What is a 'Request For Quote - RFQ'
A request for quote (RFQ) is a type of procurement solicitation in which a company asks outside vendors to offer a quote for the completion of a specific task or project. An RFQ is similar to a request for proposal (RFP) and provides comprehensive information to the bidder concerning the project's requirements. An RFQ frequently requires the bidder to itemize costs for each phase of the project to allow the soliciting company to compare several bids.
BREAKING DOWN 'Request For Quote - RFQ'An RFQ is usually the initial step for submitting an RFP, in which the bidders are asked to offer a more comprehensive price quote. However, RFQs may be submitted as an attachment to an RFP. An RFQ is typically used when products and services are standard or off-the-shelf, which allows the soliciting company to compare the various bids easily.
When the soliciting company knows the quantity of products that it desires to purchase, it customarily uses an RFQ. For example, a government agency that wants to buy 500 computers with a specific hard drive size and processing speed announces an RFQ. Since the product is uniform, the agency can easily compare different quotes.
An RFQ is usually sent to several potential vendors, asking for bidder pricing. It may contain information that the bid must include for consideration, payment terms, the factors that decide which bid the company chooses and a bid submission deadline. An RFQ focuses mostly on pricing. If the minimum criteria are met, the vendor with the lowest bid is generally given the contract.
Advantages and Disadvantages
An RFQ is not publicly broadcast. Using an RFQ reduces procurement processing time because there is no need to prepare procurement solicitation documents. The number of bidders' quotes requested limits the amount of RFQs received; this also diminishes the selection process time.
The RFQ may result in deviations from the normal process because the soliciting company determines which vendors to send RFQs to, which limits the competition. Vendors that favorably respond to the RFQ and meet the minimum criteria are included in the RFP solicitation process.
When to Use an RFQ
Using an RFQ makes the solicitation process more efficient because fewer responses are provided and the responses are qualified. This reduces the time to evaluate proposals from qualified bidders rather than evaluating proposals from a pool of qualified and unqualified bidders.
A quote received in response to an RFQ is not an offer, and the government cannot accept it to create a binding contract. The purchase order is an offer by the government to a vendor to purchase goods or services according to the particular terms and conditions. A contract is awarded when a vendor accepts the offer.