Request for Quote in Project Management - The Beginner’s Guide
Businesses and organisations buy goods and services for themselves or to complete projects for customers. Finding, comparing and selecting the best possible supplier or subcontractor for a project can be painful. This is where a Request for a Quote comes in handy..
But what is an RFQ? What does it contain? What does it look like? And most importantly: how can you, as an SME or freelancer, use requests for quotations to grow your business?
Table of contents
What is an RFQ, anyway?
RFQ stands for Request for Quote. It is often defined as a step or a document to ask suppliers or subcontractors their price to deliver goods and/or services for a clearly defined project.
Requests for quotes are typical for large organisations, enterprises and governments. Without processes, guides and steps, they would simply not function.
It's good to know that RFQ is only one step in the so-called procurement process. That sounds like corporate lingo.
RFQs look and smell like extra administration
This is not the favourite part of anybody who runs a freelance or small business. But when you think about it, everybody, including you and your customers, goes through a similar buying journey.
It all starts with identifying a problem. (For instance, I waste too much time on project management).
Finding out how much something costs brings you closer to the perfect solution to carry out your projects. An RFQ speeds up this step.
And that is only one good reason to dive deeper into the wonderful world of RFQs.
Are RFQs relevant for SMEs and freelancers?
As a freelancer or SME owner, you may wonder why you would need something complicated as an RFQ document to find out how much it would cost to complete a project successfully.
After all, you can also pick up your phone, or email suppliers and ask them to send a quotation.
You are right.
Simplicity is often the best way to move forward
Yet, understanding RFQ and integrating it systematically in project management can boost your business in two major ways.
You can either respond to RFQs from other businesses.
Or you can create your own RFQs to improve your quotation flow.
Let’s first look at what they can mean to you as a potential supplier.
Benefits of RFQs for suppliers
When a business sends or publishes an RFQ, they clearly state that they decided to buy. On top of that, they also know exactly what they want to buy.
Do you smell the opportunity? Will you grab it by its throat?
If you want to land big clients or projects, you will at one point deal with an RFQ. Winning the bid means you will need to spend less time on acquiring customers for your small business.
Responding to an RFQ is easier than creating a quotation from scratch. You receive a document with explicit instructions and project descriptions. Make sure your quotation complies with all guidelines and requirements. This way, the buyer will have sufficient information to proceed in the decision-making process.
An RFQ gives you a fair chance to win a bid. Although you won’t be the only bidder, you can stand out from the crowd by sending a professional quotation.
Benefits of implementing RFQs in your business
Besides responding to an RFQ, you can also create and implement them in your business.
That may sound like a bridge too far for small businesses, but there are clear advantages for your sales and project management.
Quickly select service providers for your projects
When you need to buy goods or services, sending out an RFQ has benefits for many reasons.
An RFQ gets the attention from many potential providers.
Once you have created an RFQ template, you only need to fill in the details of the project. The examples below will make it even easier for you.
An RFQ reduces the risk that you will forget to ask for important information to execute your project.
By providing all potential providers with the same project description, it will become easier to compare different providers and prices later on.
Create RFQs for your customers
The idea of using RFQs for your customers may sound like shooting yourself in the foot. After all, it can inspire leads to send it to your competitors.
But then again, isn’t that what they would do, anyway?
You will impress leads by simply making your process flow look more professional. The fact that you have documents ready for your project management shows you are organised.
By asking the right questions, you will receive all the information you need to create a quote. You can even use the 5W1H method for project management.
Compared to requesting a quotation form on your site, an RFQ Word document has one tremendous advantage. Few people have the patience to fill in a long web form to submit a request for a quotation. This is different with a Word document. You can even use check fields to make it easier.
You can convert an RFQ Word document into a PDF and make some fields obligatory. This way, you will not have to send documents back and forth to gather all the required information.
So, what does an RFQ actually look like? In the next paragraph, we list the key items that are typical of a good RFQ.
If you prefer to see a document, you can download some examples of RFQs for different industries and projects.
How to write an RFQ (10 elements)?
Although there is not an international standard for RFQs, this document typically contains 10 elements.
#1 Document type
An RFQ is not an order. To prevent misunderstandings, mention explicitly that the document is a “Request for Quotation”.
It won’t do any harm if you repeat this on every page with different words, such as “This is not a Purchase Order”.
#2 Reference ID
When you send lots of RFQs, a reference number will make it easier to organise your administration.
This goes for quotations, projects and invoices, too.
PRO TIP: If you use CoManage, you can use the same reference ID in your documents.
Every good RFQ starts with a proper introduction about both your company and the project. This is important because of two reasons.
The suppliers may never have heard from your company. A link to your site is the least you need to include. A brief company description may trigger curiosity and increase the amount of responses.
Even if suppliers know your company, they don’t know the details of the project you would like to have a price for.
#4 Scope of work
Clearly define your project. The more details you provide, the easier you will make it for potential suppliers to understand your needs. And the easier it will be for you to select the best possible partner.
The scope of work can be products, services, or a combination of both. Let's, for instance, look at a construction project.
The bricks and mortar are goods, masonry is a service.
Describing your project too vaguely will either result in no responses to your RFQ, or you may attract suppliers who can’t actually deliver what you need.
If you cannot describe your project, you will need a different document. At the bottom of the article, we listed two other options: RFI (Request for Information) and RFP (Request for Proposal).
