Learn, shape, compete: asking suppliers the question you are actually ready for

When a business needs something it has not bought before, such as a new software system, a piece of automation, an outsourced service or a fit-out, it usually reaches for a familiar step: ask a few suppliers for quotes. Sometimes that is exactly right. Often it is premature. The business knows it has a problem but not what solutions exist, what they cost or which approach would suit it best. Asking for firm quotes at that stage asks suppliers to make a decision the business itself is not ready to make.

The result is predictable. Quotes arrive for different things, built on different assumptions. Suppliers fill the gaps with their own preferred solution. The cheapest quote is often the one with the most exclusions. The business then spends weeks clarifying, comparing incomparable offers and negotiating changes, or it chooses quickly and discovers the gaps during delivery.

This article explains three different ways of approaching the market, each suited to a different state of knowledge, how to choose between them, why both rushing and endless research are costly, what to decide before approaching anyone, and how a supplier should respond to each kind of request.

Three requests for three states of knowledge

Buyers use several names for documents sent to suppliers, and the names are not always used consistently. Three broad types are common:

The labels and their legal effect can vary between organisations, and a request’s own terms matter more than its title. Government buyers in particular often have specific rules about what each kind of document means and how respondents will be treated. Read the document, not just its name.

The useful distinction is not the label. It is the state of knowledge each request suits: learning, shaping or competing.

Learn, shape, compete

A simple sequence helps:

• Learn: when you do not know what solutions exist, ask the market to inform you. An RFI or informal conversations with several suppliers serve this purpose.
• Shape: when you understand the outcome you need but suppliers might offer materially different ways of achieving it, ask them to propose. An RFP or a performance-based request suits this stage.
• Compete: when the requirement and commercial terms are defined well enough for offers to be compared on a common basis, ask for firm quotes or tenders.

Not every purchase needs all three stages. For a routine purchase of standard items, the business can go straight to competing. For something genuinely new, all three may be worth the time. The stages are not rigid legal categories. They are a way of matching the question to what the business knows.

Follow your weakest point

Before choosing how to approach the market, check five things:

1. Knowledge: how well does the business understand the solutions available?
2. Requirement maturity: can it define the outcomes it must have and the constraints it must work within?
3. Innovation need: does it want suppliers to shape the solution, or does it already know what it wants?
4. Comparability: could offers be compared on a reasonably common basis?
5. Commitment readiness: is the business ready to select a supplier and sign a contract, including having budget and approval?

The request should follow the weakest of these. A business that knows exactly what it wants but has no approved budget is not ready for a tender, whatever its specification looks like. A business that has budget but no idea what solutions exist is not ready for firm quotes. The how much design before seeking quotes article covers the requirement side of this test in more detail.

The cost of going too early

Asking for firm quotes before the business is ready seems to save time. Often the time reappears later as:

• Clarification: suppliers ask questions that reveal the business has not decided what it needs.
• Incomparable offers: each supplier proposes something different, and comparison becomes guesswork.
• Hidden assumptions: suppliers price their own interpretation of the gaps, and the gaps become variations later.
• Frozen assumptions: a detailed specification written before the business understood the options locks in a solution that may not be the best one.
• Damaged relationships: suppliers who spend significant effort pricing a request that is later withdrawn or rewritten may be less willing to respond next time.

The cost of never deciding

The opposite risk is permanent discovery: continuing to gather information because learning feels safer than deciding. More meetings, more demonstrations, another round of questions. Each step feels prudent, but market information is only valuable when it helps the business make a decision. If nobody can say what decision the next round of information will unlock, it is probably time to move on.

The practical threshold is not perfect knowledge. It is decision sufficiency: enough understanding to ask the next question responsibly. Each stage should reduce a specific uncertainty and end with a clear decision to proceed, change the requirement or stop.

Decide what matters before you ask anyone

Much of the value of a purchase is decided before any supplier is approached. By the time quotes arrive, the scope has been drawn, the approach chosen and many assumptions fixed. A strong supplier can deliver what was asked for, but cannot recover value that was lost because the business asked for the wrong thing. A cheap, well-delivered solution to the wrong need is still the wrong solution.

