

Governance: the budget owner defines the objective, the Procurement lead owns the process and the audit trail, evaluators own their scores, Finance owns the cost model, and counsel owns the contract. Keep a file for every event: request, Q&A, scores, memo, and award, so the process can be explained later.

What to expect: a well-run event for a significant category commonly takes a quarter, and the preparation phase decides most of the quality. Transition and realization continue after signature. Do not report the saving until the invoices show it.

Downloadable assets

The request outline, evaluation model, bid normalization sheet, and decision memo above are designed to be copied into a spreadsheet or document.

Related resources

• Procurement Playbook: the parent guide for the sourcing lifecycle.
• Spend analysis: how to build a clean spend cube: finding the categories worth an event.
• Supplier negotiation prep pack: preparing for best-and-final and incumbent negotiations.
• Contract management for procurement savings: the renewal calendar that sets when events must start.
• Reduce your cash conversion cycle: how payment terms affect working capital.

Frequently asked questions

What is the difference between an RFP and an RFQ?

An RFQ asks suppliers to price a defined specification, so price is the main variable. An RFP asks suppliers to propose a solution and a price, so approach, capability, and service are scored alongside cost. Use an RFQ when you know exactly what you want. Use an RFP when the answer differs among suppliers.

What are the steps in a sourcing event?

A sourcing event has four phases: prepare, issue, evaluate, and decide. Prepare means defining scope, gathering data, and approving the scoring model before writing the request. Issue means sending the request and running a common Q&A. Evaluate means checking compliance, normalizing bids, and scoring. Decide means a memo, contract, and transition.

How do you compare supplier bids fairly?

Put every bid on the same basis before scoring: same volume, specification, delivery point, and payment terms, or adjust for the differences. Compute total cost of ownership, including freight, the value of payment terms, and amortized switching cost. Score non-price criteria independently against weights approved before the request was issued.

How should payment terms be valued in a bid comparison?

Value payment terms by the cost of capital over the extra days. Multiply price by days divided by 365 by your cost of capital, and subtract that amount from the unit cost, since longer terms are worth more to the buyer. State the rate you used, and apply it to every bidder so the comparison stays consistent.

How many suppliers should be invited to an RFP or RFQ?

Invite enough qualified suppliers to make the competition real, which is usually the incumbent plus a small number of alternatives you would genuinely consider. More bidders raises evaluation effort and can lower response quality. Do not invite suppliers you would not award to, and do not run an event if switching is not feasible.

How this works in a System of Performance

A sourcing event produces a decision, a price, and a set of promises that must be carried into the contract register, the ERP, and the invoice. In many companies those links break once the event team moves on, so the agreed price is never checked and the next renewal starts from scratch. A Performis routine can take on a recurring job like this, with the scope and fit agreed with you: it works from the records your team supplies, prepares the work for your named reviewer, and keeps each approval on record. If you want to see how closely your awarded prices match your paid ones, bring it to us as a launch partner.