What is an RFQ (request for quotation)?

What does RFQ stand for?

RFQ stands for request for quotation, sometimes shortened to request for quote. In procurement, an RFQ is the document a buyer sends to several suppliers asking each to quote a price, delivery date and terms for goods or services that the buyer has already described in full. The buyer then compares the quotes and orders from the best compliant one.

The key word is quotation. In an RFQ the supplier does not design anything or propose an approach; it prices a requirement written by the buyer. That makes an RFQ faster to write, faster to answer and easier to compare than a request for proposal, and it is why RFQs suit routine competitive purchasing. When the buyer provides the full specification, such as drawings, a bill of materials or a detailed scope of work, the RFQ is the main sourcing event, whatever the sector, and it often asks for a cost breakdown alongside the price; manufactured parts, construction works, maintenance or IT services are examples. Some organisations call the same document an invitation to quote or a request for price; the supplier’s answer is a quote or quotation.

In business, an RFQ usually comes after the need is approved and before the purchase order. The requisition says what is needed and who will pay; the RFQ finds the price and the supplier; the purchase order commits the buyer to that supplier at the quoted terms.

When do you use an RFQ?

An RFQ is the right request when four conditions hold: the buyer can describe the item or service completely, several suppliers can provide it, the offers will differ mostly in price and delivery, and the value justifies asking more than one supplier. Typical cases are catalogue and stock items, spare parts, raw materials, standard IT equipment, printing, and simple services with a fixed scope such as a defined maintenance visit.

In large organisations and public bodies, the most common RFQ goes to suppliers already on a panel. A selection tender first appoints several suppliers to a framework agreement for a set period; the framework fixes the terms and sometimes ceiling prices, but commits no volume. Each specific need then goes out as an RFQ, often called a mini-competition, to the framework suppliers only, and that RFQ sets the price, delivery and scope of the order. How framework agreements are awarded and managed belongs to contract management.

• If the buyer knows the outcome but not the best way to reach it, suppliers have to propose a solution, and the right request is an RFP, explained in the RFP guide.
• If the buyer does not yet know what the market offers, a request for information comes first; the RFQ follows once the specification is written.
• If prices are already fixed in a contract or a catalogue, there is nothing to quote: the requester orders against the agreement.
• If the value is very small, many purchasing policies allow a single quote or a purchasing card, because the cost of comparing exceeds the saving.

A side-by-side comparison of the RFI, the RFP and the RFQ, with the decision rule for each, is in preparation as a separate guide. RFQs also sit inside larger sourcing work: a category strategy in strategic sourcing may decide that a commodity is bought by regular RFQs rather than a long-term contract.

What goes into an RFQ?

An RFQ has to make every quote answer the same question. If one element is missing, each supplier fills the gap with its own assumption, and the prices stop being comparable. The table lists the sections of a complete RFQ and the comparison each one protects.

A free RFQ template with these sections, usable as a form or a document, is in preparation among the site’s tools. Until then, the table above works as a checklist for any RFQ form, including the one built into a purchasing system.

What is the RFQ process?

The RFQ process runs from an approved need to an issued purchase order in a few steps, and usually faster than an RFP because suppliers price a requirement instead of writing a proposal. What keeps it fair is that every supplier receives the same request, the same answers to questions and the same deadline.

1. Confirm the need: an approved requisition with the budget, the specification and the required date.
2. Choose the suppliers to invite: when a framework agreement or panel covers the need, the suppliers on it and only them, since a supplier outside the panel cannot take part in a call-off; otherwise approved suppliers, as many as the purchasing policy requires for the value.
3. Issue the RFQ to all invited suppliers at the same time, with the closing date and the contact for questions.
4. Answer questions in writing and share each answer with every invited supplier, without naming who asked.
5. Receive quotes until the deadline; quotes arriving later are set aside unless the rules say otherwise.
6. Check each quote for compliance with the specification, delivery date and required documents before looking at price.
7. Compare the compliant quotes on the basis for award stated in the RFQ, usually total landed cost.
8. Award: raise the purchase order to the selected supplier at the quoted terms, and tell the others the outcome.
9. File the RFQ, the quotes and the comparison with the order, so that the price can be justified at audit.

