An RFQ Checklist for Greater Efficiency and Better Margins

A well-prepared request for quotation eases anxiety and goes a long way toward minimizing project delays and cost overruns. Here’s the scope

By Tony L. Callahan | March 28, 2019
request for quotation_materials supplier or trade partner RFQ_RFQ checklist
Not only is an RFQ essential to the bid process, it will also minimize project delays and cost overruns once the project is underway. (Photo: andranik123 / stock.adobe.com)

Issuing a request for quotation (RFQ) to a materials supplier or trade partner is essential to the bid process. A comprehensive, thoughtful RFQ helps minimize delays, change orders, rework, budget discrepancies, and other inefficiencies once the job is underway. 

Unfortunately, an ill-prepared RFQ often requires a lot of back and forth between the builder and a supplier or trade partner to align expectations and policies. Spending the necessary time (at most, a few extra hours) creating a detailed RFQ pays dividends from the start of a project to the end.

For an RFQ to work, you need to provide accurate and complete information about everything that affects quality, budget, schedule, and unforeseen (but inevitable) changes during construction, not to mention precise materials take-offs and cost estimates. Failing to be diligent will earn you a reputation that will cause suppliers and trades to stop bidding on your jobs (especially in a competitive labor market) or at least to increase their margins to cover additional costs attributed to uncertainties and unknowns about the project. 

Breaking It Down

A baseline RFQ consists of architectural plans, structural plans, a precise grading plan, specifications, scopes of work, and the bid template. 

It also should include a statement of intent, your company bio, your forecast, the RFQ schedule with deadlines, contact list, procedure for RFP (request for proposal) clarifications, right to accept or reject, proposal costs, a confidentiality clause, regulatory and safety compliance information, and the contract award criteria. 

The best RFQs also request references, price history, extras, raw material cost drivers, a record of the last three years of sales/units closed, adopted technology, supply chain partners, pending or threatened lawsuits, key performance indicators, and a notice of intent to respond. Let’s take a closer look:

Architectural plans encompass the floor plans, all elevations, construction details, and, if possible, product schedules, such as windows and doors, for bidding. Make sure the information is accurate, to minimize expensive change orders, which typically come with much higher cost margins. A complete set of plans helps ensure a complete quote.

Structural plans are the engineered set of plans—equally essential for suppliers and trades to properly bid the work.

Precise grading plans help avoid unplanned extra costs for particularly tricky lots. Include a precise grading plan and ask trades to call out any lot-specific expenses in their bids. 

Specifications list the manufacturers and/or materials that must be used for the project, ideally by name, model, or series number. Also, to prevent surprises later, include any other details that leave no doubt about your requirements. Use “or equivalent” clauses cautiously, and always require them to be bid in detail.

Scopes of work list the activities you want the supplier or trade to bid. The “scope” often includes information about minimum required safety gear, required levels of finish, and who is responsible for removing debris, among other details for the project and each trade. The scope also should state that the trade is responsible for installing materials in accordance with manufacturer installation instructions and that the materials must be installed to meet all code requirements. 

A good scope of work is a builder’s best defense against unplanned extra purchase order requests. If it doesn’t say something should be included, there’s a good chance it won’t.

Bid templates are usually spreadsheets that provide a column for a supplier or trade to enter a price for each item you want quoted. The format makes it easier for them to complete and easier for you to analyze quotes from multiple bidders. 

Statement of intent is a summary statement about your expectations, such as “to identify a quality- and safety-conscious electrical contractor that can meet our schedule requirement at a cost that is within our budget for XYZ community.”

Company bio describes your company, including how long you have been in business, how many homes you close per year, what markets you serve, your target buyers, your core values, etc. It’s your opportunity to share information about your company and inspire suppliers and trades to work with you.

Forecast provides details about project size, phase release schedule, and length of build-out. Those forecasts may well determine which companies bid the work; larger trades may be attracted to small-scale jobs they can complete quickly, while smaller trades may bid a large project with reasonable phases and a longer build-out.

RFQ schedules outline the timelines for the entire bidding process, such as the RFQ’s issue date and deadlines for the intent to bid, clarification queries, and bid submittal, and when reference checks will be completed, supplier/trade site visits will occur, the contract will be awarded, and the work will begin. Be sure to allow yourself time in the schedule to properly analyze and compare bids.

Contact list includes names, addresses, phone numbers, and email addresses for people within your organization who would be points of contact for the RFQ, such as the safety manager, customer care manager, construction manager, purchasing manager, accounting manager, and attorney.

 

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Procedure for RFQ clarifications defines how suppliers and trades follow up with questions regarding the RFQ. Make it easy but consistent, such as providing a dedicated email address or single point of contact. And if one bidder asks for a clarification, share it with others to ensure a fair bid process.