Before approaching the market, work through five questions:

1. What value should this purchase create? Describe the outcome in terms of what changes for customers, staff or the business, not just what will be delivered.
2. Which assumptions carry the case? List the assumptions about demand, capability, timing, integration, cost and how people will use the result. Which would be most expensive to discover are wrong after signing?
3. Where does the knowledge sit? The best understanding of the problem may be with staff who do the work, with customers, with an adviser or with suppliers. Bring it in before the requirement is fixed.
4. Which decisions reduce future options? Some choices, such as a proprietary technology, a long contract or outsourcing a capability entirely, are hard to reverse. Give them more attention.
5. What evidence should exist before committing? Agree what the business needs to know about scope, budget, market and risk before it asks for firm prices.

A recurring theme is the difference between a need and a preferred solution. “We need a new scheduling system” is a solution. “Planners spend two days a week rescheduling jobs by hand, and customers do not get reliable dates” is a need. Starting from the need leaves room for the market to suggest something better, including something cheaper. The article on the cost you commit before you spend explains why these early decisions matter so much.

Fairness and confidentiality in early conversations

Talking to suppliers early is valuable, but it raises fairness questions if the business later runs a competitive process:

• Be clear about status. Tell suppliers whether you are gathering information or inviting offers, and do not imply that taking part in an RFI earns preference later.
• Treat information carefully. Do not pass one supplier’s ideas, designs or prices to another. If a supplier’s idea shapes your requirement, consider whether it is fair to use it, and be open about it.
• Share answers fairly. In a competitive process, answers to one supplier’s questions that affect the requirement should usually be shared with all respondents.
• Mind intellectual property. If suppliers share designs or methods during early engagement, agree how that information may be used.

Government buyers usually have formal rules for these situations. Private businesses have more freedom, but the same principles protect their reputation and their ability to attract good responses in future.

Keep what you learn

An RFI that produces no lasting learning is an expensive questionnaire. Record what the market told you: the kinds of solution available, typical costs and lead times, which suppliers were capable and responsive, and what surprised you. Keep this where the next person to buy something similar will find it. Over time, this record makes the business a better-informed buyer and shortens future purchases.

Responding as a supplier

Suppliers see the other side of this. Understanding what stage the buyer is at helps decide how much effort to invest and what to say.

Responding to an RFI: the buyer is learning. Help them understand the options, including approaches you do not offer, and explain what drives cost and lead time. Indicative pricing is often useful, clearly labelled as indicative. A helpful, honest RFI response builds credibility for later stages. Do not expect it to guarantee preference.

Responding to an RFP: the buyer knows the outcome but wants your solution. Explain how your approach achieves the outcome, what you assume and what you need from the buyer. State clearly where your proposal differs from what the buyer might expect, and why.

Responding to an RFQ or tender: the buyer wants comparable, firm offers. Answer exactly what is asked, in the format requested. State assumptions and exclusions clearly. If you believe the requirement is not mature enough for a firm price, say so through the question process, and consider offering a conforming price together with a clearly labelled alternative, if the request allows it. The writing tender responses buyers can evaluate article covers this in more detail.

At every stage, a supplier can help a buyer who is asking the wrong question by explaining, politely and briefly, what information would allow a better answer.

A worked example

This is an illustration. A transport business with 25 staff wants to replace the spreadsheets its planners use to schedule deliveries. The operations manager’s first instinct is to send a request for quotation to three software vendors, using a feature list copied from one vendor’s brochure.

Before sending it, the manager checks the five tests. Knowledge is weak: the business does not know whether it needs a dedicated transport system, a module of its accounting software or something else. Requirement maturity is moderate: the manager can describe the problems but not the solution. Commitment readiness is moderate: there is budget approval in principle but not a fixed amount. The weakest point is knowledge, so the business starts by learning.

