What is RFQ in procurement?
Once a procurement team approves a Purchase Requisition, they move on to find a suitable vendor to raise the Purchase Order to. For this purpose, they require the vendors to state their prices. Sophisticated procurement software can convert the PR to RFQ with just a click.
An RFQ refers to a Request for Quote and is also known as IFP - Invitation for Bids. Procurement teams send these to their preferred suppliers so that they submit the price quotes and bids. RFQs provide details of the product or service required and specify the quantity needed. As the approached vendors submit the bid, the company compares them and generally accepts the one that offers the lowest price and meets the necessary criteria.
RFQs are not contracts. Contracts are only generated as a company opens a Purchase Order to the selected supplier. Requests for Quotes are highly specific in nature, so companies use them only when they know exactly what they are looking for, how much their budget is, and what suppliers they can send the invitations to. They are not to be confused with Requests for Information (RFIs) or Requests for Proposal (RFPs).