Oregon procurement manual

What is market research?

Market research is the process of gathering, analyzing and interpreting information about a product or service. A procurement professional, working independently or in conjunction with a team, conducts market research to gain insight into the procurement need and the market that supplies the product or service. The goal of market research is to:
  • Identify a variety of potential sources from which to obtain a product or service.
  • Analyze an agency ‘s spending patterns to assess current and forecast future demand.
  • Provide an objective process for decision-making that strengthens competition.
  • Identify gaps that may exist in a current contract to determine methods for closing the gaps and strengthening the future state of the contract.
  • Reduce risk and increase sustainability.
  • Inform the development of the procurement strategy.
An agency should conduct market research to identify emerging trends, innovations and potential suppliers. A primary outcome of this research is to increase the base of suppliers, which will encourage greater competition, drive cost savings and gain process efficiencies.

An agency should use the information obtained through market research to develop its procurement strategy and to:
  • Align potential solutions with the procurement goals and objectives.
  • Gain knowledge of suppliers and the market.
  • Identify risks and develop risk mitigation strategies.
  • Make fact-based, data-driven procurement decisions.
  • Identify the supplier universe and who is likely to respond to a solicitation.
  • Identify contract gaps and incorporate lessons learned from previous solicitations.
  • Identify opportunities to meet the state’s social and economic objectives in procurement.
  • Validate the procurement method and advance development of the procurement strategy.
  • Assist in developing quality specifications.
Market research should support an agency’s source selection method, and facilitate its ability to develop a quality specification and solicitation document, leverage its strength in negotiating with potential suppliers, and execute a contract that drives successful performance outcomes.

When to conduct market research

An agency generally conducts market research when the product or service has a high level of expenditure, is subject to fluctuations in availability or cost due to market volatility, requires a complex procurement, involves inherent risks or is critical to the performance of the organization. 

An agency should commit sufficient resources and conduct an appropriate level of market research that is commensurate with the risk, complexity and cost of the procurement. Less extensive analysis may be conducted for products or services that are easier to procure, but involve significant expenditure. Typically an agency will not need to conduct analysis for products or services that are easy to procure and have little cost or risk. 

How to conduct market research

One of the goals of market research is to identify potential supply sources that are capable of meeting an agency’s business requirements. From these sources, the procurement professional is able to analyze various products and services to guide the development of a solicitation that is not biased in favor of a single source or that does not reduce the number of potential respondents that may be capable of meeting the agency’s procurement need.

A procurement professional should conduct market research with the goal of assessing the market factors, cost and risk that influence a procurement strategy.

An important outcome of market research is to understand the cost “drivers” for a product or service and what costs can be controlled in a seasonal or volatile market. Additionally, market research will enable a procurement professional to identify opportunities to address burdensome terms and conditions that may be negotiable, and more fully understand the needs and priorities of the primary stakeholders that are engaged in the planning process. 

Market research documentation should:
  • Identify the supplier universe and who is likely to respond to a solicitation.
  • Describe the relative strengths and weaknesses of each supplier.
  • Describe the market factors and volatility that affect price and quality.
  • Describe the most significant cost drivers and how they affect supplier prices.
  • Describe industry trends and innovations that may impact how the procuring agency purchases the product or service in the future.
  • Describe what suppliers are competing on – price, service, quality or other factors.
  • Identify life cycle cost factors that inform a best value analysis related to the product or service, and its availability and past performance.
  • Identify potential improvements to the supply chain.
  • Identify comparable substitute products and services.
Market research enables a procurement professional to develop a more reliable estimate of the likely cost of the desired product or service by obtaining price information through market research. Beyond the up front estimated purchase price, a procurement professional should examine the cost elements that comprise the total cost of ownership. Some of these elements include:
  • Delivery cost.
  • Installation cost.
  • Staff wages.
  • Operating cost.
  • Maintenance cost.
  • Disposition cost.
As part of a cost analysis, the procurement professional should also determine historic and current pricing trends. This will help set expectations on whether the next solicitation should expect pricing to be higher or lower. The procurement professional can use this information to guide the agency’s procurement strategy. 

From the results of the cost analysis, a procurement professional can determine whether the agency’s statutory or delegated procurement authority permits the procurement to be conducted within the agency. If not, the agency must coordinate with DAS Procurement Services to conduct the procurement on behalf of the agency. Refer to "Authority, roles, and responsibilities" for more information on statutory and delegated procurement authority.
Contract risk management begins with identifying and assessing risk in the Plan stage and continues through all life cycle phases of contract management. A procurement professional, in conjunction with an agency’s contract administrator, should assess risk as information is collected and analyzed as a result of market research and during strategy development. 

Market analysis may uncover risk factors such as:
  • Extent to which the procurement includes emerging technology.
  • Supplier experience with the type of procurement.
  • Impact that a supply disruption would have on the agency’s ability to support its business function and mission.
  • Extent to which the procurement is subject to supply chain disruption.
  • Extent to which the procurement is subject to market volatility or predictable trends that repeat over time or under certain conditions.
An agency should assess these factors, in addition to procurement complexity, contract value, schedule and budget requirements, among others, to develop a risk response strategy. As the risks associated with a procurement increases, the level of engagement by an agency’s executive management team should also increase.

Resource: Use the DAS risk assessment toolkit website to identify and assess procurement and contract risk.

