What Is a Request for Quote (RFQ)?
A request for quote (RFQ) is a solicitation for goods or services in which a company asks suppliers to submit a price quote and bid on the chance to fulfill certain tasks or projects. An RFQ, also known as an invitation for bid (IFB), is usually the first step in submitting a request for proposal (RFP). These two documents are similar, as they provide details of the project or services required, but RFQs generally ask for a more comprehensive price quote. RFQs may be sent singly, or as an attachment to an RFP.
More About Request for Quote
In addition to pricing, RFQs may include details such as payment terms, factors that could influence a company's bid selection, submission deadline, and the like. A government agency that wants to buy 500 computers with a specific hard drive size and processing speed, for example, would send an RFQ to a number of vendors, as prospective bidders.
Because the RFQ format is uniform within a given company, when the RFQs come back with their prices quotes, the soliciting company may compare them easily. Typically, an RFQ process is broken into four sections: the preparation phase, the processing phase, awarding phase, and the closing phase. The company generally will award the contract to the vendor that meets the minimum qualifying criteria and presents the lowest bid.
Using RFQs—Things to Consider
RFQs are not public announcements. Because the soliciting company sends RFQs only to businesses that it trusts, it does not need to prepare lengthy procurement documentation. Also unlike a public solicitation, a company can get back only the number of bids that it requested, which also saves time.
Using an RFQ reduces the amount of time it takes to procure goods or services; it also offers a degree of security, as a company will receive bids only from vendors it prefers. On the other hand, because RFQs reduce the amount of competition, a company may miss out on receiving the lowest-available price or learning about new high-quality vendors.
When a company receives a quote in response to an RFQ, it is not an offer nor a binding contract. The solicitor will offer the job to its chosen vendor by sending it a purchase order; which in effect is a contract specifying the terms and conditions of the work. When a vendor accepts and signs the purchase order, the contract begins.