In the Firefight phase, all models within 12"of an enemy model have an opportunity to fire.
Divide the board into individual Firefights. A Firefight contains all opposing units what have a model within 12" of each other or any other enemy unit. A Firefight may thus daisy chain many units. If A is in range of B, and B is in range of C, then A B and C are all in one Firefight. You may find that you have one giant Firefight across the whole board, or you may find you have several small Firefights, each having only two units. Either is fine; we are only dividing them up for ease of resolution.
The player whose turn it is chooses the order in which to resolve each Firefight. (Again this should make no difference to the outcome; it's just courtesy.)
All shooting in the Firefight is assumed to occur simultaneously. Each player rolls To-hit for their models involved in the Firefight. Both players then allocate hits. Each player should roll To-Wound. Finally, the players roll Saves for their models. If there's any dispute over who rolls dice first, defer to the player whose turn it is. It should make no difference to the outcome anyway.
You may be able to to simplify the dice rolling by combining rolls or stages, but you should only do this if you and your opponent agree.
At the end of the Firefight phase, test Leadership for units that are eligible to Break and apply Suppression for all relevant units, friend or foe.
Geek Notes
The Firefight phase is the sharp end of the stick. In Shooting, it's hard to completely destroy an unit of Infantry. In Firefight it will be pretty easy. Any unit that wishes to advance on an objective (or enter Melee) must dare the Firefight phase. In Shooting and Movement phases, your goal should be to set up a favorable Firefight for your boys.
Let us consider a couple of scenarios, in which two otherwise equally matched forces engage in firefight. We will assume neither has any advantage in equipment or skill. They will hit on 4+s, and wound on 2+s. Each unit numbers 10 dudes with RoF 2 small arms and an RoF 10 Machinegun.
Scenario One
Red Squad moves into range of Blue Squad. Neither has any cover. Red unit gets 30 shots. They have -1 to Hit because they have moved. So they Hit on a 5+. They hit 10 times, and wound 8.33 times. Blue Squad saves 2.7 times. Blue Squad takes 5.6 or so casualties.
Blue Squad gets 30 shots too. They have no penalties to Hit. So they Hit on 4+ . That's 15 Hits and 12.5 Wounds. Red Squad is Suppressed and takes 8.3 casualties.
Moral: Don't charge into Firefight range without making preparations, you're gonna get slaughtered.
Scenario Two
Red Squad moves into range of Blue Squad. Blue Squad is Suppressed. Blue Squad is Concealed and in Soft Cover. Red unit gets 30 shots. They have -1 to Hit because they have moved and -1 to Hit because Blue Squad is Concealed.
So they Hit on a 6+. They hit 5 times, and wound 4.11 times. Blue
Squad saves on a 4+. Blue Squad takes 2.6 casualties.
Blue Squad gets 30 shots too. They have also have -2 to Hit. So they
Hit on 6+ . They hit 5 times, and wound 4.11 times. Red Squad saves on a 5+. Red Squad takes 2.74 casualties.
The result is a wash in terms of raw casualties, but Red Squad isn't Suppressed and Blue Squad is. Moreover, Blue Squad will have to test or retreat at the end of Melee
Scenario Three
Red Squad has brought along its identical twins Purple Squad and Mauve Squad. Red Squad, Purple Squad, and Mauve Squad move into range of Blue Squad. Blue Squad is Suppressed. Blue Squad is Concealed and in Soft Cover.
Red, Purple and Mauve gets 90 shots. They have -1 to Hit because they have moved and
-1 to Hit because Blue Squad is Concealed.
So they Hit on a 6+. They hit 15 times, and wound 12.5 times. Blue
Squad saves on a 4+. Blue Squad takes 6.25 casualties.
Blue Squad is half-dead and Suppressed. It must test to Break. Blue Squad will have to test or retreat at the end of Melee.
This is the way to handle a Firefight: Move multiple attackers into Firefight Range in Movement. Suppress the enemy squad in Shooting. Then gang up on the target in Firefight.