What’s the Difference Between RFQ and RFO?

difference rfq rfoAnyone who has studied or worked in Procurement for any length of time would vouch for the fact that the industry suffers from a serious lack of clarity when it comes to its terminology. Often times, two terms may be used interchangeably even though there is a subtle but significant difference between the two. A case in point is the confusion over Request For Quote (RFQ) and a *Request For Offer (RFO) — procurers and suppliers tend to mix the two up and sometimes the results can lead to miscommunication between them.

So, what is the difference between an RFO — about time you stopped using the term RFP, but more on that later — and an RFQ. 

The answers are pretty straightforward.

When to use an RFQ
An RFQ is what you issue when you choose a vendor based almost exclusively on the price he is offering. They are perfect to use when:

  1. You know exactly what you want.
  2. When what you want is basically a commodity — a standardized product that is often bought in bulk.
  3. There isn’t much—if any—service associated with the item(s) you want.
  4. You’re simply looking for the best price and are fine with ignoring less tangible factors in your choice of vendors.

So send out that RFQ—lowest bidder wins!

One small thing to keep in mind when issuing an RFQ — make sure your recipients know you’re sending out a Request For Quote and not a “Request for Qualifications,” which also goes by the acronym RFQ, but is a totally different thing.

When to use an RFO
RFOs are for when price is not the only criterion in choosing the right vendor. They apply when your organization has more complex needs such as:

  1. What you’re really looking for is a way to solve a problem—and you’re open to ideas you might not have though of on your own.
  2. What you want may include services.
  3. There may or may not be ongoing services associated with what you want—but you definitely need help getting the winning solution set up.
  4. You can’t make a decision based solely on price.

*Actually, here’s an afterthought…
If you’ve worked in procurement for any length of time, it may come as no surprise to you that the term Requests For Proposals (RFPs) isn’t particularly popular with vendors — in fact, some vendors quite clearly loathe responding to an RFP. Things are about to change. Because the RFP is on its way out — not RFP as a concept but RFP, the term. As E-Procurement solutions acquire widespread use across industries, they are also likely to change the vocabulary of procurement. And RFP is slowly giving way to RFO or the Request For Offer.

How about a quiz?
Just to make sure we’ve resolved all your confusion.  

  1. You need 200,000 rolls of 2-ply toilet paper (the soft kind) for the best possible price. Should you:
    1. Issue an RFQ
    2. Issue an RFO
    3. Go to Costco
  1. Your boss tells you he hates your email system and wants a new one ASAP. Should you:
    1. Issue an RFO
    2. Issue an RFQ
    3. Irritate everyone by issuing an RFP
  1. You’ve got about 500 fax machines floating around the company and they’re all breaking down. Should you:
    1. Issue an RFO
    2. Issue an RFQ
    3. Issue a WTF, why do we still have fax machines?

How’d you do? If you answered “a” to every question, you’re smart. If you answered “c,” you’re funny. If you answered “b”— maybe give this article another read?

What do you think?

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