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Posted on July 31st, 2012, by

Basically, request for proposal plays a very important role in the performance and development of the company because, due to this process, it is possible to invite suppliers through a bidding process and submit a proposal on a specific commodity or service. It should be pointed out that nowadays there exists a variety of types of proposals, which can be quite different, but their ultimate goal is, as a rule, similar. In such a situation, it is extremely important to develop an effective proposal and select the proper budget category that could perfectly meet the selected proposal. Such a combination is important because it is the major condition of the positive result of the proposal and the more effective the combination is the more benefits the company will likely receive.

At the same time, it does not necessarily mean that there is an ideal combination of a proposal and budget category that could be used universally and that could always bring positive effects. In actuality, it is necessary to select a specific type of proposal and match it with a definite budget category judging from the objectives of the proposals and taking into consideration commodities and services that are supposed to be supplied. This is why it is necessary to research and analyze different types of proposals and budget categories in order to be able to select the most effective ones.

Types of proposal

In actuality, a request for proposal is considered to be very effective because it implies the use of the wide range of information on company and its products (Pine and Gilmore, 1999). To put it more precisely, this type of proposal implies not only the request for price but it also implies the use of the wider information on the company and its background. In this respect, it should be said that along with information on price, the basic corporate information is also requested as well as the information on history of the company. Obviously, this information may be very important because it helps better understand the current position of the company and its development, its position in the market and even its future perspective. In fact, the more information the company can provide the more positive image of the company will be created, naturally on the condition that the company did not have any serious failures in the past, especially in the short-run. At the same time, the detailed information on product, such as the product availability and estimated completion period are also very significant because they contribute to the precise assessment of the supply potential of the company and its productivity.

However, it is not the only type of proposal that can be made. In actuality, it is possible to speak about such proposals as request for pricing or request for information. Basically, unlike the previously discussed type of proposal, these two types are more specific and mainly focused on a specific type of data that are supposed to be received, namely price and information. Speaking about the price, it should be said that this type of proposal may be applied when price is the determinant and practically only factor that determines the decision of bidders. In such a situation, the price offered is the main condition on the basis of which the decision is taken.

As for information, it should be said that request on information is actually a proposal requested from a potential seller or service provider to determine what services or products are potentially available in the marketplace to meet the buyer’s needs and expectations. It should be pointed out that this type of proposal implies the knowledge of the seller’s capability in terms of offerings and strengths of seller. Basically, such a proposal provide ample information but it does not actually invite to bidding that may be viewed as a drawback compared to the first type of proposal discussed above. Nevertheless, different types of proposals may be used in different situations.

RFP and itemized budget

At the same time, the effective proposal naturally implies the development of a budget that could meet the basic demands of the specific type of proposal selected. Speaking about the request for proposal, it is necessary to underline that this type of proposals need detailed and specific information and, therefore, the budget that could meet these demands would be the most effectively applied to this proposal. In this respect, it should be said that itemized budget seems to be the most effective and the best match to the request for proposal. It should be pointed out that, as a rule, the request for proposal often includes specification of the item, product or service for which a proposal is requested. In actuality, this means that it is very important to develop a budget that could fully reflect all possible expenses and revenues related to each item. In fact, itemized budget gives the precision and accuracy, which is highly needed for the request for proposal.

Basically, itemized budget is very detailed and implies its accurate fulfillment in order to minimize the risk of changes that may result in possible losses. At the same time, the itemized budgeting makes bidders more confident in the proposal as they can clearly see the perspectives of the product or service they are willing to acquire.

Principles of design

On the other hand, it would be a mistake to reject pointblank all other budget categories, though it should be pointed out that other budget categories will less likely meet perfectly the request for proposal. Among the rest of budget categories, it is possible to single out the non-itemized budget, which is probably the least convenient to be applied to the request for proposal because it implies the creation of the budget that does not take into consideration specific items but is basically focused on the general articles of expenses and revenues. In fact, this budget lacks specificity essential for the request for proposal. Nevertheless, it could be useful when the budget is developed for a developing company that is not focused on the production of some specific products or services but tends to the development of the production and expects for investments.

Another budget category is fixed budget, which is also not very good for the application to the request for proposal because, even though it is quite precise and accurate but it still does not take into consideration the possibility of variation, while itemized budget, in this respect, implies the possibility of change of an item expenses or revenues that, though, does not lead to the change of the budget at large.

The latter is the case of the flexible budget which implies the possibility of changes and which apparently lacks precision and accuracy. Basically, this budget is good for the application in companies with uncertain expenses and revenues since it implies the possibility of changes and the figures are not as precise as in fixed or itemized budget.

Conclusion

Thus, taking into account all above mentioned, it is possible to conclude that the request for proposal may be very effective, but, at the same time, it implies the use of itemized budget to make the realization of the proposal really effective and profitable. In fact, the request for proposal and itemized budget are a perfect match because they can provide the essential precision and accuracy and do not admit radical changes that could change the situation substantially.

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