Request for quotation (RFQ)
A request asking suppliers to quote a price for clearly specified goods or services, so offers can be compared on cost.
In short
- An RFQ works when the business knows exactly what it wants.
- Suppliers compete mainly on price, delivery and terms.
- Many businesses require several quotes above a set purchase value.
A request for quotation, or RFQ, asks suppliers to price a defined requirement: specific products, quantities, delivery dates and terms. Because every supplier is quoting on the same thing, responses can be compared directly.
When to use an RFQ
RFQs suit standard, well-specified purchases: 500 units of a part to a drawing, office furniture from a list, a fixed quantity of materials, a defined service with clear deliverables. When the business isn't sure what solution it needs, or suppliers' approaches will differ significantly, a request for proposal is a better fit.
Comparing quotes
The lowest unit price isn't always the cheapest offer. A fair comparison looks at:
- Unit price and any volume breaks
- Shipping, duties and other added costs
- Delivery time and reliability
- Payment terms and any early payment discount
- Warranty, returns and after-sales support
Policy thresholds
Many purchasing policies require a minimum number of quotes above a certain value, for example three written quotes for purchases over $10,000. It keeps pricing competitive and gives auditors evidence that suppliers were chosen fairly.
Worked example
Three quotes, one clear winner
A school board requests quotes for 200 classroom chairs. Supplier A quotes $89 each plus $1,200 delivery. Supplier B quotes $84 plus $3,400 delivery. Supplier C quotes $87 delivered. Totals: A $19,000, B $20,200, C $17,400. The lowest unit price was the most expensive offer.