What is an RFQ? [Includes Example + Template]

To determine which product or service is the best value for your business, you’ll need to submit a request for quote (RFQ) to vendors. This document contains all the information about your project and acts as a formal request for a supplier or contractor to provide you with pricing information. You can then use this to decide which vendor to choose.

RFQs are essential for effective project management. I’ll walk through everything you need to know about these handy documents, including an RFQ meaning, how they work, and how they differ from RFPs.

What does RFQ mean?

RFQ stands for ‘request for quote’ and is the process of asking another company, like a supplier or contractor, to submit price quotes or bids for a specific product, project, or service

A request for quotation has several essential details that you can provide to potential vendors, including:

• Product/service details: A breakdown of the specifications of your project.
• Company info: Information about your company, including your contact details.
• Submission deadline: By when you’d like the quote to be submitted.
• Delivery requirements: The timeframe for completing the project.
• Contract terms: Any legal considerations, such as penalties or liabilities.
• Evaluation criteria: Information about how you will judge all of the bids.

RFQs are valuable documents in dozens of industries worldwide. For instance, they’re often used by the government for public procurement. They’re also a common element of construction projects, wherein a firm sends RFQs to several potential suppliers when sourcing raw materials. 

RFQs are also invaluable in the tech space. Many technological projects, like building a data centre or installing a new IT solution, are complex and multi-faceted. Sending out an RFQ lets the organisation compare quotes to find the best partner. It also helps the company understand an estimated price range so they can budget accordingly.

What is the difference between an RFP and an RFQ?

Although a request for quote (RFQ) and a request for proposal (RFP) may seem similar, they are actually two different processes. 

An RFP is a document that a business creates to request information about a specific product or service. It’s created when an organisation doesn’t know exactly what it’s looking for. It’s all about gathering information. In contrast, an RFQ is sent when the business already has a project in mind and is looking for a price. 

With that in mind, an RFQ request contains more detailed information about the product or service the business seeks. It will detail exactly how the vendor can solve the business’s problem. Consider it an opportunity for the vendor to state their value proposition and win over the client.

When to use an RFQ vs RFP?

Let’s examine the key differences between RFPs and RFQs and explore when each is most appropriate for your digital procurement process. Understanding when to use an RFP versus an RFQ can streamline your decision-making and help you secure the best partnerships and services.

Knowledge of the project vs missing information

In general, you should use an RFQ when you already know all the details of the project you’re carrying out. You’ve already solved the problem. All that’s left to do is get a quote for someone to carry out the task to your specifications.

In contrast, you should use the RFP process when you haven’t quite figured things out. Perhaps you need the vendor to tell you how they’ll solve your problem. Maybe you haven’t ironed out the details and want the potential supplier to fill in the gaps. Either way, use an RFQ in this case.

Standard products vs complex projects

Similarly, if the product specifications are clear and standardised, an RFQ is a good choice. For instance, if you know you need 10,000 products by the end of the month, an RFQ will give you all of the information you require to make informed decisions. 

For a specific project that requires careful planning, an RFP request will help you get more information before you commit to a vendor. Building an app, for example, requires coding, wireframes, UI design, testing, quality assurance, and much more. There’s a lot more to consider than price when deciding on the ideal business to work with.

How to create an RFQ step-by-step?

The RFQ process isn’t too complicated, but it’s also crucial to get it right. Take the time to learn all of the best practices in our guide so you can nail the process every single time. Here are the steps to create an effective RFQ:

Step 1: Deciding on your approach

Before you start creating your document, you should decide on your preferred approach. Liaise with your team and stakeholders to clearly define the scope and specifications of your project. You should also decide on a preliminary budget. 

Following this, decide on a bid type. Do you want to approach a select few businesses or have companies approach you? There are a few different types to consider:

• Open bid: This involves opening your RFQ to all vendors. When a vendor bids, this bid will be visible to all other bidders. Essentially, this creates a bidding war to work with your business. It’s a great approach for transparency and cost management but may lead experienced companies to avoid working with you.

• Sealed bid: As with an open bid, sealed bids open the RFQ to every vendor. However, the vendors don’t know what other vendors offer during bidding. This avoids bias and favouritism by ensuring a level playing field for all bidders.

• Invitation for bid: With an invited bid, you conduct market research and reach out to specific potential vendors, asking them to submit their quotes for your review. This is useful when you already have a pool of companies you’d like to work with or when the project is so niche that you require a partner with specific expertise.

• Reverse auction: In a reverse auction RFQ, multiple suppliers bid for the chance to fulfil your order. The lowest bidder at the auction wins the contract. This is a viable approach for simple goods and services that multiple vendors can provide with no difference in quality.

Once you’ve chosen your bid type and aligned your organisation on the best approach, you can proceed to the next step.

