Request for Quote: Definition and How Businesses Use RFQs

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Will Kenton
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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
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Updated May 21, 2024
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Fact checked by Vikki Velasquez
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Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.
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Request for Quote Request for Quote

Investopedia / Laura Porter

What Is a Request for Quote (RFQ)?

A request for quote (RFQ), also known as an invitation for bid (IFB), is a process in which a company solicits select suppliers and contractors to submit price quotes and bids for the chance to fulfill certain tasks or projects. The RFQ process is especially important to businesses that need a consistent supply of a specific number of standard products. Companies may send RFQs alone or before a request for proposal (RFP). 

How Requests for a Quote Work

An RFQ is usually the first step in submitting a request for proposal (RFP). These two documents are similar as they provide details of the project or services required, but RFQs generally ask for a more comprehensive price quote. Also, businesses usually design RFQs for generic products in which the quantity needed is known, and RFPs are for unique, niche projects where quantities and specifications are unknown.

Key Takeaways

  • A request for a quote (RFQ) is a business process in which a business solicits quotes from select suppliers and contractors for a specific task or project.
  • An RFQ can be sent alone or in tandem with a request for proposal (RFP).
  • A business generally sends an RFQ when the quantity for a standard product is known and needs are ongoing.
  • RFQs do not generate unsolicited bids and quotes as businesses target specific vendors and contractors.

In addition to pricing, RFQs may include details such as payment terms, factors that could influence a company's bid selection, submission deadline, and the like. A government agency that wants to buy 500 computers with a specific hard drive size and processing speed, for example, would send an RFQ to several vendors as prospective bidders.

Because the RFQ format is uniform within a given company, when the RFQs come back with price quotes, the soliciting company may compare them easily. Typically, an RFQ process consists of four sections: the preparation phase, the processing phase, the awarding phase, and the closing phase. The company generally will award the contract to the vendor that meets the minimum qualifying criteria and presents the lowest bid.

Special Considerations

RFQs are not public announcements. Because the soliciting company sends RFQs only to businesses that it trusts, it does not need to prepare lengthy procurement documentation. Also, unlike a public solicitation, a company can get back only the number of bids that it requested, which also saves time.

Using an RFQ reduces the amount of time needed to procure goods or services. It also offers a degree of security as a company will receive bids only from vendors it prefers. On the other hand, because RFQs reduce the amount of competition, a company may miss receiving the lowest-available price or learning about new high-quality vendors.

When a company receives a quote in response to an RFQ, it is not an offer nor a binding contract. The solicitor will offer the job to its chosen vendor by sending it a purchase order, which, in effect, is a contract specifying the terms and conditions of the work. When a vendor accepts and signs the purchase order, the contract begins.