RFQ template and how to level supplier bids so you compare like with like

The lowest quote is rarely the lowest cost. Suppliers quote different quantities, Incoterms, payment terms, tooling treatments and scopes, so three bids arrive that look comparable and are not. A good RFQ (request for quotation) prevents that by asking every bidder the same questions in the same format. Bid leveling then converts the answers into a common basis before you decide.

This guide gives you an RFQ structure you can copy, a leveling method, and a worked numerical example. General business guidance; adapt it to your own contract terms and consult counsel for legal language.

What goes in an RFQ

1. Company and contact details, and the response deadline. Give a firm date and time with a time zone, and a single contact for questions. Share all Q&A answers with all bidders.
2. Item description and specification. Drawing number and revision, material and grade, tolerances, finish, surface treatment, standards, and applicable certifications. Attach the drawings or a spec sheet. Ambiguity here becomes price variance later.
3. Quantities. Annual volume, order (release) quantity, and price breaks at several tiers (for example 500, 1,000, 5,000 and annual volume). Asking for tiers shows you the cost curve.
4. Delivery. Destination, required date or lead time, and the Incoterm and named place you want the price quoted in. Ask for the quote in the same Incoterm from every supplier, and ask them to itemize freight separately where they include it.
5. Packaging and labeling. Unit, inner and master carton requirements, pallet configuration, and any barcode or labeling requirement.
6. Tooling and one-time costs. Ask for tooling, fixtures, first-article and sample costs as separate lines, with who owns the tooling and what happens to it if you leave.
7. Quality requirements. Inspection plan, acceptable quality level or defect limit, certificates of conformance, traceability, and the corrective action process.
8. Commercial terms. Payment terms requested, price validity period, currency, and how price adjustments are handled for raw material or exchange rate changes.
9. Supplier information. Legal entity name, address, capacity, years producing this type of part, references, and whether the quote is from the manufacturer or a trading company.
10. Response format. A table for prices so answers line up: unit price at each quantity tier, lead time, MOQ, tooling, payment terms. Ask for a written statement of any exceptions to your specification.

Send it to three to five qualified suppliers. Fewer than three gives you no comparison, and more than five costs you more evaluation time than the extra bids are worth. Verify unfamiliar suppliers first (see the supplier verification guide).

What bid leveling is

Leveling means adjusting each bid to the same scope, the same delivery point and the same terms so the numbers can be compared. The steps:

1. Confirm scope. Did each bidder quote the same specification, material, finish, packaging and quantity? Note exclusions. If a bidder left out a finish or packaging, add an estimated cost from the other bids.
2. Normalize the Incoterm. Convert every bid to the same basis, usually cost delivered to your dock. Add freight, insurance, duty and fees to the FOB bids, and remove freight from CIF or DDP prices where needed to see the underlying price (see the Incoterms guide).
3. Amortize one-time costs. Divide tooling and setup by the units over which you expect to use them, for example the expected volume over the tooling's life.
4. Adjust for payment terms. Net 60 is worth more than net 30, and a 50 percent deposit costs you the interest on that cash. Convert each to a cost using your cost of capital.
5. Adjust for quality and risk. Use expected defect rates, inspection costs, transit time and inventory you must hold. A supplier with a longer lead time makes you carry more safety stock.
6. Compare the total. Landed cost per unit, plus one-time and risk adjustments, gives the total cost of ownership per unit. Then score the qualitative factors.

Worked example: three bids for 10,000 units a year

All figures are illustrative placeholders. The goal is to show how the ranking changes after leveling.

Line (per unit unless noted)	Supplier A (overseas, FOB)	Supplier B (overseas, CIF)	Supplier C (domestic, delivered)
Quoted unit price	$5.00	$5.30	$6.40
Freight and insurance (A: added; B: removed for duty base but still a cost)	+$0.35	included ($0.30 of the price)	included
Duty, assumed 5% of goods value	+$0.25 (on $5.00)	+$0.25 (on $5.00 after removing $0.30)	$0.00
Brokerage, fees, drayage (placeholder)	+$0.15	+$0.15	$0.00
Tooling amortized ($6,000 over 20,000 units)	$0.00 (supplier's)	+$0.30	$0.00
Cost of money for payment terms (placeholder)	+$0.12 (30% deposit, 70% before shipment)	+$0.05 (net 30 from shipment)	+$0.02 (net 45)
Extra safety stock and inspection (placeholder)	+$0.10	+$0.10	$0.00
Total cost per unit	$5.97	$6.15	$6.42

Read the second row for B carefully: its $5.30 includes $0.30 of freight and insurance, so the underlying goods price is $5.00, the duty base is $5.00, and the $0.30 of freight is already in the quote. B's total is therefore $5.30 + $0.25 duty + $0.15 fees + $0.30 tooling + $0.05 money cost + $0.10 stock/inspection = $6.15. For A: $5.00 + $0.35 + $0.25 + $0.15 + $0.12 + $0.10 = $5.97.

A looks cheapest, and it still is after leveling, but the gap to C falls from $1.40 on the quotes to $0.45 on total cost. If A's quality risk or a tariff change would add more than $0.45 per unit, C wins. The point of leveling is not to hand you a winner; it is to show what you would have to believe for each option to win.

Adding a scoring matrix

After price, score each supplier on factors that do not reduce to dollars: quality system and history, capacity to grow, communication, financial stability, geographic and tariff risk, and IP protection. Use weights that reflect your priorities, for example 50 percent total cost, 20 percent quality, 15 percent delivery and capacity, 15 percent risk. Keep the written scoring in the file, so the decision is defensible later.

Common leveling mistakes

• Comparing unit prices at different quantity tiers. Compare at the same volume, or plot each bidder's curve.
• Forgetting duty and fees on overseas bids. Or using a flat guess instead of the actual tariff code and current trade-action duties.
• Ignoring tooling ownership. Cheap unit price with the supplier owning the tool can lock you in.
• Using price validity that has expired. Ask how long the quote holds and what triggers a change.
• Skipping the debrief. Tell each bidder the outcome and, where appropriate, where they missed. It keeps future bids sharp.

Reviewed September 21, 2026. Figures are illustrative; use actual quotes, tariff codes and your own cost of capital.

Frequently asked questions

What should an RFQ include?

An RFQ should include the response deadline, a full specification with drawings and revision, quantities and price-break tiers, the delivery point and Incoterm, packaging, tooling and one-time costs, quality requirements, commercial terms such as payment and price validity, supplier information, and a required response format so bids can be compared.

What is bid leveling?

Bid leveling is adjusting each supplier's quote to the same scope, delivery point, quantity and terms so the bids are comparable. It usually means converting quotes to a landed cost per unit and including amortized tooling, payment-terms cost and quality or inventory adjustments.

How many suppliers should I send an RFQ to?

Three to five qualified suppliers is a practical range. Fewer than three limits comparison, and many more increases evaluation effort without much benefit.

Is the lowest bid the best bid?

Not necessarily. Freight, duty, tooling, payment terms, quality and lead time can change the ranking. Level the bids to a total cost per unit and score non-price factors before deciding.