The Use of Quotations

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Quotations are requested when the size of the requisition or proposed commitment exceeds a minimum dollar amount stipulated usually by policy in the organization of the bidder: for example, $500.00. This rule may not apply in Governmental purchases as they are required by law to perform and award a RFQ to the lowest responsible bidder. In some Industries, proposals may be requested with the intention of selecting a firm to negotiate or settle final prices with.

Depending on your organization, after a RFQ

RFP – What is it?

by RFP - Request for Proposal

What Is an RFP and When Should It Be Used?

A Request for Proposal (RFP) is an invitation for vendors to submit a written offer to provide services or propose a solution to a defined requirement.

An RFP is typically used when an organization has an internal need but lacks the expertise, capacity, or resources to address it internally. In such cases, the requirement must be outsourced, and issuing an RFP allows qualified vendors to propose how they would meet that need.

An effective RFP is written to elicit meaningful, competitive responses. It must clearly define the scope of work and outline expectations so vendors understand precisely what is required. The goal is to reduce ambiguity and avoid shifting unnecessary risk onto suppliers.

For example, in manufacturing, an RFP may clarify expectations around raw material buffering or finished goods inventory to meet demand. In service-based engagements, it should define expected time commitments, deliverables, and resource allocation so consultants can price and plan accurately.

An RFP differs from a Request for Quote (RFQ). An RFQ is typically used when specifications are clear and supply risk is minimal. For example: “We require 12 pairs of leather gloves; here is the part number.” In this case, vendors compete primarily on price and availability, making comparisons straightforward. An RFP, by contrast, often requires vendors to propose a solution, not simply quote a price.

A well-constructed RFP requires vendors to define their monetary and service obligations clearly. It is the Purchasing department’s responsibility to distribute the RFP to multiple qualified suppliers to encourage competitive proposals.

What Should an RFP Include?

An RFP should include a clear and detailed description of the required products or services—commonly referred to as the scope of work. It should begin by stating the purpose of the document and outlining the organization’s objectives.

More structured RFP formats may also specify how vendors should present their responses, ensuring consistency and enabling fair evaluation. Clarity is critical. Avoid excessive legal terminology within the main body of the document, as this can discourage participation. Terms and conditions can be included toward the end. While higher-risk projects may require more comprehensive contractual language, not all RFPs warrant extensive legal documentation.

Evaluating Proposals

To evaluate vendor responses fairly, many procurement departments include standardized questionnaires or response templates. These may request detailed breakdowns such as hourly rates, equipment costs, methodology, and timelines. This enables the buyer to build a technical evaluation matrix and compare vendors consistently—ensuring an “apples to apples” assessment.

Final Thoughts

To receive strong, qualified responses, clearly state your requirements and present them in a structured, easy-to-follow format. Remember, the lowest price does not automatically win the award. Contracts are typically awarded based on overall best value and what is deemed to be in the organization’s best interest.

Purchasing Glossary or Buzzwords

by Quotes GeneralTerms and Conditions

RFQ – RFP Glossary Buzzwords

Ever wonder what some of the terms used by Materials Managers and Purchasing Agents mean? Terms like RFQ, FOB, DNR , or a RFP, Vendor, Standing Order Agreement.  Although, these acronyms / terms are used frequently and recognized in the field, it is always a good idea to add them in their full context at least once or define the term on your definitions page to ensure there is no misunderstandings.  Here are a few terms commonly used in the Materials Management or procurement field:

RFQ – Request for Quote or Quotation
RFP – Request for Proposal
ITQ – Invitation to Quote
RFI – Request for Information
EOI – Expression of Interest
IFB – Invitation for Bids
ITT – Invitation to Tender
RFB – Request for Bid
LOI – Letter of Intent
LOU – Letter of Understanding
FOB – Free on Board

UTQ – Unable to Quote
DNR – Do not reorder
UTS – Unable to Supply

Standing Order – A standing order is an open ended purchase order or in essence open ended contract which grants authorization to make regular periodic shipments of a specified product. Usually an annual agreement.

Supplier – A provider of goods and services that typically bills on an invoice and has regular transactions with the Owner or Buyer.

Vendor – Another Name for a Supplier.

Compliance

  • Ensuring suppliers perform their obligations and supply goods in accordance with contracts or that services are performed as prescribed by site safety rules and regulation and certain federal, state or provincial laws.

Sample of a compliance clause in a supply agreement:

  • The goods called for in this agreement shall comply with all applicable codes, standards and/or both regulations of the governing inspection authorities at the place of use.  The Vendor shall acquire and keep in force all required permits and certificates of approval.   The Vendor shall comply with all provisions of law governing its performance under this agreement including, without limitation, Safety and Reclamation Codes,  all dangerous goods legislation and all workplace hazardous materials legislation and regulations governing the design, safety, handling, packaging, labeling, transport and the use of goods.

Due Diligence

  • Due diligence in a broad sense refers to the level of judgement, care, prudence, determination, and activity that a person would reasonably be expected to do under particular circumstances.

Force Majeure (sample clause)

  • No party hereto shall be liable for any delays in the performance of their obligation hereunder (excluding financial obligations) if any such delay or failure is due to acts of God, war, riot, sabotage, strikes, lockouts, or differences with workers, accidents, lack of water, power, gas, materials, any and all government laws or regulations, or any disabling cause beyond the reasonable control, and without the negligence of, the party invoking this clause.

Notice to the other party of any event of force majeure stating the date of the commencement thereof shall be promptly given and shall immediately be followed by a notice setting for the particulars of the event of force majeure and the expected delay.  The party so affected shall take all reasonable steps to remove the force majeure conditions and to resume, with the least possible delay, compliance with its obligations under this agreement, and shall promptly advise the other party of the date when the force majeure is ended.

Assignment (sample clause)

  • The Vendor may not assign or sublet any of its rights or obligations under the Agreement without the prior written consent of the Owner,  which consent may be arbitrarily withheld.

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