Purchasing Glossary or Buzzwords

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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.

Interested in learning more or in acquiring an array of templates which cover the above terms? If you are planning to issue a RFP or RFQ, please visit our Special Offers page – RFQPro.com can help.

When to use a RFP versus a RFQ

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Using an RFP versus a RFQ:

This is a good question and one we hear often. We will try our best to provide a simple answer to help you make an informed  decision when performing your purchasing duties. This scenario surfaces when you are faced with generating a purchasing document to send to your suppliers.

Documents issued by the Purchasing group can be an RFQ (request for quote), RFI (request for information), RFP (request for proposal), or ITQ (invitation to quote), IFB (invitation for bid) or others.

A RFQ is usually used when the Owner knows exactly the type and quantity of goods it wants to buy while RFP’s ask bidders to provide a solution to a problem that could be solved in different ways.

An example of when to use a Request for Quote (RFQ) would be if you are buying 100 each Toshiba Laptop Computers c/w 2 GB ram, 100 GB HD, DVD Burner, Windows 7. You know your exact requirement and have a specification to include or issue with the request.

An RFP might be used if you were unsure as to whether you want to purchase, lease, rent  those same 100 computers with varying specifications for software and hardware requirements that may differ from PC to PC. This gives the bidders an opportunity to offer a solution to your requirement.

With the above in mind, it should be noted that evaluating a RFQ is usually easier than trying to determine an award from the results of an RFP.

Sample Letter of Intent (LOI) or Letter of Understanding (LOU)

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Letter of Intent-LOI or Letter of Understanding-LOU:

For larger contracts or big dollar supply agreements, some corporations prefer to start a relationship by issuing a letter of intent (LOI) to the successful bidder of a tender. In essence, it is an acknowledgement by both parties of their intent to carry out the offer at hand. As a buyer, you are informing the Vendor or Supplier of your intention to proceed with the commercial arrangement proposed in the bid and this is the start of the formal documentation process.

This following sample LOI can be used to get the ball rolling until formal contract documents are drawn up and executed by the involved parties.

This particular sample letter of intent or letter of understanding covers a technical supply agreement used to purchase bulk commodities with prices that might be tied to a published index or indice.

Feel free to download and use this free sample letter of intent or letter of understanding when awarding your RFP or RFQ.

Download PDF file here >>> RFQ6 – Letter of Intent

It is a little cramped as we wanted it to fit onto a single page…Note: all RFQPro.com purchased downloads include edit friendly Microsoft word templates.  If you are looking for a specific sample Letter of Intent (LOI), or LOU template we have included them in our Premium Pack and it is available for purchase by selecting the download button in the margin.