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The Different Types of Requests For Quotation or RFQs

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Different Types of Requests For Quotation or RFQs

A request for quotation may be presented in a few different ways. Each type of RFQ has pros and cons.
RFQ types:

Open bid
An open bid is when responses are visible to all qualified vendors. Bids are opened during the submission period allowing vendors to see one another’s pricing. Suppliers can alter and update submitted bids until the bid deadline.
Pro: Pricing visibility may encourage more competitive pricing, driving costs down
Con: Open pricing can backfire and lead to price-fixing among vendors

Sealed bid
A sealed bid is when an RFQ is open to all qualified bidders but the responses are opened only after the submission deadline has passed. Sealed bids are common in public and government procurement projects.
Pro: May help reduce the risk of fraud and provide vendor selection transparency
Con: Vendors may not be as motivated to provide their very best pricing

Invited bid
An invited bid is when only specific vendors receive the RFQ. They are used with both open and sealed bids.
Pro: Issuing the RFQ to previously used and trusted vendors can speed the selection and contracting process
Con: Competition is more limited and the buyer may miss out on cost savings offered by new vendors that are unknown to them

Reverse auction
A reverse auction asks vendors to supply their lowest offer and the cost decreases as the auction goes on. The reverse auction may be used as a secondary step if an RFQ is issued, but no vendor meets the price target.
Pro: It is a fast, competitive, internet-based process and the lowest offer automatically wins
Con: The contract is awarded automatically based on the lowest price, so other important factors may not be considered

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