When to Use a RFP Versus a RFQ?
When performing your purchasing duties you will likely encounter the challenge of whether to issue a RFQ, RFP, RFI, ITQ or other documentation when trying to resolve a request from within your company or organization.
The above acronyms stand for RFQ – Request for Quote (Quotation), RFP – Request for Proposals, RFI – Request for Information (Interest), ITQ – Invitation to Quote, IFB – invitation for bid and there are others.
Before we get into this, lets talk a little about competitive bidding. Quotations are normally secured when the size of the proposed commitment exceeds a certain dollar amount: for example, $1,000. Some government agencies are mandated by law to bid and shall award to the lowest responsible bidder. In industrial practise, proposals may be requested with a view of selecting those firms with whom negotiations as to the final price will be carried on.
When it is decided to ask for competitive bids, dependable sources are determined, accurate wording is developed then request for bids can be solicited.
A RFQ is usually used when the Owner knows exactly the type and quantity of goods it wishes to buy, while RFP’s ask bidders to provide a solution to a problem that could be solved in different ways.
An example of when to use a Request for Quote (RFQ) is if you are buying 10 each Toshiba Laptop Computers c/w 2 GB ram, 100 GB HD, DVD Burner, Windows XP, etc. You know your requirement and have a specification to issue with the request.
When to use an RFP, would be if you were unsure on whether to purchase, lease, rent the same 10 computers with software and hardware requirements that may differ from PC to PC. This gives the bidders an opportunity to offer a solution to your requirement.
With the above in mind, it should be noted that evaluating a RFQ is usually easier than trying to determine an award from the results of an RFP.
An RFI or request for information or interest is just that. The Owner might be looking at building a vendor list for future tender calls or projects and by submitting the RFI to potential suppliers they will pre-qualify such suppliers for their tenders.
One final suggestion, prepare your documents from the perspective of the supplier. Eliminate unknowns to ensure you reduce the number of inquiries and potential legal challenges. This will also help suppliers deliver accurate pricing and the cost associated with delivering the request to your company.