General

You Should Include a Budget in your RFP

by
Alfredo Ramirez

If you’re asking whether to include a budget in your request for proposals, the answer is yes, you should. RFP budgets are often skipped at the issuer’s expense.

A request for proposal (RFP) is a document that invites agencies, contractors and vendors to bid on a project or provide a solution to a specific need. We’ve written about how to write an effective RFP that gets the ideal responses. A good RFP clearly outlines an organization’s requirements, expectations, and goals.

However, one critical element often overlooked at the issuer's expense is the budget. Adding a budget or budget range in your RFP is essential to conducting an effective and equitable RFP process. Doing so shows your commitment to fair and equitable practices, starts any partnership on the right foot and leads to better outcomes for your process and overall project.

Improves the Quality of Responses

Did you know you can get a small website for a few hundred dollars off the internet? Did you know that a similar website can cost upwards of $100,000? The same can be said for most projects across industries: software development, marketing, strategic planning, and more.

Budgets vary significantly within project types, and an idea of how much you’re willing to spend ensures both parties have the right conversation and envision similar project outcomes.

One of the core benefits of including a budget in your RFP is that it helps improve response quality. Our research into agencies has found that nearly 50% of qualified agencies will skip responding to an RFP if it does not include a budget. Neglecting the budget means you might cut your pool of candidates in half and lower the number of proposals you receive.

By providing a budget, agencies, and vendors better understand your project scope and financial constraints, and they can tailor their responses accordingly. This is vital information for creating realistic and feasible proposals. As a result, organizations receive higher-quality proposals well-suited to their needs and budget.

In contrast, when an RFP document lacks a budget, vendors, and contractors may not have a clear understanding of the organization’s financial limitations. This can result in agencies submitting overly optimistic or unrealistic proposals, which may not be feasible or affordable. The result is lower quality responses you and your team may have to spend additional time and resources reviewing and evaluating that are unsuitable for their needs. In the worst case, it can also mean returning to the drawing board for your project or RFP.

Encourages Healthy Competition

Another key reason to include a budget in your RFP is to encourage healthy competition. When agencies and vendors clearly understand the organization’s budget, they can compete more effectively and offer more competitive prices. This competition can drive down costs, contrary to the myth that no budget means lower costs, and organizations are able to get the best value for their money.

Moreover, including a budget in an RFP document levels the playing field for all agencies and vendors. The reason is that all the interest parties are aware of the budget constraints and can tailor their proposals accordingly to your needs. This can result in a more equitable and fair bidding process, which benefits both the organization and the vendors.

More importantly, including a budget can allow for easy self-qualification or disqualification, meaning that it can save time for an agency in responding to your RFP, or moving to the next opportunity. This is an act of respect and inclusion, leading to more satisfaction with the process and your organization.

How to Add the Appropriate Budget to your RFP

Even the best intentions to include a budget in an RFP can end up misrepresenting the scope or need of the project. Whenever possible, conduct an assessment, if only a minor one, of the project and what other organizations have paid for similar projects or find out what vendors charge for your type of project. Maureen Wallbeoff and I talked about how to conduct a good assessment that can lead to the best RFP process possible.

Some easy ways of finding out what other people paid/charge for your projects:

  • Ask your friends or colleagues at other organizations or agencies
  • Send a message on your preferred listserv, like Progressive Exchange
  • Ask on the Prosal Nest, our official forum
  • Check out similar projects or project types on the Prosal marketplace (login required)

If you ever have any questions about project pricing, don’t hesitate to contact the Prosal experts for our advice and guidance.

We believe budget transparency in the RFP is as important as salary transparency is to equity and fairness in the job application process. Taking steps to provide an accurate budget or budget range will lead to a more inclusive and efficient process while also delivering better results to you and your organization.

ABOUT THE AUTHOR

Alfredo Ramirez

Alfredo is the COO and Co-Founder of Prosal. He has over ten years of experience working in the nonprofit industry and previously founded a successful digital strategies business, winning over $2 million in RFPs throughout his career. He is an avid mountain biker and snowboarder and enjoys anything that takes him outdoors.

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