According to (Conger,2008, 680), an RFP or request for a proposal is a formal document requesting a bid on a product or service that RFP’s issuer (organization) may need; the service might be a software, hardware, or operations such as marketing, management…etc.
RFPs usually posted publicly, after the issuer organization had done some research (including feasibility study) on the market and the available options (InvestoPedia, 2022).
The RFP contains information about the issuer and the required service, and the criteria that the issuer is looking for in the service provider. The response to RFP is usually a proposal that contains the service provider’s offer, and the service provider’s qualifications and experience.
Because of the broad nature that RFPs cover, there are many types of RFPs, each for a specific service. For example, there are RFPs for hardware, software, and software development.
In this text, we define the issuer organization as the organization that issues the RFP, and the service provider as the organization that responds to the RFP.
Each type of RFP has its own financial nature and requirements; the competition allowed bidders to offer more flexible financial options to the RFP issuer; and that explains the many types of financial proposals.
According to Conger, the financial options for hardware RFP include:
Lease: The hardware is leased to the issuer organization for a certain period of time, and the issuer organization pays a monthly fee to the service provider for the leased hardware.
Lease with option to purchase: The hardware is leased to the issuer organization for a certain period of time, and the issuer organization pays a monthly fee to the service provider for the leased hardware. At the end of the lease period, the issuer organization can purchase the hardware for a certain price or return it to the service provider.
Purchase: The issuer organization purchases the hardware from the service provider for a certain price.
According to Conger, the financial options for software RFP include:
One-time license fee: The issuer organization pays a one-time fee to the service provider for the software.
Ongoing Maintenance Fee: the issuer organization pays a monthly fee to the service provider who is responsible for maintaining the software and keep it updated.
According to Conger, the financial options for software development RFP include:
Fixed Price: The service provider is paid a fixed amount for the project.
Time and Material: The service provider is paid for the time spent on the project (cost of personnel) + Any other stationary costs (e.g. computers, printing, softwares …etc. ).
Time and Material with Ceiling: Same as Time and Material, but the service provider is paid a maximum amount for the project (capped price); if the project runs behind the schedule, the service provider is responsible for the extra cost.