Right to accept or reject is a statement reserving your right to reject any or all proposals or any portion thereof for any reason (including no reason) at any point prior to the written execution of the contract. 

Proposal cost waiver reminds bidders you will not reimburse any costs they incur from preparing their bids. 

Confidentiality clause protects information about your company and the project from getting into the hands of your competitors. On the flip side, keep each bid confidential, even if a supplier or trade asks for details about the winning bid. 

Regulatory and safety compliance statement lets bidders know that by submitting a bid, they are agreeing to abide by all regulatory and safety requirements for the job, including federal, state, and local government agencies, code authorities, and your company’s safety requirements.

Contract language or a copy of your standard supplier/trade contract lets bidders know what to expect and whether they can agree to your general terms.

Award criteria offers a glimpse into how and why you will ultimately award the contract. If you prequalify the capabilities of your bidders before issuing the RFQ, the lowest bid is probably OK; if not, consider another qualifier to balance cost and capabilities.

References should include at least three builders for which a supplier or trade has performed work similar to what’s specified in your RFQ. 

When you call references, ask about the supplier’s or trade’s reliability, accountability, and accuracy in bidding and on the job, specifically any errors the bidder made in the past and how they were made right. Don’t expect perfection, but do expect suppliers and trades to own their mistakes and correct them at their expense and in a reasonable amount of time that doesn’t disrupt the schedule or workflow. It’s certainly better to learn that a trade is unreliable or irresponsible from a reference than from first-hand experience.

Price history specifies how many price increases a supplier or trade has requested from a builder client in the last two years, helping set expectations for your project. A lowball bidder may be angling for price increases once it has earned the contract, which is inefficient for everyone involved.

Extras are similar to price history, but focus on what additional items the bidder has requested for similar work in the past—and perhaps identifying items in your bid that may have to be accommodated during the job. It also indicates how the supplier or trade approaches extras—and how you should. Some give builders leeway on unspecified extras, while others will nickel-and-dime you for the smallest unforeseen expenses. 

Raw material cost drivers indicate a supplier’s or trade’s key cost drivers, such as available labor for a particular skill, seasonal changes, or upstream issues, which may lead to requests for additional money during the job. Ask how often those drivers have come into play.

With that, obtain benchmarks and independent indexes to track construction costs, which will be useful to evaluate requests for cost increases—and to approach a supplier or trade partner to adjust their budget when you notice a cost decrease; you can’t expect them to approach you with a decrease in costs as readily as when their costs increase.

Last three-year sales/units tell you the size of the company bidding the RFQ relative to your project and whether a supplier or trade is growing or shrinking over time, and how quickly. Rapid growth is tough to manage, while abrupt downsizing is a red flag. Measured, steady growth and a track record of work similar to yours are good signs.

Adopted technology—from computer systems and programs (ideally, compatible with yours), to the use of drones and cameras, mobile communications, and file-sharing capability, among several other examples—shows you how a supplier or trade uses technology to run their business operations and successfully complete jobs. It also can indicate a sustainable business model capable of growing. 

Supply chain identifies where trades buy materials and their means to obtain, warehouse, deliver, and stage them on the jobsite. Also ask trades if they competitively bid their materials or simply buy from the same suppliers—and whether they pass any price increases on to their builders. 

Pending or threatened lawsuits provides insight into any active, pending, or threatened litigation against or involving the supplier or trade that could affect their ability to perform—especially if they’re being sued for failure to perform or for construction defects. You certainly don’t want to engage in a lawsuit because you hired a supplier or trade with a history of not fulfilling commitments or failing to install products to code and/or manufacturers’ installation instructions. Talk about a red flag!

Key performance indicators specify how a supplier or trade measures its performance and success (or doesn’t), which says a lot about their culture and commitment to improve and to finish jobs. Remember: What gets measured gets done. Make sure that what they measure is important to you, also.

Notice of intent to respond lets you know early whether a supplier or trade is going to submit a bid. Set a deadline for the notice of intent to bid early enough to perhaps replace those indicating they won’t bid with another bidder. 

Building a proper RFQ is essential to minimizing delays and change orders. It facilitates supplier/trade efficiencies by providing them all of the information they need to bid your work. Follow this checklist to build a proper RFQ for your next project and to set yourself apart in the eyes of suppliers and trades as a builder that truly values the bidding process.

  • This story originally appeared in the April 2019 issue of Professional Builder magazine. See the print version of this article here.

 

Tony L. Callahan, CPSM, CSCP, has worked in the home building industry for nearly two decades. 

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