A request for quotation (RFQ) is just one of many RFx documents that are a part of the procurement process. If you know how to write an RFQ, it can be very useful in the procurement process. In the right situation, RFQs are advantageous and offer quicker results than their more common counterpart, the RFP.
RFx documents and procurement terminology can be confusing, so this post will explore the request for quotation document in depth including answering:
- What is an RFQ?
- When should you use an RFQ?
- How to write an RFQ?
- What does an RFQ look like? (with examples and a template)
Let’s get started.
What is a request for quotation (RFQ)?
A request for quotation or quote (RFQ) is a document that details a buyer’s requirements and asks vendors to respond with pricing and payment terms.
An RFQ is different from an RFP because it focuses almost exclusively on the cost of a specific item or items. By contrast, RFPs are slightly more flexible and allow the vendor to propose creative solutions. RFQ decisions are made primarily based on price while RFPs may be more subjective and consider a number of factors to select the right vendor.
*Note: RFQ may also stand for request for qualifications.
When should you use an RFQ?
An RFQ isn’t a good fit for every procurement situation. Typically RFQs are used to buy very specific products, such as hardware or a list of office supplies. However, they are occasionally used for service procurement, such as a maintenance contract. RFQs work best in strategic sourcing situations when the issuer knows exactly what they want and how many.
Think of an RFQ as a no-frills pre-order form — it clearly defines the product or service specifications needed. From style to size to design, every available variable should be accounted for in your request. The RFQ also outlines how each vendor should provide their pricing information. Responses include itemized costs of each product. This level of detail allows the buyer to make accurate vendor comparisons.
Should you use an RFQ?
- Do you have a list of prequalified vendors that can supply the specific product or service you need?
- Do you know exactly what you want to buy and how many of each item?
- Is price the most important factor?
- Are you buying something that is ready out-of-the-box and needs no specialization?
- Will you be able to manage the item yourself without support from the vendor?
If you answered yes to all of these questions, then an RFQ is a good choice for you.
4 Types of RFQs
A request for quotation may be presented in a few different ways. Each type of RFQ has pros and cons.
An open bid is when RFQ responses are visible to all qualified vendors. Bids are opened during the submission period allowing vendors to see one another’s pricing. Suppliers can alter and update submitted bids until the bid deadline.
Pro: Pricing visibility may encourage more competitive pricing, driving costs down
Con: Open pricing can backfire and lead to price-fixing among vendors
A sealed bid is when an RFQ is open to all qualified bidders but the responses are opened only after the submission deadline has passed. Sealed bids are common in public and government procurement projects.
Pro: May help reduce the risk of fraud and provide vendor selection transparency
Con: Vendors may not be as motivated to provide their very best pricing
An invited bid is when only specific vendors receive the RFQ. They are used with both open and sealed bids.
Pro: Issuing the RFQ to previously used and trusted vendors can speed the selection and contracting process
Con: Competition is more limited and the buyer may miss out on cost savings offered by new vendors that are unknown to them
A reverse auction asks vendors to supply their lowest offer and the cost decreases as the auction goes on. The reverse auction may be used as a secondary step if an RFQ is issued, but no vendor meets the price target.
Pro: It is a fast, competitive, internet-based process and the lowest offer automatically wins
Con: The contract is awarded automatically based on the lowest price, so other important factors may not be considered
The RFQ process
How to write an RFQ
The request for quotation documents vary widely from one industry to the next and can be customized to fit your business’s needs.
Key RFQ components:
- Project name
- Project goals and background
- Buyer point of contact information
- Submission deadline and instructions
- Product or parts description
- Technical requirements
- Delivery requirements
- Prequalification questionnaire
- RFQ type (open or closed)
- Scoring criteria
- Selection process timeline
Terms and conditions
- Legal and security requirements
- Terms and conditions
- Standard contract
RFQs are often used in public procurement. The U.S. General Services Administration used an RFQ when they needed to establish government-wide janitorial services. As you might expect, the RFQ is very detailed and offers very specific information about scope, guidelines and requirements. The document also provides a clear process for evaluation so suppliers know what to expect.
RTI International is a nonprofit institute based in North Carolina. The organization provides global research and technical services to government and commercial clients. In 2017 they prepared a request for quotation when they needed to acquire new tablets and tablet covers. This document is a great example of the detail-oriented nature of the RFQ.
Utility company RFQ
BrightRidge, a public power company, created a request for quotation to purchase a very specific piece of equipment. The document details all the specifications for the transformers and offers helpful information and instructions to guide vendors.
Every RFQ is different. An RFQ that works well for supplies procurement, won’t be well suited to an IT support services quote. RFQ templates can be used as a guide, but customize them to fit your needs.
Additional RFx resources
Need more templates? Interested in learning more about the other types of RFx documents? Want to know what the difference is between an RFI, RFQ and RFP?
We’ve got you covered. Check out these helpful blog posts:
Remember that issuing RFx documents doesn’t have to be a manual process. RFx technology allows issuers to create RFx templates, collaborate with vendors, automatically score proposals and more. Technology is transforming the procurement process and empowering better vendor selection. To learn more, check out this ebook: RFP software guide: How to find an RFP solution that identifies right-fit vendors.