A Request for Quote or RFQ is a standard approach to procurement when you need providers to enter into a bidding procedure for the merchandise or services that you need to buy. It involves sending all interested providers a specification of what you need and then comparing the estimates that you get based on factors such as cost, delivery and quality. The more comprehensive the specification, the easier it is to compare the various quotes. The issue with this is that it involves substantial time and therefore cost for both parties and limits what providers can do to suggest innovation. Ultimately, you might realize that some suppliers decline to bidding if they think the investment is not worth the possible reward.
The answer that many Organizations are embracing is one that some businesses have used for several years. This is to utilize a design and model approach. In this approach you decide on a provider or a few of providers to work with you on designing innovative solutions for your procurement process need and then constructing a prototype which could be examined for feasibility. One benefit of this is that it is possible to stop the process early if it seems like a plausible solution is not likely to be produced. This prevents the common problem of adhering to a full tendering process which may take weeks and just finding out in the end when all bids are submitted that a solution is not technically possible or the solution is too costly. This wastes time and money for you and your providers. When you have a prototype that Works and continues to be priced you are in a much stronger position to go to market if you desire.
Here are some of the major Advantages of this approach.
- You receive an earlier indication of the possible cost of this job than if you go to market with a traditional bidding procedure. This helps you to choose whether the finished solution will be cheap and so end the job before either party commits an excessive amount of money.
- It assists the application of Waste reduction methodologies, such as value engineering, to be implemented in the design phase instead of the more usual post-contract award stage. The end result is that you get cost savings.
The total time taken from Concept to end is shorter than the typical system of contract allowing because any dead period between different stages of the standard process are eliminated.