• Learn: the business sends a short RFI to eight vendors and asks two similar businesses what they use. It describes its problems, volumes and existing systems, and asks what approaches exist, typical costs and implementation times. Responses show three broad options: dedicated transport systems, add-ons to accounting software and custom development. Typical subscription costs vary several-fold, and implementation times range from a few weeks to several months.
• Shape: the business writes a request for proposal describing outcomes rather than features: reduce planning time, give customers reliable delivery windows, track vehicles, integrate with the accounting system and support the planners’ busiest periods. It invites three vendors, from two of the three solution types, to propose and demonstrate using the business’s own sample data.
• Compete: after the demonstrations, the business chooses the dedicated system that performed best on its own data and negotiates final terms with that vendor, using a second proposal as a reference point.

The whole process takes about three months, roughly six weeks longer than sending the original RFQ. But the solution chosen is one the original feature list would have excluded, and implementation proceeds without the scope disputes the manager had seen in a previous project. The business records what it learned about the market for its next technology purchase.

How this applies to a small Australian business

Small businesses often skip straight to quotes because it feels efficient. Practical steps:

• Check the five tests before approaching suppliers: knowledge, requirement maturity, innovation need, comparability and commitment readiness.
• Learn first when you do not know the options; shape when you know the outcome but not the best solution; compete when offers can be compared.
• Describe needs, not preferred solutions.
• List the assumptions that would be most expensive to get wrong.
• Be fair and clear with suppliers about the status of each request.
• Record what you learn for future purchases.
• As a supplier, read the stage the buyer is at and respond accordingly.
• When dealing with government buyers, read their procurement rules and the request’s own terms carefully.

Signals worth watching

• Quotes that cannot be compared because each supplier proposed something different.
• Many clarification questions revealing the requirement is unclear.
• Low quotes with long lists of exclusions.
• Requests rewritten after release.
• Rounds of information-gathering with no decision at the end.
• Suppliers declining to respond to your requests.
• Specifications copied from one supplier’s brochure.

Common mistakes

• Asking for firm quotes before the business knows what it needs.
• Gathering information indefinitely without a decision in view.
• Describing a preferred solution instead of the need.
• Treating the request’s label as more important than its terms.
• Sharing one supplier’s ideas with its competitors.
• Forgetting what the market taught you.

Frequently asked questions

Do small purchases need this process? No. For routine, low-value purchases of standard items, a simple request for quotes is usually enough. Use the staged approach for purchases that are significant, unfamiliar or hard to reverse.

How many suppliers should we approach at each stage? Enough to see the range. An RFI might go to six to ten suppliers or be replaced by conversations with a handful. An RFP usually goes to a shortlist of three or four, and a final quote stage may involve two or three.

Should we pay suppliers for proposals? Usually not for standard proposals. Where you ask for significant design work, a prototype or a detailed investigation, paying for it is fairer and often produces better work.

Can we skip the RFI and just talk to suppliers? Often yes. Informal conversations, demonstrations and calls to other businesses can serve the same purpose for a small business. The important thing is to learn deliberately and record what you learn.

What if a supplier from the RFI stage expects to win? Be clear from the start that taking part in information-gathering does not give preference. Treat all respondents fairly at later stages.

Questions to ask

• What decision are we asking the market to help us make?
• What do we genuinely not know yet?
• Are we describing a need or a preferred solution?
• How much do we want suppliers to shape the solution?
• Are we ready to compare firm offers and commit?
• What will tell us it is time to move from learning to selecting?
• How will we keep what we learn for next time?

Bringing it together

The way a business approaches suppliers should match what it knows. Learn when the options are unclear, shape when the outcome is clear but the solution is not, and compete when offers can be compared. Decide what value the purchase should create, which assumptions carry it and where the knowledge sits before asking anyone. Avoid both premature tenders and endless discovery, be fair with suppliers and keep what you learn. The best request asks the market only the question the business is ready to act on.

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Source: KEVOS notes, drawing on teaching material comparing requests for information, proposals and tenders, and on project-value research describing how early decisions shape what a project can achieve. Examples and figures in this article are illustrations. This article is general information, not legal advice.