RFP vs RFQ: What’s the difference?

RFQ (request for quote) is a request sent to suppliers that details a buyer’s needs and asks vendors for their pricing and payment information. An RFQ in business includes specific requirements and deliverables that the buyer expects. Usually, the buyers are well aware of the marketplace and offerings, so the RFQ is short and straightforward to get product specifications and pricing.

Generally, when you issue an RFQ, you know the exact type and number of products or services you’re looking for. Since product information usually follows a standard RFQ format, you can quickly seek the supplier with the highest quality and lowest price.

Here are the typical characteristics of a request for quote:

• Is used when you understand your exact needs
• Specifies detailed requirements
• Focuses on deliverables, costs, and payment conditions
• Evaluates vendors by their ability to provide the services and goods as requested
• Awards contract to the vendor who offers the most competitive price

To prepare an efficient RFQ, you can apply these best practices:

• Write a clear list of requirements of products features and functionality
• Limit inessential background
• Provide the product quantity, timeline for delivery, and duration of services required
• State your preferred payment terms
• Detail a pricing format for all vendors for consistency

Read more about the 6 steps to writing the perfect RFQs. Creating a thorough RFQ is the first step to helping you find the best suppliers for your company’s needs.

That wraps up the RFQ meaning in business. Let’s come to the RFP definition.

RFP (request for proposal) is a formally structured questionnaire for buyers to collect critical vendor information. In an RFP, you detail your problems and invite bidders to provide solutions. Each vendor will have a unique approach to solving your pain points.

When you receive proposals, you can put all vendors side-by-side and explore their capabilities in performing your project. There are many factors to evaluate, such as their method, experience, and the feasibility of their solution. You should set a weighted score for each factor, and the winning vendor shall be the company that scores the highest.

Here are the basics of RFPs:

• States concise background information about your problems and needs
• Provides detailed requirements for the products and services you want
• Contains specific questions about the bidder and what solution they can offer
• Indicates your will for further collaboration rather than a mere questionnaire
• Assess and compares vendors according to your priorities

Keep in mind some tips when writing an RFP:

• If you need a customized service, ask the bidders to provide examples of their previous works for other clients. Case studies will give you a more accurate expectation of their ability.
• Require a comprehensive pricing plan to avoid sticker shock later
• Write in-depth questions and emphasize your priorities thoroughly as a guideline for bidders. Try to be as detailed as possible and avoid vague questions.
• If you’re unsure how a vendor’s expertise can meet your needs, ask them for their examples, certifications, or references that help you make better decisions.

Now you’ve known the RFP and RFQ meaning, let’s explore 4 key differences between RFP vs RFQ:

Purpose

The most distinct characteristic between RFQ and RFP is their purpose. Companies mainly use RFQs when they know exactly what they’re looking for and don’t need details on the product or service. Instead, they’re ready to buy and focus on meeting their financial constraints.

On the other hand, RFPs are applied when you need to purchase sophisticated goods or tailor-made services that require specialized expertise or dedicated personnel to do the job.

Types of questions

In an RFQ, the questions focus on pricing requirements for the specific goods, such as product specs, vendor’s costs, payment terms, as well as purchase order and invoice conditions.

In contrast, an RFP requires more detailed information on the product and solution. This is because the project for an RFP is often more complex and needs further consultancy than an RFQ.

Style

Writing an RFQ follows a standardized format. All information is well structured, allowing you to quickly compare the prices of different vendors.

On the other hand, due to the essential need for details, writing RFP is a more complex process that demands a combination of technical knowledge, price schedule formatting, and legal terms understanding. Thus, RFPs are usually formal and direct documents.

Scope of content

With the above features of RFQs and RFPs, both have their advantage when you use them properly.

Since RFQs center around costs, you can focus on your budget and eliminate other distractions when evaluating vendors. On the contrary, you should choose RFPs when you need to compare vendors’ capabilities and select the best proposal in consideration of many factors beyond just prices.

To effectively manage your procurement process with RFQs and RFPs, you can adopt a PWA Magento purchase order. This system can automate purchase order processing, helping you to prepare RFQs quickly right at the warehouse, as well as controlling all PO statuses. Since the software centralizes all data on inventory and vendors, you can have the right products at the right cost at the right time.

Now that you can answer the question “what does RFQ mean”, let’s discover a common template of an RFQ. Typically, an RFQ contains 3 main sections: Buyer information, seller information, and review and evaluation. Each section has a list of information including:

Buyer information:

• Company name and description: Brief information about your company
• Requirement and goals for the desired products and services: What you’re looking for and your expectations
• Contact information

Seller information:

• Product details: Name and specifications of the goods
• Product quantity: The requested quantity that bidders must satisfy
• Delivery requirements: Your preferred delivery method if possible
• Product price: Price for each product and conditions if needed

Review and evaluation:

• Evaluation method: Criteria to assess vendors, such as technical expertise, price, delivery method
• Timeline: A specific timeline that bidders must comply to
• Terms and conditions: Negotiate with the vendor to reach a mutual agreement, especially on payment terms, product quality, and delivery issues
• Submission requirements and instructions

After you compare all quotations and select the best supplier, consider if you want to establish a long-term relationship with them by negotiating a blanket purchase order.

Here are the standard sections that create a good RFP:

1. Your company background: What your company does and your target customers
2. Project overview: A brief introduction about the project
3. Project goals: What you want to accomplish with this project
4. Scope of work: Description of the project and a detailed scope of work
5. Target deliverable schedule: Expected completion date for bidders to propose proper resources
6. Current roadblocks and barriers to success: Any constraints that may affect the project, such as technical issues or limited personnel resources, so you can quickly disqualify vendors that can’t handle the tasks and connect with competent suppliers
7. Questions on bidders’ proposed solution: Questions related to the project that bidders must answer. Ask them to provide a detailed project execution plan for evaluation.
8. Budget constraints: It’s better to be upfront with your budget to eliminate surprises later for all parties.
9. Evaluation metrics and criteria: How you evaluate and select the vendor, such as past performance history, case studies, projected costs, technical expertise, or responsiveness in the bidding process
10. Submission requirements: Guidelines that bidders must follow when submitting their proposal, in terms of format, deadline, content requirements
11. Contact information: Your email address or other methods for bidders to contact you for RFP clarification and submission

This article just walks you through the RFP and RFQ definitions and the prominent difference between them. If you’re looking for items or goods with known specifications, RFQ is the most appropriate. If you require sophisticated services that need customization for your needs, RFP will be the choice. Using the right type of request will create an efficient procurement strategy for your company and help you make better business decisions.