Estimated reading time: 8 minutes
• A request for a quote is a formal document sent out to vendors asking them to submit pricing quotes based on a particular brief. A request for proposal (RFQ) is an objective way to compare vendors.
• Normally, your RFQ will go out to vendors after or as part of a request for proposal (RFP). A request for a proposal asks for more information from the vendors beyond pricing.
• A request for proposal asks for information that will help a business make a risk assessment, competitor analysis or find out other information that may be a deal-breaker before signing a contract with a vendor.
Prior to sending a request for a proposal, ensure that your vendors clearly understand the project at hand. Sending them a statement and scope of work will enable them to figure out what path they need to follow to accomplish their goals. Next, you can request their pricing information. These are the 5 steps involved in sending a perfect request for a quote.
Setting the Budget
You must have a budget for the project at hand before requesting vendors to send in their price quotations for services or supply of materials. The budget should be detailed and broken down comprehensively, hence the need for a statement of work or scope of work. The budget provides an objective way of evaluating each vendor’s quotation.
Identifying the Criteria for Selection
Your procurement team must develop the criteria for choosing the right vendor. Their list of requirements will then be included in the process of requesting quote. In fact, in most cases, this is determined when preparing an RFQ template, so that such a meeting does not need to happen whenever an RFQ is going out. For instance, the selection of vendors may be based on the quantity required, delivery requirements, payment terms, and conditions a vendor states in their quotation. An objective RFQ review process helps filter quickly through the list of vendors that send in quotations.
Preparation of RFQ Document
Once you have the budget and selection criteria, the next step is the preparation of the RFQ document itself. As stated, the RFQ may be part of a request for proposal. The goal should be to give vendors as much information to help them adequately prepare their quotations. The more information they have, the more likely their quotations will be.
Here is some of the information to ensure the vendors have.
Project goals– These are included in the statement of work sent prior to the RFQ. If they were not sent, they need to be included as part of the RFQ.
Timeline– Give the vendors an accurate indication of how long the project will take and how soon it will start. The vendors can then know whether they can meet such expectations.
Pricing Details– The request for a quote should ask vendors to give a breakdown of their costing method. Your procurement team should have determined how much information they need. For instance, you may request details on labor costs, cost of supplies, and other fees. A breakdown sheds light on a vendor’s methodology for coming up with a price quotation.
Submission Instructions– The RFQ should tell vendors how to send back their quotation and the deadline. You should give ample time for vendors to conduct their analysis and send in properly researched quotations. At least 3 to 4 weeks is enough to allow for a detailed submission.
Reviewing RFQs and Selecting a Vendor
The final step is reviewing the submitted RFQs from vendors and setting them on the correct vendor. This would be easy if the preparatory work was done sufficiently. If you had given vendors a template to fill out their quotations, the selection process is likely to have been faster. A template also ensures that vendors do not leave out crucial information. Your team will be able to pick the vendor who meets all requirements at a cost within the set budget. The next step is the contracting process, which also relies on the terms indicated in the RFQ.
The Need for RFQ Software
Your organization can streamline its process of sending out RFQs through e-procurement software. An RFQ solution helps to manage requests more easily by having a team collaborate in preparing templates. The templates are stored in a central repository and can be easily retrieved and tweaked when the need arises. The software would also make it easy to track requests and create an audit trail of how a particular vendor was chosen over the others.
RFQ software also helps to keep track of communication with vendors. It is also possible to set up portals for individual suppliers with notifications being sent to relevant parties when an event occurs.
An RFQ can be a good fit when your organization has a list of prequalified suppliers of certain services or products. In such scenarios, there may be no need to send out a request for proposal (RFP). An RFQ may also be sufficient if the price is the most important factor when selecting a vendor. In that case, technical requirements are not too important. The same goes when buying a product that doesn’t need technical support from the vendor.
If your organization needs to improve its RFQ preparation process through a software solution, ProcurePort can provide the right fit. ProcurePort is the world’s leading provider of e-procurement solutions. Schedule a free consultation and demo session here.
