The Request for Quote (RFQ) process varies from company to company depending on your spend and the amount of staff designated to the procurement function.
If you are lucky enough to have a RFQ Software platform integrated into your computer operating system you are one of the fortunate ones. These companies have software which allow the purchasing department to quickly and easily turn an electronic requisition (request from the user group) into a RFQ and spin it out to three or more vendors for P&D (Price and Delivery) without leaving their chair. Most companies do not have this type of functionality and they in turn expect Buyers to retype, cut and paste, email or fax a hard copy to vendors for a quote. In these instances, much of your potential savings could in turn be chewed up by the labor costs dedicated to requesting the quotes. There are better ways.
The RFQ is the Buyers way of determining present market costs and conditions for item which are needed to run the organization they work for. Typically they are looking for price, delivery, quality, payment terms and specifications on their needs. Often these needs are dictated by a user group or another department which is looking for product for maintenance, repair or operating (MRO) issues. This is not the only instance where a RFQ is used, this same user group might be looking at a capital purchase of new equipment or other service related needs. The RFQ is purchasing way of keeping a handle on costs for goods and services.
Having a RFQ template for these different types of purchases will help you expedite the time you spend on acquisition and reducing acquisition costs makes your department more effective and lowers cost. Let us help…we have many different RFQ type forms and templates in our bundles as well we are an eProcurement or eSourcing software provider by way of our RFQPro Software Platform.
If you subscribe to our mailing you will receive our FREE welcome pack of templates which include a couple of standard RFQ forms along with an invitation to bid letter. They are instantly delivered upon confirmation of your address. If you want more robust RFQ Templates, we recommend you buy either the Purchasing Manager or Mega Pack Bundle. Both contain many sample RFQ forms which can be quickly modified to meet your specific needs to avoid having to start from scratch.
How you are governed in respect to bid procedures for any RFQ, Tender or RFP you issue will vary depending on whose dollars you are spending. If you are a purchasing professional working for a public organization and spending tax payer dollars, you are likely using a different set of guidelines then a buyer representing a privately owned organization. Each private or independently owned company’s bid procedures might differ depending on their size and spend.
In addition to their bid list, public purchasing agencies are often mandated by statute or regulation to advertise their bids in local newspapers whereas private corporations usually draw bidders from an internal bid list only.
In a formal bid system, regardless of ownership structure or bidding guidelines, the bidder typically will be provided:
- Instructions to bidders – explains how, when, and where the response to the bid must be submitted;
- Specifications – a detailed specification which the item required must meet. This is often technical by nature and the RFQ might include pages of quality guidelines, engineering drawings and strict compliance requirements;
- Conditions – a set of legal, special and general conditions which must be met by the successful bidder;
- Bid Form – which your bidders will use to provide their cost and any other commercial terms.
For the opening and award component of your tender, this again will vary for the public purchaser when you compare practices to the private or corporate purchaser. The public purchaser is often required to open all bids in a public arena and will be required to disclose bid sums. Basically, they open the tender in front of anyone in attendance and post the sum to a white board. Many of the bidders will take part in the process just to see competitors bids. The private buyer is not required to follow this process and often has more flexibility when it comes to evaluating and awarding the bid.
The public buyer will have to justify and defend a selection if the lowest bidder is not awarded the tender. If the bidder meets all the criteria posted in the tender, RFP or RFQ and they are low bid often this is all that is required to be awarded the contract. For the selection criteria, more weight is put on unit cost whereas a private company might put more emphasis on service, warranty and quality.The public purchaser is under more scrutiny and the award process is much more transparent.
All out-going procurement documentation along with the bidding procedures are typically managed by the purchasing department. They are the keepers of the bid list or vendors in good standing, the issue and closing date of the bid and all other commercial aspects of the bid.
Part 1 – Buyers Guide to Cost Savings
As a Buyer or Purchasing Professional you should be evaluating your spend. What does this involve and how does it benefit my organization to complete a spend analysis? Basically, you are reviewing how your organization spends its operating budget or what makes up costs. To do this, one could run a historical report from your purchasing software system. It might allow you to drill down and report the top 20 or 30 vendors and how much money your company spent with them in the last 12 months. Better yet if it could provide the commodity or description of the spend then you are off to the races. If Purchasing cannot directly pull this data from a software program, your next best option is to approach the accounting department. They should be able to give you a list of the top vendors A/P sends payment to.
Once you have your list of the top 20% of your vendors in relation to how much money you spend with them annually we are fairly certain you are going to see that this list likely represents close to 80% of your operating budget. Yes the 80/20 rule will apply. Why focus on the top 20%, well there are only so many hours in the day and as a buyer you need to focus your efforts on where you are going to make the biggest impact. Spending hours on toilet paper contracts to save $10.00 might not be the best way of utilizing your time.
Cost conscious business owners will Read the rest of this entry
When you decide to issue a request for quote (RFQ) it is customary to include a cover letter. RFQ is the short form terminology used by purchasing people for a request for quote and if you are interested in portraying a professional image you should expect to spend some time and effort on your cover letter. In many cases it is the first impression you will make with your vendors so make sure it is formatted correctly and in business like manner with all the appropriate blocks (address, signature). Make sure it calls attention to the subject at hand and including all your contact coordinates is mandatory.
It is usually delivered on corporate letterhead, with a date, vendor address, contact person, title and reference (subject or tender #). You can request an acknowledgment so you can confirm all bidders are in receipt of your documentation and your cover letter will then typically end with your name and title. Here is a sample set of text you can use for a cover letter or invitation to quote letter. This request for quote cover letter template, as well as several other very beneficial procurement related forms are included in our free welcome pack…subscribe and it will be delivered directly to your email inbox digitally in Microsoft word or Open Office format. Read the rest of this entry