Mar 12, 2024
How to Write a Request For Quotation (RFQ) + Template
From basics to best practices, we've got you covered!
Introduction
In a dynamic business environment, organizations are constantly challenged by cost fluctuations. It has become imperative to maximize efficiency and strategy around your procurement practices.
Efficient procurement is anchored by embracing an RFQ-centric approach. RFQs empower companies to solicit competitive bids from suppliers, driving cost savings. The process is critical for businesses requiring a consistent supply of specific products.
This article navigates the process of crafting an RFQ to ensure optimal procurement. We have also added a request for quotation template for clarity.
How RFQs differ from RFPs and RFIs
RFQs, RFPs, and RFIs are all used in procurement but serve different purposes. In some cases, a company might require all three documents in the following order:
An RFI (request for information) is the initial relationship-building tool. This document is used to gather information from potential suppliers. It narrows down the vendor pool, making it easier to find competent suppliers.
The second step in the procurement process is to issue an RFP (request for proposal). This document is sent to select vendors to solicit proposals. It outlines the project, including its requirements, timeline, and other specifications. RFPs invite qualified contractors to explain how they can meet the company’s needs. This step is typically required for complex projects.
The last step is to send out RFQs to chosen suppliers, asking them to submit their price quotes and bids. This process enables strategic quality and market price evaluation. It allows buyers to make informed purchasing decisions and secure the best deals.
Types of RFQs
Here are six types of RFQs and their pros and cons:
Open RFQs
An open RFQ is a publicly accessible document — any vendor can submit their quote. It is used when a company wishes to attract a wide range of bids and does not have preferred suppliers.
Advantages
A high number of participants increases competition and the potential for lower prices
Fosters business relations with a variety of vendors
Saves time as you do not need to carry out pre-qualification processes
Challenges
Often results in a large volume of bids to review
The quality and relevance of bids may vary significantly
Closed RFQs
Closed RFQs are sent to a pre-selected list of vendors. These are often affiliated with the company or have undergone a vetting process.
Advantages
Streamlines the procurement process by engaging only pre-qualified suppliers
Reduces reliance on a single vendor
Challenges
May limit competition and the potential for discovering new, competitive suppliers
Can be time-consuming to vet each supplier beforehand
Single-source RFQs
A single-source RFQ is issued when a company decides to deal with only one supplier. This is often because of the supplier’s track record with the buyer. It could also be due to their unique ability to provide a particular product or service.
Advantages
Saves time in the procurement and decision-making process
Streamlines communication and strengthens relationships with key suppliers
Challenges
Limits the ability to compare prices or services, potentially resulting in higher costs
Increases dependency on one supplier, potentially leading to supply chain disruptions
Multiple-source RFQs
A multiple-source RFQ involves requesting quotations from several suppliers for comparison purposes. It is used to procure commodities or standard products with many potential suppliers.
Advantages
Encourages competition among suppliers, leading to better prices and terms for the buyer
Diversifies risk, mitigating supply chain disruptions
Challenges
Requires more time and resources to evaluate the various quotes and negotiate terms
Poses risks for sensitive information, demanding confidentiality measures
Itemized RFQs
In itemized RFQs, the company breaks down its requirements into detailed components. The supplier has to provide pricing for each.
Advantages
Enables accurate comparison of specific items or services directly
Improves budgeting and cost analysis accuracy
Challenges
Can be time-consuming for both the buyer and suppliers to prepare and analyze
May lead to a higher volume of clarifications and inquiries
Project-based RFQs
This type of RFQ is used for complex purchases, such as large projects or capital investments. The request covers a comprehensive scope of work rather than individual items.
Advantages
Allows suppliers to offer solutions that encompass the entire project
Higher potential for innovations or efficiencies compared to itemized RFQs
Challenges
Complicates response evaluation, requiring assessment of capabilities, methodologies, and project management alongside price
Minimal flexibility after issuing, possibly disrupting the procurement process
What to Include in an RFQ
An RFQ must include these critical elements:
Goals: Specify what your project aims to achieve. Craft a concise description of its objectives. Include the scope and relevant background information.
Specifications: Highlight the nature of your project and the quantity of goods required. Include general and technical specifications, quality standards, and possible customizations. Remember, more details lead to more accurate supplier quotes.
Timeline: A project timeline gives suppliers a clear picture of the manpower needed. It’s best to be realistic so there is ample time to get the resources ready. Mention the project start date, duration, milestones, and end date.
Pricing Specification: Specify the level of detail you require in the quotes. A complete cost breakdown enables transparent evaluation and comparison of quotes. Ask for itemized pricing for each unit or service, including supply and labor costs. Specify if you want the quotes to be per hour or project.
Submission Details: Include details on how to send back the RFQ. Mention the submission deadline along with any relevant documentation and organization information needed.
Contact Information: Add your contact details so suppliers can raise questions and doubts.
Terms and Conditions: Mention any terms and conditions that vendors must follow. This can include payment and shipping terms, warranties, and legal requirements. Add your evaluation criteria and preferences that vendors should consider when preparing quotes.
