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We break down what an RFQ is, when to expect them, and how to plan and manage your own business requests.
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The procurement industry is rife with acronyms, and RFQs are an important addition to the endless list. You might have come across RFQs and wondered how it differs from all the other Rx forms.
We help simplify the differences by providing you with a crash course on all things RFQ in this blog!
An RFQ stands for Request for Quotation. This request is made early in the procurement process and is used by buyers whose requirements are influenced by price.
It is generally sent out by a business to solicit goods and services from prospective vendors and suppliers.
The RFQ requests prospective bidders to submit a quote on their price to fulfill the requesting organizations’ project requirements.
This request is made by companies looking for standardized goods and services, with minimal or no support from the supplier. If the quantity of supply is known and the requirement is continued, then you can expect to receive an RFQ.
An RFQ is usually sent out before the Request for Proposal (RFP). However, under certain circumstances, it can be sent by itself. This is when the organization is locked in on its requirements and doesn’t need comprehensive information from the bidder.
While they usually target selected vendors/contractors, there are a few different types of RFQs.
In the next section, we outline what types of RFQs there are, and under which circumstances they benefit buyers.
Now that you know what an RFQ is, let us look at the different types out there. There are four types of RFQs you can expect to receive as prospective bidders, based on the client’s requirements. They are as follows:
In the open bid format, an RFQ is published to attract qualified contractors or suppliers. The responses are opened to the forum during the submission period. These responses are visible to all potential bidders, meaning you can see each other’s pricing.
Based on your current standing, you can alter and reduce prices to match your competition.
On the upside, this format is useful when trying to successful acquire a client contract. On the downside, an open forum means added competition from other bidders vying for the same contract.
So, it is paramount to decide on a strategy that is most beneficial to your business while bidding.
Like the open bid, the sealed bid RFQ is open to all qualified vendors. Where it differs is the response process. All responses are sealed, and the prospective buyer can only open the quotes post the submission deadline.
This is useful to avoid highly competitive bids from other vendors. The minor disadvantage here is the inability to gain the upper hand due to reduced competition.
This is one of the more commonly used RFQ bidding types. This involves having a pre-selected list of suppliers and contractors that the client contacts.
A request is sent only to the shortlisted vendors, who then send in their RFQ submissions. This type of RFQ can be sent out in both the open and closed bid format.
This method is useful as it speeds up the procurement process. Additionally, being selected for such a bid is an indicator of good standing in the market.
The pitfall with this RFQ process is inability to participate unless contacted. This can prevent you from acquiring clients you haven’t built rapport with.
The final RFQ type that is used on occasion is the reverse action format. As the name suggests, this is an auction used to drive prices down, rather than up. This is usually used when the process does not yield a viable bidder/price.
While this is a speedy process, it discounts the other influencing factors that you might bring to the table. This process automatically awards the contract to the lowest bidder.
How you respond to the request depends largely on the type of RFQ you receive. Your responses will influence the success of your bid.
The next step to understanding what an RFQ is, is to learn what it includes.
The following are some of the most essential information to include in your RFQ form:
Now that you know what it involves, how do you go about making major RFQ decisions? We’ll tell you how!
In this section, we outline the steps involved in sending out an RFQ, from preparation to awarding a contract.
While this might not seem like the most exciting phase in the RFQ process, it is the most crucial one. Here, you map out exactly what your business can provide the client and if you can meet the stipulated requirements.
We have broken this down into a few important steps:
Clearly define your business’s capabilities – Here you make a blueprint of the precise goods and services you can provide to prospective clients.
While this list is not exhaustive, it is a good starting point for things to consider in the planning process. In this stage, it is important to factor in the abilities of all internal stakeholders. This is to ensure that you cover all bases and incorporate them into your RFQ response.
Collate all supporting documents – It is important to ensure that your RFQ form is accompanied by all the relevant documents. This includes, but is not limited to, the list provided in the previous section. Jump back to the ‘what to include’ section for a refresher. (Link to ‘What to include’ section)
Undertake risk assessments – Before jumping head-first into any procurement process, it is important to mitigate risks. This involves identifying and planning for any potential obstacles that might arise during any stage of the RFQ process. This ensures that your business is protected if any unforeseen or unavoidable circumstance arises.
This stage is both tedious and time-consuming, but it is vital to take your time. This ensures that your RFQ procurement process runs as smoothly as possible
This is the exciting bit! This is where you get to draft and process your RFQ response. Another important step in the RFQ procurement phase is the drafting phase. By now, you would have shortlisted the integral points to include in your response. Based on the agreed-upon requirements, drafting an RFQ response is the next big step. At this point, there are a few things to consider:
Based on what type of RFQ you respond to, this would usually begin once your submission deadline has ended.
Before the final selection is made, consider the following:
The most rewarding phase for both parties is the awarding and signing phase. Once the client finalizes a preferred vendor, an award letter is sent. Few things to note here:
You are halfway to understanding what an RFQ is. Here are some final things to consider.
As we touched upon earlier in this blog, an RFQ can be sent in place of an RFP. But what is the key difference?
The major difference is the focus of the request and the process involved. An RFP is a more comprehensive proposal that emphasizes your business. This includes the history and background of the business, the services, capabilities, limitations, success, and price to name a few.
It‘s used to help organizations consider other factors when they are unsure about the length or quantity of what they require. Additionally, this is to weigh in other logistics of the agreement.
In contrast, the RFQ is a speedy process with pricing being the crux of the evaluation and awarding/procurement process.
Here are some of the major advantages and disadvantages that we have identified:
Thus, it is critical to evaluate if the cost benefits of an RFQ outweigh other determining factors.
What is an RFQ? An RFQ is a request made in the procurement process by businesses looking for a price quote from potential suppliers. It is used to solicit goods and services, where the quantity required is known and the duration is ongoing.
Now that you are well-versed in what an RFQ is, it might still seem like a huge mountain to climb! Here’s where we come in.
While we don’t get involved in the pricing side of things, what we can do is help you improve on quality.
If you decide that an RFQ is not for you, why not get in touch with our team? We can help you with all things proposals!
Creating RFP proposals yourself and putting your business into words can be challenging. This can be especially daunting when you consider your potential competitors.
Get in touch with Hudson Succeed now for help in constructing high-quality, persuasive proposals!
You are one step closer to providing your services to the best in the business. Tell us what you are looking for and get a free quote from us today!
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