An RFQ, or Request for Quotation, is the process of asking for the price of exactly what you’re looking for. In other words, a vendor asks another business to provide a quote for specific services or products. The process is a very common operation carried out by purchasing and supply managers, though it can be executed a variety of ways. The ultimate goal when it comes to the RFQ is achieving fast cost savings.
An RFQ may be divided into four steps: preparation, processing,
The company soliciting vendors will send out an RFQ to potential qualified companies that then respond with forms that list prices and estimates for each components of the project, or each product. An RFQ is not a binding contract. The binding agreement takes place after the offer is accepted
Purpose of an RFQ
What does this mean? It means that the quotes are comparable because of the little variation between the product or service from company to company. Benefits of initiating this process include reduced procurement processing time and fewer bids to sort through since they are all hand selected.
RFQ Terms for Reference
- Open Bid: open to all potential vendors.
- Sealed Bid: Buyer opens all bids at the same time. There is a deadline associated with sealed bids and vendors are not aware of competitor quotes.
- Invited: Business asks specific vendors to bid on the product or service.
- Reverse Auction: RFQs are like a reverse auction, so if a company doesn’t get the price it wants the first time around, it can ask vendors to offer the lowest price for the product or service.
How to Respond to an RFQ
How a selected company responds ultimately depends on the request. An RDQ should state the products or services it is asking for information about, which will help the selected company customize the response.
The RFQ response must focus on the price and estimate of the service or product. Along with your quote, you can provide a letter that includes experience and history, flexibility, and other reasons why your organization is more equipped than other vendors.