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Tuesday
Mar012005

Is It an RFP or a Contract?

More and more business relationships begin with a request for proposal or an RFP. The March 2005 issue of "Inc." magazine contains a story on "Perfecting the RFP" in its "Hands On" section. This article has a few tips on how to respond to an RFP. You can find the article on the "Inc." magazine web site at this link.

There is more to RFPs, however, then a sales spin. From a legal standpoint, the RFP is the contract between the parties. If you are inviting others to make proposals for goods or services you desire, then you must think through the points that are important to you and include those points in the RFP. In short, you need to treat your RFP as you would any other contract.

Issuing RFPs
If the subject matter, dollar amount or importance to your company would warrant legal review if it was a stand-alone contract, then consult with a lawyer before issuing your RFP.

Let me give you an example. You need to have a new web page developed for your business or a new product or service you are launching. Did you know that unless you have a written contract where the developer assigns their copyright in the site they develop to you, it is the developer and not you that owns the copyright for your site? Many developers have held businesses hostage when the business wanted to make changes to the site or to transfer the site to another vendor. This problem could have been avoided with a carefully drafted RFP. Even though the dollar amount may not have warranted legal review, the importance of the web site to the marketing and branding of the business justified consultation with a lawyer.

Responding to RFPs
The same is true when you are replying to an RFP. You may want the job. You may be willing to do what it takes to get the job. Before you submit your response, however, look carefully at the terms of the RFP. If there are one or more terms that are not acceptable or if important provisions are not set out, you have the opportunity to supplement and even change the terms of the RFP in your response. If there are significant dollars at stake or if the work is important to your business, lawyer review and suggestions of responsive language up front can be significantly less expensive than fighting problems down the road.

This is a real world problem. I have two disputes in my office right now. In one, the documentation between the parties is atrocious. It is hard to say how it will turn out. In the other, there is a comprehensive RFP addressing each and every point in dispute. Which one of these two businesses would you want to be?

Lessons
The following lessons may apply to your business.

DON'T: Don't forget that an RFP is a contract. The RFP and the response to the RFP may be the only "contract documents" between the parties.

DO: Do review the terms of an RFP carefully. Whether you are issuing the RFP or responding to an RFP, make sure that every important legal issue is covered.

DO: Do carefully review responses to RFPs. If you issue an RFP, make sure the responses do not deviate from your request. If the response does deviate, discuss the deviations with the other party and reach an agreement acceptable to both of you.

DO: Do address terms that are not acceptable or items that have not been covered in the RFP when you submit a response. If your response is accepted, then the RFP, as modified by your response, will likely be the contract between the parties.

DO: Do seek help from experienced attorneys to prevent legal problems arising from transactions subject to RFPs.

With these tips in mind, RFPs and their responses can clearly document the understanding of the parties and help you achieve business success.

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