Procurement Glossary: 30 Terms Every Buyer Should Know

Procurement has a habit of hiding simple ideas behind abbreviations. Here are the terms that actually come up when comparing supplier quotations — defined in plain English, with the practical detail that matters when money is on the line.

Sourcing documents

RFQ — Request for Quotation

What you send suppliers: the items, quantities, specs and commercial conditions you want priced. A tight RFQ is the cheapest quality-control you'll ever buy — vague RFQs come back as incomparable quotes.

RFP — Request for Proposal

Like an RFQ but for solutions rather than items: suppliers propose how as well as how much. Evaluated on approach and capability, not just price.

BOQ — Bill of Quantities

The construction tender's master item list: works and materials with units and quantities. In a comparison, the BOQ is the anchor every vendor's lines map onto.

BOM — Bill of Materials

Manufacturing's equivalent of the BOQ: the parts list for a product, usually anchored by part numbers rather than work descriptions.

Quotation / Offer

The supplier's priced response — legally, an offer you can accept within its validity period. Everything on it (price, validity, terms) is negotiable until accepted.

Comparing bids

Bid tabulation (comparison sheet)

One table, all vendors: each master item on a row, each vendor's unit rate and total in columns, plus summary rows (subtotals, tax, grand total, savings). The core deliverable of any quotation comparison — see our step-by-step guide or a live example.

Like-for-like (apples-to-apples) comparison

A comparison where every number sits on the same basis: same items, quantities, units, currency and tax treatment. Anything else is decoration, not comparison.

Normalisation

The work that makes like-for-like true: mapping item descriptions to one master list, converting units and currencies, aligning tax bases.

Weighted scoring / decision matrix

Score each vendor 0–100 per criterion (price, delivery, payment, scope, quality), multiply by weights, sum, rank. The standard way to defend a decision that isn't "cheapest wins" — full method in our weighted scoring guide.

Scope completeness

The share of requested items a vendor actually quoted. A vendor missing 10% of the scope isn't 10% cheaper — you'll buy the gap elsewhere, usually at worse prices.

Offer validity

How long the quoted price stands (e.g. "valid 30 days"). Short validity on a long evaluation is a risk: the price may be gone before you can award.

Lowest bidder / L1

The vendor with the lowest comparable total. "Comparable" is doing the heavy lifting — before normalisation, the apparent L1 is frequently wrong.

Money and terms

Ex-VAT vs tax-inclusive

Whether a price contains tax. Rank vendors ex-tax; budget cash tax-inclusive; never mix the two in one column.

Advance payment

Money paid before delivery (e.g. "50% advance"). It's supplier financing provided by you — and your exposure if the supplier fails. Lower advance = better terms, other things equal.

Retention

A slice of payment (often 5–10%) held back until warranty or acceptance — protection against defects discovered after delivery.

Payment milestones

Payments tied to events (drawings approved, FAT passed, delivery, commissioning) rather than dates — aligns the supplier's cash flow with your risk curve.

Exchange-rate (FX) risk

The chance a foreign-currency price changes in your money between award and payment. How to handle it: our multi-currency guide.

Price escalation

A contract clause letting the price rise with an index (metals, energy, CPI). Watch for it in long-delivery quotes: the number on the quote may be a floor.

Delivery and logistics

Incoterms

Standardised trade terms defining who pays and who bears risk on each leg of delivery. The ones you'll meet most:

Never compare an EXW quote against a DDP quote on price alone — they're prices for different products.

Landed cost

Goods price + freight + insurance + customs duty + clearance fees + inland transport = what the goods actually cost at your door. The only fair basis for comparing quotes with different Incoterms.

Customs duty & HS code

Import tax assessed on the goods' customs value (typically CIF), at a rate set by the goods' HS (Harmonized System) classification code. Wrong HS code → wrong duty → wrong landed cost.

Lead time / delivery period

Order-to-delivery duration, usually quoted as a range ("4–6 months"). Compare against the project need date, not against the other vendors only.

FAT / SAT

Factory / Site Acceptance Test — inspection gates before shipping and after installation. Common payment-milestone anchors for equipment.

Suppliers and quality

OEM

Original Equipment Manufacturer — the company that actually makes the product, as opposed to a trader or assembler reselling it.

Tier-1 brand

Informal shorthand for the top set of global manufacturers in a category. In a comparison, brand tier is a scoring criterion, not a footnote.

Type-test certificate

Third-party proof that a product design passed the standard's full test regime. For electrical assemblies, the difference between certified and "similar to" is a real risk line.

Single-source risk

Dependence on one supplier with no practical alternative — worth flagging even when that supplier wins fairly.

Vendor prequalification

Screening suppliers (financials, references, certifications) before they may bid — moves quality control ahead of the price comparison.