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.

RELATED TERMS
  1. Request For Proposal - RFP

    A type of bidding solicitation in which a company or organization ...
  2. Invitation For Bid - IFB

    When a company or organization provides detailed project specifications ...
  3. Best And Final Offer

    1. In real estate, a prospective buyer's last and highest offer. ...
  4. Bid Bond

    A debt secured by a bidder for a construction job or similar ...
  5. Vendor

    The party in the supply chain that makes goods and services available ...
  6. Bidder

    The party offering to buy an asset from a seller at a specific ...
Related Articles
  1. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  2. Small Business

    New Year Planning For Business Owners

    Make a resolution to start your business off on the right foot in the new year.
  3. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  4. Small Business

    Risks Associated With Government Contracts

    Government contracts can be rewarding, but they also come with a variety of risks.
  5. Investing

    Explaining Dutch Auction

    A Dutch auction is a public offering auction.
  6. Investing

    Days Payable Outstanding

    Days Payable Outstanding, or DPO, is an accounting measurement that tells the average number of days it takes a company to pay its suppliers and vendors. Days Payable Outstanding is widely used ...
  7. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  8. Investing

    How Does a Tender Work?

    Tender usually refers to the process in which governments invite suppliers to bid for the right to work on large projects.
  9. Personal Finance

    Shopping Online: Convenience, Bargains And A Few Scams

    Shopping from the comfort of your couch has major benefits - and some unpleasant side effects.
  10. Investing

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
RELATED FAQS
  1. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  2. When would a vendor care about its accounts payable turnover ratio?

    Read about some of the reasons that vendors should pay attention to their accounts payable turnover ratio, and how it helps ... Read Answer >>
  3. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ... Read Answer >>
  4. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
  5. How do companies like ClickBank help websites make money?

    Find out how sites such as ClickBank help websites make money by offering the opportunity for vendors and affiliates to promote ... Read Answer >>
  6. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center