What Is RFQ in Procurement?

A request for quotation or RFQ in procurement is the process of asking suppliers to submit their service or product charges for a specific task. This document is issued to get an idea of the estimated costs of working with a supplier for a specific project or service. RFQs help businesses make informed purchasing decisions by comparing pricing and terms from different vendors.

Purpose of an RFQ

This type of RFx document is used to request cost rundowns when the buyer has a clear picture of what they want. Since the focus is mainly on cost, an RFQ allows buyers to compare prices quickly and fairly. It also supports a transparent and consistent selection process, where all suppliers respond to the same requirements.

Key elements

RFQs comprise these core elements:

• Product specifications: A clear and detailed description of the product or service required. Include technical details, dimensions, materials, model numbers, and standards to be met, along with blueprints and reference documents.

• Quantity requirements: The exact number of units, packages, or service hours. If quantities vary by location or time, break that down. This helps suppliers offer accurate pricing and plan resources.

• Delivery timelines: Your expected delivery schedule — whether it’s a one-time shipment, phased delivery, or ongoing service. Be clear about location(s), required lead times, and any critical deadlines.

• Terms and conditions: The legal and operational framework for doing business with you. This may include payment and delivery terms (e.g. Incoterms), penalties for non-performance, quality assurance standards, and contract duration.

• Response deadline: The deadline for submitting RFQ responses. Include the time zone and exceptions for considering late submissions. Designate a contact for answering questions and specify whether a pre-submission meeting is available.

• Evaluation criteria (if shared): Let suppliers know what aspects matter more to you by including a scoring matrix. Factor in price, lead time, quality, past performance, and sustainability practices. Transparency here improves the quality of responses.

RFQ process

Here is the stepwise process for issuing and reviewing RFQs:

Step 1: Preparation

Start by understanding what your organization needs. Align with internal teams on specifications, quantity, budget, and deadlines. Draft the RFQ document and prepare any attachments suppliers may need.

Step 2: Supplier identification 

Identify qualified suppliers who can meet your needs. Use your existing supplier base, industry directories, or recommendations. Consider new vendors if you are looking to improve pricing, quality, or service.

Step 3: Issuance

Distribute the RFQ to the shortlisted vendors via email or supplier portals, depending on your setup. Make sure the instructions are clear and all necessary documents are included.

Step 4: Supplier response

Suppliers review your RFQ, prepare their quotes, and submit them by the deadline. Their response should include pricing, lead times, terms, and any clarifications or assumptions. You may need to follow up if anything is unclear.

Step 5: Evaluation

Review all the responses, comparing suppliers against your evaluation criteria and discussing internally. You may contact them for clarification or to negotiate before making a decision.

Step 6: Award

Once the preferred supplier is selected, issue a formal award notice. Notify the other suppliers, keeping them in mind for future opportunities, and start the onboarding process with the winner.

When to use an RFQ

RFQs work best for projects requiring standard products or services. Buyers send out RFQs when they have clear and well-defined needs — scope, methodology, resources, and quantities — and want to base their decisions on the best value for money. 

For example, a client looking to purchase specific office suppliers with clear descriptions and quantities would issue RFQs to multiple stationery suppliers to compare prices and secure the best deal. 

RFQ vs RFP vs RFI

Here is a side-by-side comparison of RFQs, RFPs, and RFIs.

Benefits and challenges

Here are the benefits and challenges of using RFQs:

Benefits

• Encourages competitive pricing by allowing multiple suppliers to bid.

• Speeds up procurement for projects with well-defined, straightforward needs.

• Makes it easy to compare offers due to standardized requirements. 

• Helps maintain transparency and accountability in supplier selection, providing all with the same information and enabling objective comparisons. 

• Provides a clear paper trail that supports audits and strengthens internal control and compliance efforts.

• Encourages new supplier participation while keeping current ones competitive.

Challenges

• Less effective for complex or custom requirements. It is best to use RFPs when multiple solutions are possible.

• May prioritize price over quality, service, or long-term value. Include weighted evaluation criteria to balance your decision factors.

• Can be time-consuming for suppliers if the RFQ lacks clarity. Ensure requirements and expectations are clearly defined upfront.

• Limits room for innovation or creative solutions from suppliers. Use open-ended RFIs or RFPs to invite alternative approaches.

• You risk receiving quotes that do not fully meet your actual needs. Double-check that specifications are complete and unambiguous.

• Frequent use without awarding can frustrate or alienate vendors. Only issue RFQs when there is genuine project clarity and intent to purchase.