Commercial real estate often necessitates the procurement of outside vendors for construction, architecture, engineering, and more. However, the process of finding the right vendor can often be a daunting one. Using a request for qualifications (RFQ), though, streamlines the process.
What Is a Request for Qualifications (RFQ)?
A request for qualifications (RFQ) is the first stage in the procurement process and happens before your company enters into any contracts. It’s a document asking potential vendors or suppliers to provide details on their background and experience in supplying a good or service. Buyers use requests for qualifications so that they can get a detailed understanding of a supplier or vendor’s experience and qualifications before they decide to use them.
The RFQ “is, in essence, asking for a resumé from each service provider,” said Michael Clarke, the founder of Pulled, a digital web platform that allows commercial property owners to get advice from experts and find service providers for their project needs. Obtaining an RFQ is essentially a screening step for buyers to find qualified vendors.
An RFQ does not include price quotes and payment terms. Those details are instead included in a request for quote or quotation, which is a separate document.
RFQs are mainly used for construction projects, engineering, architecture, and other services applicable to real estate, especially commercial real estate. Governments also use RFQs quite often when they’re looking to hire a company for construction or engineering projects.
Benefits of RFQs: Should You Include this Step?
For those seeking out vendors or suppliers, an RFQ is a good way to screen the businesses first. Asking vendors to submit an RFQ will ensure that you’re selecting the best and most qualified vendor for your project. You’ll be able to get an idea of what experience they have and whether they’ve worked on a project similar to yours in the past.
“The biggest benefit,” said Clarke, “is that you receive much more information around the provider and resources available to help make more informed decisions regarding the scope and capability to complete a project without major challenges.”
If you plan to also request RFPs, getting the RFQs first will help you narrow down your choices so that you only need to request RFPs from those who meet your needs. And as a result, you can ask for shorter, more focused RFPs, since you already have information about their qualifications from the RFQ.
Another benefit of RFQs is that you can keep the vendor information on file for future projects. If one particular vendor isn’t suited for this project, you might find that another project comes along later on that they would be perfect for. If you already have the RFQs on file, you won’t need to complete that process again, thereby making your next vendor procurement process simpler and more efficient.
How to Write a Request for Qualifications
1. Outline Your Goals
The first step for creating a request for qualifications is to outline your goals for the project, considering the outcome that would make the project a success, said Clarke. For commercial real estate, if there are other investors in your project, it’s also a good idea to get their feedback to ensure that everyone’s expectations are in line and are being met.
Some questions to answer as you outline your goals include:
- What are you looking to accomplish?
- What qualifications or skills do you want your vendors to have?
- Are there specific requirements for this project that only certain vendors can meet?
- What is your timeline?
- What technical skills are needed to accomplish your goals?
- How many years of experience do you want your vendors to have?
The more questions you can answer, the better, as that will make your final decision easier, and it will give vendors an idea of what information they need to provide in the RFQ.
Clarke added, “By providing a strong understanding of the project’s needs, unqualified vendors will be discouraged from responding, which will make the evaluation process easier.”
2. Create the RFQ
Now that you have your goals and requirements ready, you can get started on creating the RFQ template for vendors to fill out. Make sure to include the following information:
- Company information with contact details
- Project description
- Timeline for the project, with any due dates included
- Evaluation criteria
- Submission instructions (for instance, should the vendors email you, send a hard copy, etc.?)
- Qualification questions
- Experience requirements
- Contract terms
Clarke also suggested using an RFQ template, or RFQ management system.
3. Send the RFQ to Potential Vendors or Suppliers
Now that you’ve written everything out, you can begin to contact the vendors you’re interested in. You can look up their business information to figure out the best way to contact them, whether that be by phone or email.
“It’s best to be available to answer any questions and share information that is requested from every vendor instantly,” said Clarke. “This helps to keep the RFQ fair and transparent.”
4. Evaluate Responses
The final step in the RFQ process is for you to comb through all of the responses and make sure the vendors followed directions and filled out the RFQ completely, said Clarke. Once you’ve done that, you’ll need to evaluate each vendor or supplier’s qualifications and experience to see if they’re the right fit for your project.
You might even want to develop your own scoring system, weighing the most important qualifications to see who comes out on top. Because not every question will have straightforward yes or no answers, it’s also a good idea to discuss the RFQs with your investors or business partners so that you can all come to an agreed-upon decision.
Finally, you can choose the winner and contact the vendor or supplier that best meets the needs for your current project. And as stated above, it’s a good idea to keep the remaining RFQs on file in case they come in handy for future projects.
Click here to download a free Request for Qualifications (RFQ) template.
When to Use Requests for Qualifications
There are a number of situations in which RFQs are beneficial, helping commercial property owners select a vendor for their project. A few examples include:
Highly Specialized Projects
With projects that require less common expertise, said Clarke, RFQs are highly beneficial to “help narrow the field of vendors.” Some such projects could include difficult construction projects or specific architectural designs.
Very Large Projects
RFQs are good for “very large projects that require strong capital expenditures or tight deadlines,” said Clarke, as you want to make sure your vendors can handle a project of that size.
For example, the city of Bedford, VA put together an RFQ regarding the construction of a new 700-student middle school. For a project of that scope, the city needed to make sure all of its vendors were qualified to complete the task, so an RFQ proved highly beneficial.
Newer Goods and Services
According to Clarke, RFQs are “beneficial for goods and services that are newer in the market.” For new goods and services, there may be fewer experts, so “Essentially, a commercial property owner would want to know that the providers they are working with have the available resources and expertise to complete the project without getting stuck through the process,” said Clarke.
What’s the Difference Between an RFQ vs RFP?
There are a few key differences between these two types of requests for procurement. In contrast to an RFQ, a request for proposals (RFP) is a request for companies to submit their proposal for a project.
RFPs come into play when vendors or suppliers are competing for selection — or participating in competitive bids.
RFQs are often paired with RFPs, said Clarke.
Like an RFQ, an RFP is intended to show the most qualified vendor, but unlike an RFQ, the RFP also includes pricing so that you can choose the most qualified vendor for the best price. Typically, RFPs will include information about a company’s history and capabilities, as well as financial information. From there, governments, investors, or landowners can choose a vendor that works for their project.
When governments are using RFPs in a competitive bid, there are sometimes rules they need to abide by, often requiring them to go with the lowest price, unless there is a valid reason not to. You can check with a commercial real estate attorney to figure out your local laws and guidelines.
Procurement Requests to Know
There are so many acronyms during the procurement process that it’s easy to get confused. Here’s a short and easy list to help clarify the process for contractors and investors alike.
- Request for X (RFx) – This is a catch-all acronym that refers to the others.
- Request for Information (RFI) – If you include this step, the RFI is often the first step and can help you weed out non-expert vendors and unqualified potential suppliers, saving you time during the RFQ stage.
- Request for Qualifications (RFQ) – As we mentioned above, this document asks vendors to send in their qualifications.
- Request for Proposals (RFP) – The next step is to ask vendors to submit proposals for your project.
- Request for Quote (RFQ) – A request for quote is when you’ve narrowed down your potential vendors and you’re ready to compare them based on their proposals and costs.
- Request for Bid (RFB), Invitation for Bid (IFB) – A request for bid or invitation for bid is when you don’t need the vendor to propose ideas because you already know exactly what you need. You only need to know what it will cost.
A Request for Qualifications Is a Good Way to Screen Vendors
If you’re looking to hire vendors for a commercial real estate project, it’s generally a good idea to use a request for qualifications, as it will help you narrow your options and find the vendor that’s the best fit for your specific project.