How to write a request for quotation (RFQ)
Crafting a proper RFQ can prevent misunderstandings and improve the quality of responses. Here are the steps to follow:
Start with the basics
Contact Information and Introduction
Provide the name, address, contact information, and relevant details of your organization. Highlight your interest in receiving competitive quotes.
Purpose of the RFQ
Clearly state your reason for issuing the RFQ. Specify your goals, whether you wish to receive a service, goods, or both.
Project overview and scope
Briefly describe your project, including its objectives and the scope of work. This helps potential suppliers understand the context of the RFQ.
Specify your needs
Detailed specifications of products or services
Include comprehensive details about the desired products or services. Add any technical specifications, quality requirements, and any other details that apply.
Quantity and delivery schedule
Specify the quantity of items required and the expected delivery date, including milestones.
Criteria for evaluation and selection process
Outline the criteria that will be used to evaluate and choose vendors. This may include expected price range, quality, experience, and reliability.
Financial aspects
Price format and breakdown
Specify the desired format for pricing — per unit, per project, or other. Ask for a breakdown of costs with itemized pricing for components or services.
Payment terms and conditions
Clearly define the payment terms and conditions. Include the acceptable invoice format and preferred payment methods. You can also mention the potential of holdbacks until certain obligations are fulfilled.
Legal and compliance requirements
Standards and certifications required
Specify the industry standards that suppliers must adhere to. Mention relevant certifications, experience, and qualifications you seek.
Confidentiality and data protection
Highlight any data protection requirements that vendors should comply with. This ensures the security of sensitive information shared during the procurement process.
Additional information
Background information
Ask vendors to include relevant information about their organization to assess their capability.
Requests for samples or demonstrations (optional)
Ask for samples or demos of the suppliers’ offerings to assess their suitability.
RFQ template example
Request for quotation for the provision of [goods/services] from [vendor’s company].
GENERAL REQUIREMENTS
[Company Name] would like to invite quotations for the provision of [requirements].
BACKGROUND
[Brief overview of your company]
[Background information about the project]
PROCUREMENT TIMELINE
This procurement process is intended to follow the timeline below:
Issuing RFQ: [date]
Deadline for Queries: [date]
Deadline for Responses: [date]
Response Evaluation: [date]
Awarding Contract: [date]
Strategy/Delivery Meeting: [date]
QUESTIONS
Any queries about the RFQ, the procurement process, or the contract, should be referred to:
[Name, position, and contact information]
Questions should be submitted via [preferred method] only.
QUOTE SUBMISSION
Quotations should be submitted by [time and date] to [email/portal].
[Additional requirements for submitting quotes]
EVALUATION CRITERIA
[Company] will assess suppliers based on the following criteria:
[Factors and weightage of each e.g., Lowest price: 20% Quality: 40%]
[Additional specifications for vendors to consider]
PROJECT SPECIFICATION
Background: [detailed background information about your requirements]
Scope of the project: [what’s included and what will be sourced separately]
Goals: [preferred outcomes i.e., what you want to achieve]
Input: [any demands or specific instructions for suppliers]
Timeline: [delivery schedule and project structure, including milestones and deliverables]
Labor hours: [fixed price, unit costs, or daily/hourly rates]
Materials: [specific goods or services required, including quantity]
CONTRACT CONDITIONS
[Specific terms and conditions for providing goods/services e.g., IP rights, quality standards, and shipping terms]
SUPPLIER SUBMISSION
Section A: Organization Details
[Name]
[Contact]
[Address]
[VAT Registration Number]
Section B: Vendor’s Experience
Please provide a brief history of your organization, including [annual turnover, department background, and other specifications required].
Section C: References
Please mention two companies you have worked for who would be willing to refer you.
Organization 1:
[Name]
[Contact]
[Address]
Organization 2:
[Name]
[Contact]
[Address]
Please carefully review each section of the RFQ before submitting a response.
[Your organization]
[Address]
[Signature]
FAQ
When should you send an RFQ?
It’s best to send an RFQ when you have clearly defined requirements and are ready to solicit quotes from potential suppliers.
How do you avoid common mistakes in RFQs?
You can avoid common RFQ mistakes by:
Being clear about your requirements
Using standardized templates
Providing sufficient response time
Conducting thorough evaluations
How many suppliers should I send the RFQ to?
It depends on your precise needs and situation. If you don’t have a preferred vendor, it’s best to send RFQs to multiple entities to ensure competitive pricing.
How long should I give suppliers to respond to an RFQ?
Depending on the complexity, you should typically give 2 to 4 weeks. This leaves enough time to prepare comprehensive responses.
How long should the RFQ process take from start to finish?
The RFQ process duration varies based on multiple factors. These include the RFQ complexity, supplier responsiveness, and evaluation process. But it generally ranges from 4 to 8 weeks.
What should I do if the quotes received are too high or do not meet my expectations?
Consider negotiating with the suppliers. You could also seek alternative solutions or realign your requirements with budget constraints.
Conclusion
RFQs offer buyers a comprehensive outlook of the market landscape. They serve as invaluable tools, delivering insights into available products, services, and pricing. Use our comprehensive request for quotation template to gather all the necessary information from potential suppliers.
RFQs can be time-consuming, but you can expedite the process using digital procurement tools. Beebolt allows you to automate custom RFQs, helping you get the best quotes. Try it for free!