Request for Quotation
Encyclopedia
A request for quotation is a standard business
process whose purpose is to invite suppliers into a bidding process to bid on specific products
or services. RFQ, generally means the same thing as IFB (Invitation For Bid).
An RFQ typically involves more than the price per item. Information like payment terms, quality level per item or contract
length are possible to be requested during the bidding process
.
To receive correct quotes
RFQs often include the specifications of the items/services to make sure all the suppliers are bidding on the same item/service. Logically, the more detailed the specifications, the more accurate the quote will be and comparable to the other suppliers. Another reason for being detailed in sending out an RFQ is that the specifications could be used as legal binding documentation for the suppliers.
The suppliers have to return the bidding by a set date and time to be considered for an award. Discussions may be held on the bids (often to clarify technical capabilities or to note errors in a proposal). The bid does not have to mean the end of the bidding. Multiple rounds can follow or even a Reverse auction
can follow to generate the best market price.
RFQs are best suited to products and services that are as standardised and as commoditised as possible, as this makes each suppliers’ quotes comparable. In practice, many businesses use a RFQ where an RFT
or RFI
would be more appropriate.
An RFQ allows different contractors to provide a quotation, among which the best will be selected. It also makes the potential for competitive bidding a lot higher, since the suppliers could be quite certain that they are not the only ones bidding for the products.
Requests for quotations are most commonly used in the business environment but can also be found being applied to domestic market
s.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
process whose purpose is to invite suppliers into a bidding process to bid on specific products
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
or services. RFQ, generally means the same thing as IFB (Invitation For Bid).
An RFQ typically involves more than the price per item. Information like payment terms, quality level per item or contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
length are possible to be requested during the bidding process
Bidding
Bidding is an offer of setting a price one is willing to pay for something. A price offer is called a bid. The term may be used in context of auctions, stock exchange, card games, or real estate transactions....
.
To receive correct quotes
Sales quote
A sales quote allows a prospective buyer to see what costs would be involved for the work they would like to have done. Many businesses provide services that cannot have an upfront price, as the costs involved can vary. This can be due to the materials that would be used , and the manpower that...
RFQs often include the specifications of the items/services to make sure all the suppliers are bidding on the same item/service. Logically, the more detailed the specifications, the more accurate the quote will be and comparable to the other suppliers. Another reason for being detailed in sending out an RFQ is that the specifications could be used as legal binding documentation for the suppliers.
The suppliers have to return the bidding by a set date and time to be considered for an award. Discussions may be held on the bids (often to clarify technical capabilities or to note errors in a proposal). The bid does not have to mean the end of the bidding. Multiple rounds can follow or even a Reverse auction
Reverse auction
A reverse auction is a type of auction in which the roles of buyers and sellers are reversed. In an ordinary auction , buyers compete to obtain a good or service, and the price typically increases over time...
can follow to generate the best market price.
RFQs are best suited to products and services that are as standardised and as commoditised as possible, as this makes each suppliers’ quotes comparable. In practice, many businesses use a RFQ where an RFT
Request for tender
A request for tender, commonly abbreviated to RFT, is a formal, structured invitation to suppliers for the supply of products or services. In the public sector, such a process may be required and determined in detail by law to ensure that such competition for the use of public money is open, fair...
or RFI
Request for Information
A request for information is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes....
would be more appropriate.
An RFQ allows different contractors to provide a quotation, among which the best will be selected. It also makes the potential for competitive bidding a lot higher, since the suppliers could be quite certain that they are not the only ones bidding for the products.
Requests for quotations are most commonly used in the business environment but can also be found being applied to domestic market
Domestic market
A domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading...
s.
Further reading
- Request For Quotation, compared with RFI, RFT and RFP. Suggested contexts of when to use each.
- Detailed description and template for RFQ, Detailed description on what an RFQ should contain and a template for an RFQ.
See also
- Request for tenderRequest for tenderA request for tender, commonly abbreviated to RFT, is a formal, structured invitation to suppliers for the supply of products or services. In the public sector, such a process may be required and determined in detail by law to ensure that such competition for the use of public money is open, fair...
- Request for informationRequest for InformationA request for information is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes....
- Request for proposalRequest for ProposalA request for proposal is issued at an early stage in a procurement process, where an invitation is presented for suppliers, often through a bidding process, to submit a proposal on a specific commodity or service. The RFP process brings structure to the procurement decision and is meant to...
- Request for comment
- Reverse auctionReverse auctionA reverse auction is a type of auction in which the roles of buyers and sellers are reversed. In an ordinary auction , buyers compete to obtain a good or service, and the price typically increases over time...
- OptimizationOptimization (mathematics)In mathematics, computational science, or management science, mathematical optimization refers to the selection of a best element from some set of available alternatives....
- Operations researchOperations researchOperations research is an interdisciplinary mathematical science that focuses on the effective use of technology by organizations...
- E-procurementE-procurementE-procurement is the business-to-business or business-to-consumer or Business-to-government purchase and sale of supplies, Work and services through the Internet as well as other informations and networking systems, such as Electronic Data Interchange and Enterprise Resource Planning.E-procurement...