A request for a quote is a formal document sent out to vendors asking them to submit pricing quotes based on a particular brief. A request for proposal (RFQ) is an objective way to compare vendors. Normally, your RFQ will go out to vendors after or as part of a request for proposal (RFP). A request for a proposal asks for more information from the vendors beyond pricing. A request for proposal asks for information that will help a business make a risk assessment, competitor analysis or find out other information that may be a deal-breaker before signing a contract with a vendor.
Prior to sending a request for a proposal, ensure that your vendors clearly understand the project at hand. Sending them a statement and scope of work will enable them to figure out what path they need to follow to accomplish their goals. Next, you can request their pricing information. These are the 5 steps involved in sending a perfect request for a quote.
Setting the Budget
You must have a budget for the project at hand before requesting vendors to send in their price quotations for services or supply of materials. The budget should be detailed and broken down comprehensively, hence the need for a statement of work or scope of work. The budget provides an objective way of evaluating each vendor’s quotation.
Identifying the Criteria for Selection
Your procurement team must develop the criteria for choosing the right vendor. Their list of requirements will then be included in the request for a quote. In fact, in most cases, this is determined when preparing an RFQ template, so that such a meeting does not need to happen whenever an RFQ is going out. For instance, the selection of vendors may be based on the quantity required, delivery requirements, payment terms, and conditions a vendor states in their quotation. An objective RFQ review process helps filter quickly through the list of vendors that send in quotations.
Preparation of RFQ Document
Once you have the budget and selection criteria, the next step is the preparation of the RFQ document itself. As stated, the RFQ may be part of a request for proposal. The goal should be to give vendors as much information to help them adequately prepare their quotations. The more information they have, the more likely their quotations will be.
Here is some of the information to ensure the vendors have.
Project goals– These are included in the statement of work sent prior to the RFQ. If they were not sent, they need to be included as part of the RFQ.
Timeline– Give the vendors an accurate indication of how long the project will take and how soon it will start. The vendors can then know whether they can meet such expectations.
Pricing Details– The request for a quote should ask vendors to give a breakdown of their costing method. Your procurement team should have determined how much information they need. For instance, you may request details on labor costs, cost of supplies, and other fees. A breakdown sheds light on a vendor’s methodology for coming up with a price quotation.
Submission Instructions– The RFQ should tell vendors how to send back their quotation and the deadline. You should give ample time for vendors to conduct their analysis and send in properly researched quotations. At least 3 to 4 weeks is enough to allow for a detailed submission.
Reviewing RFQs and Selecting a Vendor
The final step is reviewing the submitted RFQs from vendors and setting them on the correct vendor. This would be easy if the preparatory work was done sufficiently. If you had given vendors a template to fill out their quotations, the selection process is likely to have been faster. A template also ensures that vendors do not leave out crucial information. Your team will be able to pick the vendor who meets all requirements at a cost within the set budget. The next step is the contracting process, which also relies on the terms indicated in the RFQ.
The Need for RFQ Software
Your organization can streamline its process of sending out RFQs through e-procurement software. An RFQ solution helps to manage requests more easily by having a team collaborate in preparing templates. The templates are stored in a central repository and can be easily retrieved and tweaked when the need arises. The software would also make it easy to track requests and create an audit trail of how a particular vendor was chosen over the others.
RFQ software also helps to keep track of communication with vendors. It is also possible to set up portals for individual suppliers with notifications being sent to relevant parties when an event occurs.
An RFQ can be a good fit when your organization has a list of prequalified suppliers of certain services or products. In such scenarios, there may be no need to send out a request for proposal (RFP). An RFQ may also be sufficient if the price is the most important factor when selecting a vendor. In that case, technical requirements are not too important. The same goes when buying a product that doesn’t need technical support from the vendor.
If your organization needs to improve its RFQ preparation process through a software solution, ProcurePort can provide the right fit. ProcurePort is the world’s leading provider of e-procurement solutions. Schedule a free consultation and demo session