Depending on the nature of the requirement, it may be necessary to investigate the potential market in terms of the number of suppliers likely to be able to provide what is needed. For example, if seeking to set up a contract for the provision of taxi services, then knowledge of the local taxi companies would be helpful. Likewise, when purchasing a new item of high specification laboratory equipment, it will be necessary to understand the supplier-base in global terms.
Market research can also help to identify alternative products and solutions to the requirement. This information can be useful in finalising the specification.
Within the procurement legislation it is permissible to have technical discussions with potential suppliers to gain an understanding of how the market works and to help formulate the best means of developing and writing the tender documentation. The discussions must not, however, give any supplier an advantage over the others. Care must be taken to ensure that a supplier does not unduly influence the ultimate product specification, which could result in complaints from other suppliers that the specification is unfair. Likewise, the research should not lead a supplier to believe that it can expect to obtain the business without first participating in an open competition (ie responding to an invitation to tender or a request for quotation).
The tender specification should be based on outputs and provide sufficient information to enable the suppliers to submit genuine tenders upon which you can judge which offers the best value for money for the users.
Market research should identify:
- Whether, within your institution or the sector, there is an existing arrangement that is available for use or if another department/institution(s) is about to undertake a similar exercise in which case it may be possible to aggregate requirements and share the workload and potential cost benefits.
- The size of the potential supplier base will have an impact on the decision of what type of procurement process to follow. For example,
where there are a large number of suppliers then a two-stage process such as the restricted procedure, would be more appropriate as the process of selecting suitable suppliers to submit tenders will be a more effective means of obtaining tenders, or where there is a lower number of potential suppliers (say, less than 10) then, the use of an open procedure may be more appropriate.*
- An estimate of the potential cost of the requirement – enabling the appropriate tendering route to be determined eg does the requirement fall under the EU procurement procedures
* Where there is a combination of a very limited supplier-base and ad hoc requirements, consideration could be given to setting up a dynamic purchasing system. Such a system could be set-up on behalf of the sector, geographical region or group of institutions that were likely to purchase such equipment on a fairly regular basis. Note: the dynamic purchasing system is dependent on its completion using fully electronic means.
The Cabinet Office have issued a Myth-busting Factsheet on Pre Procurement Market Engagement.