Many RFQs now run in an e-sourcing tool rather than by email. The tool sends the same request to every supplier, holds quotes sealed until the deadline, keeps the questions and answers in one place and puts the prices side by side. Where e-sourcing sits among the other purchasing systems is explained in what is e-procurement; a dedicated guide to RFQ software is in preparation.

What does an RFQ comparison look like?

The fictional example below shows why an RFQ is decided on total landed cost among compliant quotes. A facilities team issues an RFQ for 250 LED floodlights, to be delivered to its site within four weeks. Three suppliers answer, each with a different unit price, delivery term and lead time.

The arithmetic is simple: Supplier A costs 250 × €42.00 = €10,500 plus €900 of freight, or €11,400; Supplier B costs 250 × €44.50 = €11,125 delivered. The Incoterms rules of the International Chamber of Commerce, eleven three-letter trade terms, explain the gap: they allocate the tasks, costs and risks of delivery between seller and buyer, so an EXW price and a DAP price for the same item are not the same offer. Had the RFQ required a DAP price from everyone, the comparison would not need the freight estimate at all.

How are RFQ quotes evaluated?

RFQ quotes are evaluated on the basis the RFQ announced, in two passes. First, compliance: does the quote meet the specification, the delivery date and the documentary requirements? Second, among compliant quotes, cost: usually the lowest total landed cost, sometimes price combined with a small number of stated factors such as lead time or past performance.

• Price everything the buyer will pay: unit price times quantity, freight, packaging, duties, installation and any minimum order surcharge.
• Check the validity period: a quote that expires before the purchase order can be approved has to be confirmed again.
• Compare payment terms only when they differ materially; a longer term is worth something to the buyer’s cash position, but it rarely outweighs a price gap.
• Ask suppliers to clarify obvious errors, such as a unit mismatch, without letting them change their price after seeing the others.
• Where the RFQ allows it, shortlist two or three compliant suppliers and finish the competition with them, through clarifications, negotiation rounds and a best and final offer, before selecting one; every shortlisted supplier gets the same information and the same deadline.
• Record why the winner was chosen, especially when it is not the lowest unit price, as in the example above.

When quality or approach matter enough to need a scoring grid with weights, the request has outgrown an RFQ. That is the territory of the RFP, whose weighted evaluation is shown in the RFP guide.

Is a quotation binding?

A quotation is usually not a binding offer; the contract forms when the buyer orders and the supplier accepts. US federal rules state it plainly: under FAR 13.004, a quotation is not an offer and cannot be accepted to form a binding contract. The order issued in response is the offer, and the contract exists once the supplier accepts it, by notifying acceptance, by delivering what was ordered or by performing the work substantially.

Outside federal buying, the effect of a quote depends on the governing law and on its wording. A quote marked “firm for 30 days” may bind the supplier to hold the price for that period; a quote marked “subject to confirmation” does not. Buyers who need a price held should ask for a stated validity period in the RFQ, and then place the purchase order within it.

How do public buyers use RFQs?

Public buyers use RFQs for lower-value purchases, under simplified rules. In US federal buying, Part 13 of the Federal Acquisition Regulation governs these simplified acquisitions, and it sets out how quotations are requested and evaluated.

The EU public procurement directive, Directive 2014/24/EU, organises its procedures differently: open and restricted procedures, competitive procedures with negotiation and others, without a procedure named RFQ. The RFQ logic still appears in two places. Below the EU thresholds, national rules or the buyer’s own policy often require a number of quotations, so check the applicable rules before relying on any figure. Above them, it runs inside a framework agreement with several suppliers: under Article 33(5) the buyer reopens competition by consulting in writing the framework suppliers capable of performing the contract, sets a time limit, keeps tenders unopened until it expires and awards on the criteria set in the framework documents; under Article 34, a dynamic purchasing system invites all admitted suppliers to tender for each specific contract. In the UK, the Procurement Act 2023 calls the same step a competitive selection process under a framework (sections 45 and 46).