RFQ or RFP? An introduction to the different types of tender
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Before delving into the stages of the procurement process, it is helpful to understand that there are different kinds of procurement processes and transactions. These include:
Requests for Quotations or RFQs deal with procurements which have total transaction value below a certain threshold (ie. low value purchases).
Requests for Proposals or RFPs deal with procurements which have total transaction value above a threshold (ie. high value purchases).
Transversal procurement/contract A collective procurement by multiple departments. This procurement process is coordinated by the Office of the Chief Procurement Officer.
In very particular circumstances, procuring entities may also use limited/closed bidding, or may receive unsolicited bid proposals.
The current maximum thresholds are: R500 000 for all organs of state other than municipalities. The threshold for municipalities is R200 000.
These thresholds are subject to change from time to time.
Where the value of the good or service being procured is below a monetary threshold, a procuring entity may ask a number of suppliers to provide a quotation for the good/service, instead of going through the full tender process.
The request to suppliers is set out in an RFQ document.
The RFP will ask for information from bidders on their technical knowledge, the quality of their product or service and their experience in the field.
The responses will be submitted in a proposal manner, outlining the technical competencies, background experience, etc.
If the value of the transaction is above the monetary threshold (see above), procuring entities have no option but to go through a fully competitive tender process - bids must be advertised for competitive bidding.
Sometimes the RFP process may be utilised to establish a panel of service providers, wherein the bidders will be evaluated for functionality and the compliance requirements, excluding pricing. The (SITA), for example, maintains a list of IT service providers with pre-approved contracts.
When the organ of state accesses or procures from the panel, all service providers on the panel will only be asked to provide a quotation for their services, because the bidders have evaluated for functionality for inclusion to the panel.
This occurs when a selected set of potential service providers are invited to bid - where only a few service providers exist that have the ability to provide a particular service. In highly specialised requirements, this may even be an invitation to a sole supplier, where no other supplier can perform the function.
A single source appointment may be made in order to provide the continuation of service such as maintenance to equipment that can only be serviced with branded parts.
Unsolicited bids can be allowed in order to facilitate innovation in service provision. For example, government may have a challenge and a supplier does extensive research and develops a solution that it wishes to present to procurement heads.
If the instigation of the process comes from a supplier, rather than from a public entity - the bid is unsolicited.
A public entity does not have an obligation to accept unsolicited bids, but it may if its supply chain management allows.
It is important that when developing a solution, suppliers take into account government’s plans to integrate the systems, financial, Human Resources and supply chain management, as well as the size of government, and the policies and processes that would need to be supported by the solution.
As a rule, unsolicited bids are rare because of the potential for abuse of the process.
This is when a procuring entity procures a commodity in bulk at discounted rates, on behalf of multiple departments. The manages close to 50 transversal contracts on behalf of government. These range from surgical gloves, tyres, maintenance of government vehicles, courier services etc.