Request for quotation (RFQ) is a kind of a letter of inquiry in which a company announces that it plans to start a project of services/goods purchasing. It should contain a detailed specification and formal conditions to be accepted by bidders. Such a form of inquiry often concludes the purchasing process. It also contains principles of creating and making of a bid. A RFQ regarding implementation of special projects often requires that the company making it not only assess feasibility, but also general condition of bidders and their capability of actual performance of the bid.

WHAT ARE THE COMPONENTS OF RFQ?

Usually, it contains a few words about the bidder company and its business profile. It should also contain the final effect that the company wants to achieve by making such an inquiry, as well as the methods of bid evaluation. What should RFQ be like then?

• Complete – it should contain all the necessary information (scope of works/description of goods, performance deadlines, specific formal conditions, if any).

• Clear – it should contain no ambiguities in the description of proceedings.

• Convenient in terms of deadlines – it should give time for preparation of a bid.

• Cost effective – it should give a chance for a real benefit.

• It should exhaust the minimum delivery requirements.

BENEFITS FROM APPLICATION OF RFQ

The application of RFQ can either be the final stage of choosing the winning bidder or one of the stages of a procurement procedure (an element preceding an electronic auction, negotiations or another RFQ). In any case, it allows to increase competition amongst suppliers/contractors, which results in generating the highest possible savings for the company making the inquiry.

It also allows to break a big change process (e.g. implementation of an IT system in an organization which has so far used paper documents) into stages. Following the above example, RFQ allows to choose contractors who will fulfill orders for hardware and software and run trainings for the users.

PROPER STRUCTURE OF RFQ

A proper structure of RFQ contributes to the success of the entire procurement procedure. If it is too general, the bidder will not be able to prepare a specification that is precise and fits the buyer. On the other hand (especially with large and complex projects), if specification has to much detail it can limit the contractor’s invention and creativity, thus artificially inflating his quotations or limiting the market.

AN EXAMPLE OF RFQ APPLICATION

A production company is willing to buy two 400m2 storage tents together with a service of leveling and paving of the yard. After inquiry was published and bids collected it turned out that only an insignificant number of companies who provide such comprehensive services have made their bids. Moreover, the bids were not attractive enough in terms of prices. Therefore, the company broke the comprehensive inquiry into two separate ones. This resulted in a large amount of bids for both inquiries, which made it possible to choose the bid which ensured the required level of savings.