Bid vs. Proposal What’s the Difference?

While scanning State and Federal agency contracting sites, I’ve seen different uses of the words “bid” and “proposal.”  From the contractor/supplier point of view, these terms may seem interchangeable.  Indeed, it even seems that some government contracting agencies use these terms as synonyms. In the second edition of his 2016 book, “Contracting for Services in State and Local Government Agencies,” William Sims Curry tells us that in a 2015 research project, only 73% of contracting agencies reported that “they used the term ‘proposal’ exclusively when referring to contractor responses to RFPs.”

Bid vs. Proposal, What Is the difference?

From a best-practice prospective, there is a significant difference between these two words.  Using these terms as synonyms could lead to misunderstandings of a government agency’s intention in terms of how the information contained in Request for Proposals (RFP) or Invitation for Bids (IFB) responses will be treated.  Such confusion can lead to contractor/supplier protest, resulting in delayed decisions and unwanted legal actions and publicity.   Curry tells us that “these terms cannot be used interchangeably because each type of solicitation is unique and subject to differing rules.”

So here are the rules for using “bid” and “proposal.”

The word “bid” should only be used to describe a response to an IFB or Request for Bid (RFB).  These solicitations are typically straight forward initiatives to secure commodities, capital equipment or construction work and normally not services.  Bid responses are always subject to disclosure at public openings and are not subject to (price, terms & condition, timing, etc.) negotiation.

On the other hand, the term “proposal” is only used to describe a response to a RFP, which is used primarily to secure services or a combination of products and services. RFPs are more complex than IFBs or RFBs due to the nature of their requirement, which can be satisfied in different ways.  The RFP is designed to help the contracting agency understand the various proposed methods and approaches that can be used to meet the requirement.  The variability of responses may include information considered proprietary, confidential, sensitive or a competitive secret by the proposing contractor/supplier.  For that reason, and the fact that provisions of the proposal are subject to negotiations, the details provided in contractor proposal responses are typically not subject to immediate public disclosure.   The reason for this is that the contracting agency, after reviewing a proposed approach to satisfying the RFP requirement, may desire changes to a prospective contractor’s approach in terms of timing, methodology, resourcing, objectives, cost, etc.   The contractor recommended by the contracting agency will most likely be selected if both parties can agree to the changes.

So, What Does This Mean To You?

If you are the contracting agent, you will want to adhere to the described usages of the terms “bid” and “proposal.”  If, for any reason, you cannot then make sure to at least clearly state your intention of how the information contained in received proposal and bid responses will be disclosed.  Government agencies tend to be bound by laws requiring more transparency than private corporations when it comes to disclosing responses. I have seen options offered by governmental agencies to allow contractors to submit a redacted version of their proposals to satisfy the need for subsequent public disclosure of RFP responses.

If you are a contractor/supplier, know that not all contracting agencies adhere to the same usage/treatment of the terms “bid” and “proposal” as described in this blog.  You may want to reconsider responding to a RFP where the contracting agency or organization intends to disclose sensitive information contained in your response to the public—and your competitors.  Most contracting agencies do not publicly disclose proposal information prior to contractor selection. However, after a contractor has been selected, proposals are normally subject to public release rules unless the contractor marked certain portions of its proposal as “proprietary.” Contracting agencies normally reserve the right to determine whether information marked “proprietary” by the contractor is actually proprietary. There are ways to mitigate this risk but you will want to read the nitty gritty details contained in that RFP. In any case, you should submit written questions to the contracting agency requesting clarification.

Do You Keep Missing The RFP Target?

Does This Sound Familiar?

The owner of a small services firm told me about how her business responded to thirty or so RFP solicitations. She spent time and effort carefully filling out the forms, crafting out a recommended approach and pricing to satisfy the requirements of those opportunities that were “right up her alley.”

And this is what she got for all that effort . . . zilch, nada (thing), diddly-squat! She was, however, invited to explain to her partners and investors why she wasted their time and money.

So What Happened?
Hearing more about her approach, it turns out that she should not have responded to any of those thirty RFP opportunities. Why? Even though those opportunities were in her firm’s areas of expertise, they were not a good fit for reasons that had nothing to do with the scope of work defined in those RFPs.

Just because you find out about an RFP or RFQ opportunity, that doesn’t mean it is an opportunity for you.  But make no mistake about it. Winning competitive RFP/RFQs is a game of large numbers. You’ve got to be in as many of these opportunity bubbles as possible. The question is, which ones won’t pop on you?

So, consider my 10% theory. No matter how good your organization is, even if your product or service is the best thing since sliced bread, you still must have at least ten RFP/RFQ responses going just to win one. Question is . . . which ten? Obviously the business owner described above responded to the wrong RFP/RFQ opportunities.

Bottom Line: Think Twice Before You Respond To Any RFP Solicitation!

In my next blog, I’ll talk about how and why you need to understand the true story behind a RFP solicitation before you respond to it.