Requests for proposals — or RFPs for short — are frequently issued by government agencies, nonprofit groups, and corporations to encourage businesses in a particular industry to bid on projects. RFPs typically outline specific requirements and deliverables, leaving it to potential contractors to propose how they would perform the work and how much they would charge.
Is bidding on RFPs worth your time and effort? Here’s a look at some of the pros and cons.
Pro: RFPs can be huge in scale. Some companies have hired full-time employees just to respond to RFPs, and it’s no wonder: Some requests are massive, such as this $427 million cloud-services consulting contract. What’s more, the federal government aims to reserve 23 percent of its contracts for small businesses, giving your company a good chance of consideration if you meet the qualifications.
Con: Responding to RFPs can be difficult and time-consuming. Many RFPs require you to follow very specific rules and provide highly detailed proposals, so you may need to devote considerable resources to comply with prospective clients’ requests. For instance, more than half of law firms surveyed by LexisNexis reported that they averaged 20 hours or more on each RFP response. When it comes to bidding on to large federal contracts, the time commitment can be considerably higher. Before you respond to an RFP, determine whether you’ll see any return on your investment after the time spent in simply doing the work on the proposal.
Pro: Responding to RFPs can be a foot in the door. If you don’t have a personal connection or referral to an organization, responding to its RFPs can help you convince your target customer of your business’s value. Yes, you’re likely to face some competition, but if you know that your prices are competitive, bidding on projects is likely to help create opportunities, notes Michael Gallo, owner and principal of Valerisys Consulting.
Con: Your odds of winning the contract are often very low. Some agencies are obligated to issue RFPs as a formality, even when they’ve already chosen a contractor. If they haven’t, you may be bidding against dozens — or even hundreds — of other businesses. And some projects end up falling through. Before you respond to an RFP, do as much research on the issuing party’s RFP track record as you can. Don’t waste time responding to long shots. Website developer Confluent Forms suggests asking these questions when evaluating whether an RFP response is worth it.