RFQs explained: How to write a request for quote (with template)

Every business scans the marketplace for the best vendor so they can make an informed purchase.

Whether you’re looking for a reliable product vendor or a service provider, knowing how to write an effective request for quote is important.

A well-written and comprehensive request for quotation (or RFQ) can help companies get competitive quotes that will help fulfill their business and project needs.

In this blog, we will dive into the RFQ meaning, with example templates to help you achieve your procurement and business goals. We’ll also explore how Wrike’s features can help you manage your vendors.

What is a request for quote?

A request for a quote (RFQ) is a formal document that businesses use to gather pricing and terms from vendors for specific products or services. It helps organizations compare offers and choose the best fit based on cost, quality, and timelines.

A typical RFQ contains:

• General and technical specifications for the product or service
• The last date for accepting RFQ responses
• Estimated dates for the final product or service delivery
• The proposed contract duration with the vendor
• Other terms and conditions that need to be accepted by the vendor

It’s important to note that a request for quote is not a firm offer to purchase. Therefore, it is not considered a formal contract or agreement. The final contract is created once the buyer sends an offer and the vendor or supplier accepts it.

What is an RFQ in project management?

Similarly, an RFQ in project management is a written document inviting potential vendors to supply essential goods or services for project completion.

To complete project deliverables, teams work with external organizations to obtain raw materials, complementary products, spare parts, or necessary services. They negotiate with external organizations and complete the requisite documentation.

A request for quotation is not exclusively used in the project management domain. Many private and government organizations use it as a part of their procurement and business process.

Some companies also consider an RFQ as a request for qualification to:

• Shortlist vendors based on their capability to meet internal company standards
• Evaluate suppliers and find out if they can supply the desired products and services

Many businesses also use a term called RFP — request for proposal.

How is an RFQ different from an RFP and RFI?

Organizations in the business-to-business (B2B) domain generally use a request for information (RFI), a request for quote (RFQ), and a request for proposal (RFP).

All these documents help buyers gain more information from their prospective vendors. Each one of them helps you accomplish different goals.

• Request for information (RFI): A request for information is a formal document companies use to explore available options in the marketplace. They use open-ended questions to discover how prospective vendors can support them in meeting their business challenges.
• Request for proposal (RFP): A request for proposal is an official process that outlines a project for products or services. Buyers use RFPs to gather information on different vendors and how they will perform if chosen. Companies use RFPs when they have a complex project with detailed technical requirements and significant product customizations.

So, RFQ vs. RFP vs. RFI — which should you choose? It depends on your priorities. An RFI is for initial information gathering, an RFQ focuses on pricing and payment terms, and an RFP aims to secure a formal proposal.

When should you use an RFQ?

An RFQ isn’t required for every procurement order. There are certain situations in which a request for a quote is used:

• A prequalified list of suppliers exists.
• Specific products or services are required, and there is no scope for innovative solutions.
• Bulk product quantity is needed on an ongoing basis (for example, raw materials for constructing a table).
• There are standard product specifications without any scope of customization (for example, an RFQ for screws for a steel almirah).
• There is no requirement for an add-on service or maintenance contract.

Are there different types of RFQs?

A request for quotation can be formulated in different ways, as outlined below:

Open bid

An open bid is a request for quote format in which the buyer publicly opens the bid during submission time.

The pricing and payment terms of suppliers are available for everyone to view. Open bids encourage a competitive process but may prompt vendors to fix higher prices.

Sealed bid

In a sealed bid process, all qualified bidders send their bids. These bids are opened after receiving all responses.

Sealed bids are considered a more transparent bidding format compared to open bids. Government or public sector contracts commonly use sealed bids in their procurement process.

Invited bid

An invitation for bid (IFB) is a request for quote where selected vendors are invited to send in their bids. Invited bids are cost-effective as only trusted or pre-vetted suppliers are chosen to participate.

However, while the supplier selection process seems easier to navigate, buyers may miss out on cost savings due to the limited competition.

Reverse auction

A reverse auction is a request for quotation method in which vendors give their best (lowest) offers for the buyer’s consideration.

Many companies conduct reverse auctions when they fail to find vendors. Reverse auctions can be a good option if cost is the primary criterion for awarding a contract. Conducting reverse auctions online can give quick results besides being competitive for companies.

What is the RFQ process?

Writing the exact project requirements is crucial for creating a successful RFQ. The clearer the business needs are, the easier it will be to choose the perfect vendor for the project. Let’s find out more about how an RFQ process works:

Preparation

Gather all information before you start writing the request for quotation. Though this step sounds time-consuming, it is also the most critical one, so don’t rush it.

