The RFQ process is fairly straightforward. You know what you want to buy and require a simple way to tell potential vendors what you want, what you expect from their bids, and the timeline for evaluating the responses and choosing a supplier.
You can use software to automate some of this process. SaaS (software as a service) companies or e-sourcing systems host online platforms that include questions for vendors, secure online hosting where vendors can submit responses and upload overall company profiles, submission tracking and scoring, and supplier notifications.
Whether you want to invest in software or will be managing the process internally, RFQs follow the same process.
Invest the time in this phase of the project to save time later. Good preparation includes deciding exactly what you want in the product and the process. Setting up clear requirements from the beginning allows you to quickly review bids and award a contract. Work with project managers and other internal stakeholders to make sure you’ve identified all the necessary requirements and have established the best RFQ process. Your RFQ should include the following:
- Specific parts or products, with detailed descriptions
- Delivery requirements
- Product quantity
- Payment terms
- Selection criteria
- RFQ timeline and review process
- Terms and conditions
- Submission requirements
At this point, decide who should respond to the RFQ. Will it be an open bid or will you invite pre-selected vendors? Will you seal the bids until the deadline or open and reveal bids during the process? Depending on the specific product and budget, you may want to limit this process to a few vendors. Or, if you are trying to discover the best price for the product, you may open the RFQ to a wider audience.
Identify how much risk you are willing to assume with the chosen vendor. As part of the preparation phase, acknowledge any monetary risk, or even changes to quality or delivery. Internal stakeholders can help with the risk assessment.
Include RFQ documents such as a draft contract with terms and conditions, and a pricing template. To help with process, create a form with fields for price per unit, quantity, and total price that vendors complete as part of their RFQ response. This information will let you easily compare bids. Here’s an example of a pricing template for vendors to complete and include with their response.
Send the RFQ to the vendors (either ones you have pre-selected or found through public channels) and be sure to allow enough time for them to respond with a thoughtful quote. During this phase, be prepared to answer questions about the RFQ and share the answers with all the vendors. You may find it helpful to track the queries as you answer them to help with subsequent projects or pricing.
It’s essential during this time to treat everyone equally — this will ensure that you conduct a transparent and fair bidding process. Don’t provide more information to some vendors than others and stick to any confidentiality requirements spelled out in the RFQ as you receive the bids.
Keep track of the responses as they come in and acknowledge their receipt. Be sure to notify the selection committee of your progress, so those members will know how much time to set aside to review the bids. Depending on your process (and the size of the contract) you may choose to open all the bids once the deadline has passed, or to open the bids as they arrive. Put safeguards in place to ensure that, if you open the bids as they come in, you are protecting the confidentiality of each vendor’s response.
AWARDING THE CONTRACT
Once the deadline has passed for receiving bids, the reviewer or review committee can now compare the submissions based on the selection criteria. If you’ve used a template or form to collect price quotes, it should be easy to compare the bids. The winner will be the lowest price at the best terms. Based on that RFQ response, you can create a contract or purchase order to finalize the deal.
Document the winner, the process, the number of bids, and criteria in an internal memo. This information will be a valuable for the internal auditor, and will provide guidance for future projects.
The contract should be fairly easy to finalize and sign since many of the contract details were part of the RFQ process, including terms and conditions, payment, and other deliverables. There may be some negotiation still left to do such as packaging, changes in pricing levels, or delivery schedule.
Once the contract is signed, notify the other vendors that a winner has been chosen and thank them for their participation. You may want these vendors to be part of your product cycle in the future. Treat them ethically at this stage and they will be willing to invest the time in bidding on future projects.