With a Request for Quotation (RFQ), a procurement officer invites suppliers to bid on providing specific products and/or services. An RFQ typically involves more than the price per item. Information like payment terms, quality level per item, or contract length are possible to be requested during the bidding process.
To receive correct quotes, RFQs often include the specifications of the items/services to make sure all the suppliers are bidding on the same item/service. Logically, the more detailed the specifications, the more accurate the quote will be. The more accurate the quote, the easier time a procurement officer will have awarding the contract to the right supplier. Information in an RFQ also can be used as legally binding documentation.
The suppliers have to return the bid by a set date and time to be considered for an award. Discussions may be held on the bids (often to clarify technical capabilities or to note errors in a proposal). Bid submission does not mean the end of the bidding. Multiple rounds can follow or even a reverse auction can follow to generate the best market price. Procurement officers are expected to award the contract to the supplier who can provide the best product and/or service for the lowest price.
An RFQ allows different contractors to provide a quotation, among which the best will be selected. Releasing an RFQ also increases the odds that a procurement officer will receive multiple bids. The more bids a procurement officer receives, the more likely he or she is to find the products and/or services as a good price. And vendors, while responding to an RFQ, must consider that other suppliers will also bid, which can affect the price they set.
Requests for quotations are most commonly used in the business environment but can also be found being applied to domestic markets.