A Request for Quote (RFQ), also called an Invitation for Bid (IFB), represents a critical business procedure where a company requests select suppliers and contractors to submit price quotes and bids aimed at undertaking specific tasks or projects. This process is particularly important for businesses requiring a continual supply of standard products in known quantities. Frequently, companies issue RFQs either standalone or preceding a Request for Proposal (RFP).
The Mechanics of a Request for Quote (RFQ)
Typically, an RFQ marks the preliminary phase before sending out a Request for Proposal (RFP). While both documents detail project specifications or services required, RFQs generally demand comprehensive price specifics. Businesses typically design RFQs for standard products with known requirements, whereas RFPs cater to unique projects with uncertain specs.
Key Takeaways:
- RFQ Definition: A business process where firms solicit quotes from selected suppliers and contractors for a defined project or task.
- Usage Flexibility: RFQs can be issued independently or alongside an RFP.
- Specific Need: Typically used when the ongoing requirement for a standard product is known.
- Targeted Outreach: Solicitation is directed towards selected vendors, preventing unsolicited bids.
RFQs often encompass pricing elements, payment terms, bidder’s selection criteria, and submission deadlines. For example, a government agency aiming to acquire 500 computers with particular specifications might send RFQs to prospective vendors. Because the structure of RFQs remains consistent within a company, comparing the returning price proposals becomes straightforward. The RFQ process generally comprises four stages: preparation, processing, awarding, and closing. The contract usually goes to the vendor meeting minimum criteria with the lowest bid.
Considerations for RFQ
The RFQ is not a public callout but a targeted solicitation towards trusted vendors, which circumvents the need for extensive procurement documentation. This approach limits received bids to the solicited vendors only, thus saving time.
Using RFQs minimizes the timeframe for procuring needed goods or services and offers security by restricting bids to preferred vendors. However, this streamlined competition could mean missing out on the lowest available price or new quality vendors. RFQs produced quotes are non-binding; the actual contract begins once the company sends and the chosen vendor accepts a purchase order, effectively stipulating the contract terms and conditions.
Related Terms: Request for Proposal (RFP), Invitation for Bid (IFB), procurement, vendor management.
References
- Asian Development Bank. “ADB Business Center: Request for Quotations”.
- U.S. General Services Administration. “Research Active Solicitations”.
- U.S. General Services Administration. “Request for Quotation, Standard Form 18 (Rev. 6/1995)”.
- Insight Solutions. “Successful RFQ (Request for Quotation) Process Broken Down in 4 Steps”.