#5 Payment terms
The other party will provide you with a price. But an RFQ is an excellent opportunity to determine the payment conditions from the start of your project
Including your terms gives you a stronger negotiation position.
As a downside, you may not receive bids from excellent providers who do not agree with your payment terms.
#6 Project deadlines and milestones
Give potential suppliers detailed information about your timing.
Project management is doomed to failure without strict deadlines and milestone
In addition, it is also wise to include the publication date of the document itself.
If you create your first RFQ as a small or medium business, this is something you could easily forget.
#7 Evaluation and elimination criteria
On which basis, besides pricing, are you going to shortlist interesting suppliers?
Here are some ideas to get you started:
Don’t reveal your budget.
If applicable, mention required certifications and experience.
You can ask for a specific number of references for a similar project.
Not complying with your RFQ requirements can be a good reason to eliminate suppliers.
#8 Quotation requirements
Make sure all suppliers understand what you expect to receive.
Deadline for the submission.
How does the quotation need to be delivered? Email, post…
Do you want a total price or does the quotation need to contain subtotals?
#9 Terms and conditions
You can best refer with a link to your general terms and conditions and add some specific project related terms in your RFQ.
This gives you the power to override, in advance, the terms and conditions of suppliers.
If they, for instance, have a default expiration date of 30 days for quotations, you can increase them here. If the supplier doesn’t agree, they will not respond or you can eliminate them on this basis.
RFQ is not a power game to feel like a king
But if you want your project to succeed in due time and within your budget, you need to define the ideal circumstances to execute the project.
#10 Contact details
Suppliers may want to contact you with additional questions. It’s in your own interest to reveal the contact information of the project manager.
The downside is that some people will try to find a shortcut and get the project assigned to them in different ways you have described in your RFQ.
A smart way to discourage people from abusing contact information is to define when, how and why suppliers can contact you.
If you want to play it safe, mention in your selection criteria that inappropriate spam behaviour could lead to elimination.
The above 10 elements of an effective request for a quote give you a solid foundation for managing your project(s).
How you pour all of this into a document is another thing.
2 examples of RFQs + blank template
You can download the RFQ examples as a Word document. No need to fill in your email, just click on the button.
RFQ example small construction project
Download the RFQ sample for a small renovation project. You can use it as a basis or inspiration for your own construction building business.
RFQ example marketing project
You want to boost your marketing and know exactly what services you are looking for, but you have not selected a provider. In that case you can best download this RFQ example.
This blank Word template contains an ideal outline with all the elements of a request for a quotation. Fill in the fields and you are ready to publish or send out your first RFQ.
Project management is a lot more than finding the best supplier or subcontractor for the right price. Although RFQs are powerful, sometimes you need another type of document.
You don’t understand what you need. Use an RFI.
The project is too complicated. Use an RFP.
What is the difference between RFI and RFQ?
RFI (Request for Information) and RFQ (Request for Quotation) are both steps of the procurement process. Gathering information is more generic and precedes the step of asking for a price.
Simply put: before your customers (or you) ask how much something costs, you want to find out if a product or service fits your needs.
Let’s illustrate this with an example.
You run a web shop, but it is not performing well.
You have heard that Search Engine Optimisation and Search Engine Marketing could drive traffic to your site. But you do not understand the differences, options, techniques, strategies, etc.
The best you can do is to contact several digital marketing agencies or freelancers and send them a Request for Information.
You could have looked it up on the Internet, or asked it by email or on the phone, but using a more formal approach has its advantages for you.
When you have collected the answers to your RFI, you
have a better understanding of what the services or products entail.
have a better background to make an informed decision: which service fits your needs best?
did not waste your time researching or assuming you understood the details of a service or product.
have a clear idea about the responsiveness and professionalism of different providers. If they ignore your RFI, deliver it late, or cannot clearly explain to you what they do, you have saved yourself a load of troubles later down the road.
If you like the responses to your RFI, you can go a step further and contact the list of selected providers. Ask them how much the specific services (or products) will cost. In that case, an RFQ is the fastest way to find your answer.
What is the difference between RFP and RFQ?
While the main purpose of the RFQ (Request for Quotation) is to receive a price offer for a specific product or service a business or organisation wants, the RFP (Request for Proposal) is a more detailed description of more complex projects.
Simply put: if you know exactly what you want, a price and some answers to a couple of questions will help you make the best decision. (RFQ)
For complicated projects, give as much detailed information as possible about selection criteria, methodology, values, etc. (RFP)
In following situations, an RFP makes more sense than an RFQ:
Large building projects for governments, businesses or enterprises (schools, offices, factories,...)
IT projects for governments, businesses or enterprises (hardware, software, maintenance, training, support…)
Wrapping it up: RFQ project management for small businesses and freelancers
Although an RFQ is something typical of big organisations, you can easily implement it in your small, medium or freelance business.
Instead of wondering what to include in your RFQ, you can download an RFQ example, or blank template, and adapt it to your needs.
This way, you will be sure that you mention the 10 key elements of a request for a quotation.
You can send them out or publish them.
Or you can offer them to your leads or customers to gather vital information for your own quotations.
When you want to bid on extensive projects, or level up your game with corporate clients, governments or organisations, understand what is expected from your quotation.
We hope this information about the importance of an RFQ to your project management will help you grow your small, medium or even freelance business.
If you want to make your project management even easier, why not give CoManage a try?