What is a Contract Proposal?

Malcolm Tatum

Contract proposals are documents prepared by a vendor or supplier in the hopes of securing the business of a particular customer. In many cases, these proposals are prepared as a response to a query from the potential customer. The ultimate goal of any contract proposal is to establish a contractual relationship between the supplier and the customer that will be in effect for an extended period of time.

A typical contract proposal will include several important types of information.
A typical contract proposal will include several important types of information.

Businesses of all sizes sometimes make use of their buying power to secure special rates from different vendors or suppliers. While large corporations routinely use this approach, smaller businesses sometimes band together into cooperatives or consortiums in order to combine their purchasing power for better rates. In both these scenarios, it is not unusual for the business to issue what is known as an RFP, or Request for Proposal, to a selected number of potential suppliers. The supplier who responds with a contract proposal providing the most overall benefit to the customer usually secures the business, and hopefully establishes what is a long-term relationship between the two.

A typical contract proposal will include several important types of information. First, the document will provide pricing, based on the needs of the customer. It is not unusual for the pricing to be less than the standard published pricing provided to customers who do not have the same level of purchasing power. Many suppliers and vendors also include what is known as tier pricing, which is simply a pricing schedule that provides the customer with additional price breaks if their product consumption within a given period of time exceeds a certain amount.

A proper contract proposal will also detail the range of support that the supplier will provide for the customer. This can include such items as order processing procedures, guarantees on delivery of goods or services within a specific time frame, and procedures for processing returns. Along with the pricing, addressing the scope of services can often make a huge difference in whether or not the attempt to secure the business is successful.

The duration for the contract proposal is also important. Identifying a specific starting and ending date allows the customer to understand how long the commitment will be in effect. The inclusion of situations that could allow each party to void the contract also helps to protect the rights and responsibilities of both the vendor and the supplier. Many contract proposal formats also include provisions that make it possible to automatically extend the contract, if both parties are amiable to this option.

There is no one right way to prepare a contract proposal. The final format depends a great deal on determining what is likely to attract the customer and earn the business. While using an RFP as a road map to preparing the proposal is always the best option, situations where no proposal guidelines are provided make it necessary for suppliers to investigate the nature and needs of the customer in great detail. Ideally, the research will allow the supplier to prepare and submit a contract proposal that resonates with the customer and makes it possible to establish a long-term relationship that is mutually beneficial.

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