• Write down business needs: Identify the specific business and project requirements. Talk to project managers, internal teams, and relevant stakeholders to determine what they need to execute the project. The more accurate the requirements are, the easier it will be to compare vendor responses to find the best one.
• Determine the vendors: Decide whether you want a bigger pool of vendors to bid for the project or a smaller, pre-vetted group. Sometimes companies prefer to work with the vendors with whom they already have a good relationship.
• Create the RFQ: Create the request for quote document from scratch or save time using the easy-to-use template provided in this article. An RFQ template is a good option if your company sends out RFQs frequently. Teams can customize the request for quote based on the project needs. Reviewing bids and awarding contracts will be easier if all vendors provide bid information in the same format. Remember to include details such as:
  
  • An introduction to the company and project for which the products and services are being solicited
  • A complete list of product or service specifications
  • Exact product specifications, including quality guidelines and required quantity
  • Any basic vendor qualification criteria that suppliers need to meet to bid for the project
  • Detailed information on the bid’s evaluation process, including selection criteria
  • How to bid and the bid submission deadline

Tip: You can use Wrike’s Gantt charts to get a bird’s-eye view of key RFQ milestones, like submission deadlines and vendor evaluations, ensuring your procurement cycle stays on schedule.

Management

In this step, the request for a quote is sent to the vendors. Companies set a deadline to receive all the bids. Three to eight vendor bids can be considered to be a cost-effective and competitive bidding process.

Having less than three bidders would mean that the process isn’t competitive, and there is scope for the buyer to get better pricing. Receiving more than 10 bids can make the process time-consuming and complicated.

• Issue the document: Give your vendors sufficient time to work on the request for quote response. If you have provided adequate information about the business, project needs, and product specifications, expect very few follow-up questions. If you do happen to get vendor queries, make sure to respond to them promptly.
• Review the bids: In this step, all bids are opened and evaluated based on the selection criteria such as pricing, delivery dates, and product quality. This also ensures that the bid selection process is objective, unbiased, and fair. Any decision is made solely based on the bid responses document.
• Communicate: Keep the bidders informed on all the steps in the RFQ process. Send acknowledgments to each vendor once you receive their bids. Keep them informed about the bid opening date and when the bid results are expected. It’s good practice to keep vendor offers confidential unless you have an open bid.

Closing

Bidding is straightforward when the RFQ process is comprehensive. Long hours spent by procurement team members on perfecting the RFQ document pay off at this stage.

Decision making can be made easier by sending out RFQs in a templated format and comparing vendor responses. 

• Stakeholder management: Create a one-page bid response summary with key information for project stakeholders or the bid selection committee. List the number of bids received, qualified bidders, and pricing details for every bid. Bidders may be disqualified if they don’t meet the vendor selection criteria. In this case, communicate the reason for disqualification to them.
• Selection: Select the vendor that meets the pricing targets and project terms. Formulate a memo outlining the reasons for choosing the final supplier. Detailed RFQ process information is useful for managing upcoming bids or training new team members.
• Award: So, you’ve finally found a dependable supplier for your RFQ! Use this time to inform them of their winning bid and get their written acceptance. If you enter into price negotiations with the winning supplier, sign a binding contract with them before announcing the bid winner. Publicly inform all the bidders of the final decision and thank them for their applications. Maintain cordial relations with the vendors that didn’t qualify as you may require their services in the future.

How to write an RFQ

Before you write an RFQ, you must need to know what it entails. While RFQs vary for different industries and business needs, there are certain elements that should always be included in a request for quotation.

Invitation to bid and summary

Write a brief outline summarizing all the key elements present in the request for quotation, such as:

• Product quantity, features, and specifications
• Project deliverables and whether they are one-time or required at periodic intervals
• Important dates, such as bid submission dates and the last date for accepting bids

Complete the summary by extending an invitation to vendors to send in their bid responses.

Business and project overview

Give a complete overview of the company and its project requirements in the RFQ document. This gives vendors a thorough knowledge of buyers’ specific project needs, meaning they are more likely to place bids.

For example, an electronics manufacturer may send out an RFQ to source microprocessor chips, an essential component in many electrical appliances such as microwaves, computers, toasters, video game consoles, and dishwashers.

The RFQ should mention the products that they will be manufacturing.

Speaking of manufacturing, Wrike’s project management software can be highly useful in this industry.

For example, Electrolux’s design team used to juggle emails, PowerPoints, and Excel files. However, Wrike changed everything for the manufacturing company. 

Vendor requirements

Not every vendor will qualify for the bid. Organizations have criteria for selecting and screening prospective suppliers. Consider using some of these questions to gain more information about prospective vendors:

• Can you provide a concise overview of the company? How long has it been in operation?
• Can you share a list of the company’s business licenses and certifications?
• Are you compliant with the industry laws and policies?
• Have you completed similar orders in the past?
• Can you share your previous quality assurance reports?
• Can you provide past client testimonials and references?
• Do you have the capacity to deliver this order on time in compliance with the quality guidelines mentioned in the RFQ?