Step 2: Preparing your document

Next, it’s time to prepare your document. This should clearly state your project requirements, such as specifications, quantity, payment terms, and delivery date. Here are all of the essential details to include:

• A brief introduction to your company and project. 
• Your business’s contact information.
• The vendor’s contact information.
• Submission requirements (what the vendor’s quote needs to include).
• Submission deadline (by when the vendor needs to send their quote).
• The project’s scope and specifications. 
• Any extra project resources, such as drawings or concepts. 
• The deadline for delivery of the project. 
• Selection process (what you’re looking for in your ideal vendor).
• Terms, conditions, and legal considerations.

Create a standardised RFQ document that you can send to every vendor. This will provide a level playing field, making it easier to compare prices and expertise. An RFQ template can help with this. We’ve provided one below for you to use.

Step 3: Send out your RFQ document

Made your document? Distribute it along with supporting resources to your chosen vendors. Depending on your industry and the project’s urgency, you can either send by email or direct mail. Remember to include a point of contact so they know how to reach you. 

Now, all that’s left to do is wait for the deadline. At this stage, it’s important to treat all vendors equally and keep an open mind. Leaving bias at the door is fair for your bidders and may help you secure a better deal than you’d initially anticipated.

Expert tip: Acknowledge every response you receive and keep your bid evaluation team informed about progress. Keeping tabs will ensure everyone stays in the loop and invested in the RFQ business process.

Step 4: Review the RFQs and choose your vendor

Review them once the deadline has passed and you’ve received all competitive bids. You and your team need to ask:

• Who is providing the cheapest quote?
• Which business can provide exactly what we need?
• Does this business’s value proposition align with our needs?
• Which vendor is truly providing the best value?

Your team should also evaluate the bidders based on your own internal factors. It’s all about considering what you need and whether that supplier can provide it. Price is a factor, but there’s little use choosing the cheapest option if they can’t offer the right service.

Step 5: Close the deal

Have you decided on your chosen vendor? Let them know promptly, but wait until they’ve signed the contract before you inform the other bidders. 

You’ll need to negotiate with your chosen vendor to iron out any details, such as deliverables, timeframes, and whether the pricing is fixed. Use contract lifecycle management software to create and distribute a robust contract that protects your business from operational risk. 

Once all contracts are signed, you should notify and thank the other bidders. Being courteous is important as you might want to work with the other vendors later. Encourage them to bid on future projects if and when they arise.

An RFQ template

Below, we’ve created a standardised template that you can populate with your business information. Here, you can break down your RFQ into buyer info and project details, seller information, and the evaluation process.

RQF example A-Z Construction

To show you how the template above could look in practice, let’s fill out the RQF to send to vendors for the imaginary A-Z Construction, who have just been tasked with building a new bridge over the Darling River. They need the construction materials, so they’ll send out an RFQ to find potential vendors.

RFQs best practices

Here are some best practices to keep in mind throughout the RFQ process. By following these tips, you’ll be better prepared to achieve accurate, streamlined results across your supply chain, ensuring efficiency at every step.

1. Be as clear and detailed as possible

The more clear you can be with your RFQ, the more likely you are to get responses with accurate quotes. Include details about your upcoming project, including the quantity, specifications, and delivery expectations.

2. Create a level playing field

You may miss an opportunity if you go into the RFQ process with your eye on one supplier. Keep an open mind and be fair to every vendor. Ensure they can access the same data and see the same document as everyone else. This makes it easier to compare options once submissions come through.

3. Create pre-qualification selection criteria

Reviewing 30-50 submissions at once can be very challenging if you’re reviewing each in kind. Choose some pre-qualification criteria to quickly pre-screen applications. 
For instance, you could filter out candidates who have never worked on a project like yours or instantly filter out vendors priced above a certain threshold. This would reduce the pool of applicants, saving time.

4. Check pricing structures carefully

When you review the quotes provided by each vendor, check carefully for hidden fees and contract terms. A potential supplier might offer the cheapest rates for a service, but vague contract terms may lead you to pay more down the line. It’s worth it to be diligent.

5. Protect yourself

When you enter the contract negotiation stage, clearly outline your terms and conditions. We suggest securing a product warranty to protect you if the materials are defective. You can also set discounts to protect you if the product arrives late. Outlining these TOCs is essential to contract management.

Summing up

RFQs are the most effective way to achieve cost savings on your next project. They give you the option to select the best deal from multiple vendors. They can also help you find reliable partners who understand your needs and how to meet them. 

Managing projects from start to finish requires excellent organisation and stellar communication. Salesforce can help with that. With our platform, you can view all of your data, teams, customers, and projects in one place. This makes it easier to see what needs to be done, when, and by who. 

Take control of your projects today and start driving results with data management by Salesforce. Browse our range of products today to learn how our platform can help you grow your bottom line.