subject: Procurement Management Terminology For Pmp Professionals [print this page] If any company wants to procure goods or service by signing a contract with another company, the first step for the buyer organization or project team is to identify what they want. Sometimes, they are not sure of their own requirement and in such cases; they issue what is called RFI, i.e., Request for Information .
For example, a Telecom Operator in India wants to setup a 3 G network. They are not sure what all is required to run a 3 G network, so as first step they can issue an RFI to vendors like Nokia, Siemens, Alcatel etc. After receiving the RFI, the telecom operator gets aware of the process of setting up a 3 G network. With that knowledge they can now issue an RFP, which stands for Request for Proposal. Sellers like Nokia, Siemens, and Alcatel etc can submit their proposal against this RFP.
Sometimes RFP is also called RFB, or Request for Bids.
If the buyer wants to procure some standard items like HP laptops, HP Printers, Usha Fans etc, they generally issue RFQ, i.e., Request for Quotation. RFQ is issued for purchasing standard off the shelf items.
Purchase Order or PO is the simplest type of contract. In such contracts, the buyer mentions the item that they are purchasing and at what price. PO is generally issued for small purchases.
Statement of Work or SOW defines the scope of the deliverables as per the contract. Generally contracts are drafted by the legal department where as SOW is drafted by the project team to actually define the deliverables required as per the SOW.
NDA stands for Non Disclosure agreement. NDA is signed to maintain the confidentially of each others information.
LOI or Letter of Intent is generally issued by the buyer to the seller. This is issued to indicate the seller that the buyer is interested in buying their services.
And lastly, T&C stands for Terms and condition. In any contract, there are various Terms and conditions.