Specifications and project terms

How do you ensure a smooth purchase order process? It all starts with a clear breakdown of project specifications and terms. Use this section to give detailed information about the project and the products and services requested. Include details about:

• Product specifications (size, quality, and quantity)
• Delivery dates for the product or service
• Project terms and conditions, such as performance incentives, product warranty or guarantee, length of the contract, and renewal options, if any
• Hardware or software requirements for the product or service

Tender fees or deposits

In government and public sector RFQs, tender fees may be applicable. Tender fees are cash deposits vendors pay to buyers to demonstrate their faith in the bid. The tender fee is also called an earnest money deposit (EMD).

Buyers hold the deposits in escrow during the bid process, and the money is returned to the vendors who are not selected. After signing the binding contract with the buyer, the winning bidder’s deposit is adjusted in the final payment schedule.

Pricing table or template

Including a pricing table or template in the RFQ can be helpful for managing bid responses after they come in.

A pricing table is a formula-driven section that calculates total cost when the product quantity, size, and other units of measure are entered. Here’s an example of what a pricing template would contain:

• Total number of units
• Price per unit
• Product weight per unit
• Shipping cost per unit 

Pricing tables collect, present, and analyze comparable information across different vendors, making it easier to review vendor pricing information.

Timeline

How can you ensure a consistent supply chain while managing tight timelines? While timelines vary across projects, an average request for quote timeline ranges from six to 10 weeks. Avoid frustrated vendors and costly procurement cycles by clearly mentioning timelines in the RFQ.

A successful RFQ can lead to faster production cycles, delighted customers, and satisfied stakeholders. Use some of these tips to shorten your RFQ timeline:

• Create an RFQ template library to save time and effort in creating multiple requests for quotes.
• Streamline the RFQ process with a detailed frequently asked questions (FAQs) section about the company and project.
• Use complementary procurement documents such as RFP and RFI to help with the vendor shortlisting process.
• Optimize the length of RFQs and send them to a small group of pre-vetted vendors.

Evaluation criteria

RFQs need to be reviewed carefully to minimize business risks by finding the right vendor. Establishing well-defined evaluation criteria ensures that the RFQ process is fair and unbiased, leaving no scope for subjectivity.

• Establish an RFQ scorecard: Standard sourcing questions tend to be long and open-ended. One great way to make the RFQ process more data-driven is to set up a scoring system. Evaluators can quickly compare vendors and identify their strengths and weaknesses. RFQ scorecards can be rated based on a simple or weighted approach. In a simple scoring system, all criteria have the same weight in the final score. In a weighted system, different elements are prioritized based on business importance. For example, category weights can be split as follows: technical requirements 20%, functionality 20%, reputation 20%, and financial stability 20%.
• Define what’s important: Gather all RFQ stakeholders and get their feedback on achieving RFQ success. Determine the overall RFQ structure and approach by asking their perspectives on:
  
  • Selection criteria for vendors, including years spent in business, similar projects handled, capacity to handle projects, place/state of supply, quality assurance certification or licensing
  • Product specifications, especially those that are non-negotiable
  • RFQ document structure and the sections to be included, such as company information, vendor criteria checklist, pricing tables, and product requirements

RFQ template example

What does the perfect RFQ format look like? The truth is, it depends on what you’re buying. A request for quote for an IT hardware company is very different from the one sent out by an oil engineering firm. Whether you’re creating your first RFQ or the 10th one, here is a simple request for quotation template that can help.

How to respond to an RFQ

So, you’ve been asked to request a quote — what’s the best way to do it? Typically, according to HubSpot, it takes top performers 25 hours to write an RFP response. An RFQ is designed to provide pricing and payment information to a buyer. You can make your request for quotation stand out by including other important details, such as:

• Demonstrating that your company has a fair understanding of the buyer’s needs and is ready to support them
• Assuring that the project will be delivered on time
• Showcasing a willingness to be flexible based on company needs or product specifications
• Providing past client testimonials, social media feedback, and other social proof that illustrates your company’s domain expertise
• Reviewing the document in detail and making valuable suggestions or recommendations to help the buyer work on their requirements
• Writing a planned response to the RFQ and submitting it well within the deadline
• Proofreading and editing the RFQ response before sending it to the buyer

How to plan and create your RFQ documents with Wrike

RFQs are a key part of your project management toolkit. Writing an effective RFQ will help your team get the perfect products or services at competitive prices from reliable vendors. Empower your staff to streamline workflows, find the best vendors, and delight your customers with a versatile professional services platform like Wrike.

Stop spending hours creating requests for quotations. Use Wrike’s customizable request forms to create RFQs and send them to external vendors. Tailor the forms to user responses to ensure no important details are missed.  Store everything related to the RFQ process in a unified location so that information is easily accessible.

Also, visibility into workflows when creating an RFQ can make or break your supply chain. 

One of our customers at Wrike, House of Design, saw a 20+ hour weekly reduction in admin time, thanks to our custom workflows and request forms. This change enabled the machine shop manager to cover 100% more jobs through the fabrication process.