[NAME, COMPANY AND ADDRESS, ex.
John Smith
XYZ Inc.
1234 First Street
Suite 567
Anycity, Anystate  85245]

Dear [NAME, ex. John Smith], 

I was pleased to receive and examine your proposal of [DATE, ex. June 10].  Thank you for your interest in [NATURE OF PROPOSAL, ex. rendering cleaning services at our construction sites].

I regret, however, that we are unable to accept your proposal. [STATE REASON(S), ex. Although I find the services outlined in your proposal to be of high quality, we are currently under two-year contract with Jerry's Disposal for similar services.]  {IF THERE IS A POSSIBILITY OF DOING BUSINESS IN THE FUTURE, MENTION SO, ex. After the contract expires, however, we will be pleased to discuss the possibility of doing business in the future.} 

Thanks again for your proposal.  I do appreciate your time and effort and wish you the best in the future.

Sincerely, 

[YOUR NAME, ex. Jill Jones]