A Request for Quotation or an RFQ in a construction project is a document that details a buyer’s requirements and asks suppliers to respond with pricing and payment terms. Request for quotations can be for supply of materials or services on a project. RFQ’s generally means the same thing as call for bids (CFB) and invitation for bids (IFB).
Let’s take a look at the steps in this process:
How can I use RFQs?
Preparing a Request for Quotation (RFQ)
Start your RFQ by gathering as much information as possible such as drawings, specifications, product codes for example. Details specs will limit the time spent on answering queries later. Consider the following:
- Supply definitions of the products or services required with detailed specifications.
- Include Quantities.
- Specify expected delivery date.
- Ask if the items are held in stock and are an exact match.
- Include a location of the proposed delivery.
- Specify an expected reply date for the request.
- Include your expected payment terms if sending to a supplier outside of your agreements.
- Contract terms and conditions.
Including how your decision will be reached (price and availability for example) and the timeline to award can be useful for setting the suppliers expectations.
Select your suppliers
Consider the most suitable suppliers for your request. Your request for quotation should be open to more than one bidder but generally requests may be only sent to 3 suppliers, this is mainly due to limiting the time spent on analysing the replies and may give you a decent spread of replies in order to compare the offerings.
The market is always evolving, so consider the RFQ an opportunity to open yourself to new suppliers. Interacting with new suppliers will give you some insight on how timely and reliable they may be along with the benefit of testing their competitiveness.
While your RFQ shows interest in a supplier, it isn’t a binding contract. That can be an advantage – you can get an in-depth description & price from more than one potential supplier and consider all of your options before making a purchase.
Analyse the replies
Then it’s time to analyse the replies you received. Keep your due date in mind at this stage. If you set a deadline for bids, wait until you’ve reached that date to be fair to you vendors. The evaluations process is made easier and speedier if an efficient, well-thought-out template is used.
The successful bidder will be the one offering the lowest price for the goods or services specified while complying to all selection criteria. There may be a clarification process necessary and minor negotiations needed to reach the right result.
Select your winner
The most obvious way to make your decision is by selecting the supplier that is offering the most valuable solution at the lowest price. While that’s a solid strategy for choosing to buy from someone, there are other things to consider as well.
How were your conversations with the sales rep before sending the RFQ? Did they truly have your best interest in mind? Are they reliable? Are they someone looking to be in a mutually beneficial and respectful business relationship? Are the procured items in stock and a good match? The answers to these questions should also factor into your decision making.
After you’ve chosen your supplier, let them know the good news. The other suppliers will be expecting a response to their quote, and it’s rude to leave them hanging. Don’t forget to notify the other businesses that received your RFQ that you’ve decided to move forward with another company. Giving them a reason can be useful feedback to the supplier to improve their future offering.
It’s common courtesy, and you don’t want to burn any bridges for future RFQ’s.
Selecting the right technology
Selecting the right software can help to manage the RFQ process. The right system will allow data and the replies to be stored and the data to be retrieved for future quotations.
The technology should make it easy to track the decision-making processes. With the help of technology, procurement agility can be increased and provide value to the organizations. The LiveCosts catalogue and RFQ system can help in establishing these simple procedures.