Anybody who sells into commercial, industrial or institutional channels has to deal with Requests For Quotes. A request for quotation (abbreviated as RFQ) is how large organizations invite vendors to bid on systems, services or individual products.
For AV pros, quotations on systems and services are the most common. Additionally, what’s asked for the in RFQ typically goes beyond price or specifications, and can include derivate metrics such as change order policies, payment terms and other considerations. And typically, when an RFQ is put out, suppliers have a specified deadline within which to submit their quotes in order to be considered.
On the surface, RFQs are a straightforward concept. However, in the real world, there are always factors that complicate and confound the process.
Right off the bat, the RFQ is dependent upon the people at the organization who’ve written out the RFQ, and their understanding of what they require.
Human nature being what it is, that understanding can vary widely. Even among industrial clients who have a strong technical background there can be a gulf between what the client thinks they want, and what they actually need for the application they’re seeking a solution for.
In a more open, less regimented interaction between vendor and prospect, there’s a needs-assessment: you, the vendor, asking specific questions and asking still more questions based on the answers received, in order to flesh out a more clear picture of what an appropriate solution looks like.
The challenge here is that the RFQ process, by its nature, hamstrings the vendor’s ability to conduct a needs-assessment. There’s the potential to quote out on something that’s wildly inappropriate for the prospective buyer.
It certainly doesn’t help that sometimes prospects issue an RFQ when what they really ought to have issues was a Request for Tender (RFT) or Request for Information (RFI).
Just a brief digression is in order here. A Request For Tender differs from an RFQ in that vendors are submitting a proposal for products or services as specified by the prospect, but the negotiations over cost will occur at a later time. It’s often the case with government procurement that RFTs are mandated by law in order to avoid the perception of favoritism or conflict of interest.
Requests For Information (RFI) are entirely different from RFQ or RFP. In this case, the purpose of releasing an RFI is to collect information on what the vendor is capable of offering.
This information is gathered by the people in charge of procurement for a few reasons. In some cases it will be considered for future reference when issuing RFQs. In others, it’s a more open-ended process, seeking insight from vendors about what possible applications might be in the prospect’s interests. You can think of it as the prospect conducting their own needs-assessment, and asking vendors for their support with the process.
Getting back on track here, relating back to what I said about the RFQ process lacking proper needs assessment, the most common complaint vendors have about RFQ is that putting a quote together can be time consuming, require not only technical and sales skills, but also require a crystal ball, as you try to guess what the prospect is actually fishing for.
To add insult to injury, that time and effort to assemble a quote isn’t guaranteed to pay off. Whether an RFQ leads to further discussion between vendor and prospect, or the prospect simply receives competing quotes and puts up a wall with no further communication depends entirely on the prospect organization’s prevailing ethos.
Trying to open up discussion with procurement managers for whom radio silence is Standard Operating Procedure is a particular exercise in frustration.
Further, it’s not at all uncommon for the RFQ process to be more or less a charade: an incumbent supplier has the business locked down, but internal rules require the procurement managers to float out an RFQ to interested vendors purely to maintain the appearance of fair play.
In instances like that, the temptation is there to respond to an RFQ with a ludicrous low-ball quotation. The sentiment there is, “I’m not going to win this business, but they’re going to go back to their favored vendor and grind them down for a better deal that erodes my competitor’s margins.”
Is it petty? Absolutely. Does it happen? Definitely.
Yet as much as RFQs are a lot of effort for uncertain return, you’ve got a zero percent chance of winning the business if you don’t participate.
In the next installment I’ll segue from complaining about RFQs to offering solutions to improve your chances of winning the bid.