Throughout the Plan stage, the procurement professional should validate the procurement objectives and requirements. This can be accomplished by analyzing and discussing research results with the procurement team and stakeholders, revising and updating the procurement plan and strategy and documenting market research outcomes.

An agency must document the results of the research in the procurement plan. Refer to Procurement Planning for more information on the procurement plan.

Market research resources

A procurement professional can conduct market research by accessing multiple resources in the state. Similar solicitations or contracts may be discovered by searching ORPIN. Additionally, a procurement professional can obtain information from the state’s cooperative procurement program, ORCPP, or by posting an inquiry to Buyer Link. The Oregon State Library provides agencies free online access to the ReferenceUSA/Business Data database. 

Beyond these resources, and depending on the nature of the procurement, a procurement professional should initiate an analysis of the market through additional channels that may include:
  • Industry organizations and publications.
  • Consultant reviews.
  • Advertisements.
  • Product or service demonstrations from multiple suppliers in target market.
  • Request for Information (RFI) from suppliers.
  • Previous solicitation efforts.
The procurement professional should also consult with other public entities with similar purchasing needs, both within and outside the state of Oregon. The following sections provide an example of the resources a procurement professional may use to support an agency’s market research.

One of the first steps of market research is to gain an understanding of the total market size and market share of both supplier and customer. The procurement professional can assess the current state of a given market for the needed product or service through a desktop review using common search engines. By examining these dynamics, the procurement professional will gain an understanding of:
  • The value and uses of the product or service.
  • The level of market concentration or fragmentation.
  • The supplier universe and capabilities.
An agency should always include a desktop review in its market research for products or services that may be easier to procure, but involve significant expenditure. For more complex procurements, a desktop review should be conducted and should supplement other resources described in this section.

If this search does not produce results that are responsive to the agency’s procurement need, or if additional information is required, the agency should initiate an analysis of the market through additional internet resources that may include:
  • Industry research (Gartner, IBISWorld).
  • Buyer/supplier organizations (ThomasNet, Hoovers).
  • Solicitation and contracts of cooperative procurement entities (NASPO ValuePoint, GSA).
  • Institute for Supply Management.
  • Trade organizations.
  • Market indicators (Federal Reserve, World Bank, US Bureau of Labor and Statistics’ Producer Price Index and Consumer Price Index, US Bureau of Economic Analysis, National Bureau of Economic Research, industry reports, and university research departments).
Additionally, the procurement professional can use key word searches through Google to gain access to:
  • Solicitations and contracts of peer public entities.
  • Solicitations and contracts of private entities.
  • Specifications for products or services.
Even if a procurement professional is unable to access specific information directly through the internet, contact information for organizations, suppliers and other resources needed for market research can be located online.
​Beyond market dynamics, research on agency spending patterns also informs a procurement professional’s market research. The DAS Procurement Services research team can provide insight into existing statewide contracts and price agreements related to an agency’s particular category of need and the spend data associated with those contracts. The research team can create reports that identify contracts, agency spend information on and off the identified contracts and key contract stakeholders that use the contracts. 

From this data a procurement professional can analyze organizational spend related to a procurement category.
 
Resource: Visit the DAS Procurement Services price agreement purchase reports webpage to access expenditure information by procurement category.
A procurement team is composed of key stakeholders with experience in the category of need related to the procurement. In addition to these resources, the procurement professional can broaden input by interviewing additional stakeholder groups, including public and private entities. One method to identify additional stakeholder groups to interview is to analyze spend data on a given contract and a given category to identify users of current contracts and users with high spend in the category. Refer to How to conduct procurement planning task: "4. Build procurement team" for more information on the procurement team.

Additional stakeholders can provide information and insight into the product, service or contract which the procurement team may not have experienced. Through stakeholder interviews and meetings, the procurement professional can share market research findings to determine whether the information gathered is complete, compelling, and supports strategy development. In some instances, the procurement team may learn that the need is broader than originally anticipated and may seek to expand the scope of the procurement. 

By engaging end users and other procurement stakeholders throughout the process of gathering and analyzing market research, the procurement professional should validate the priorities and requirements of the procurement need and should seek to determine the most critical procurement objectives, which may consider product or service delivery terms, quality, or availability as much or more than price.
A procurement professional should perform a peer review to gather and analyze contracts from other states, counties, cities and cooperative purchasing organizations. A peer review is useful for measuring how well an agency’s contracts stand today and for identifying best practices that an agency can incorporate into its procurement strategy. A peer review should be used to:
  • Identify alternate procurement models.
  • Identify best practices.
  • Identify process efficiencies.
  • Identify lessons learned and potential roadblocks.
  • Provide a benchmark against current contracts.
A procurement professional should start by gathering contract documents from peers with similar size and scope to the agency’s procurement need. This will ensure comparisons are as close to “apples-to-apples” as possible. The most important documents to gather are contracts, solicitations, and price lists or price catalogs.

If the procurement professional identifies a noteworthy peer entity contract or solicitation and can locate contact information for the procurement professional in the peer entity, requesting a phone call or reaching out to them by email is also very useful. Talking directly with the procurement professional can allow an agency to clarify aspects of the solicitation or contract and ask them about contract execution or lessons learned that can be incorporated into an agency’s solicitation document. 
A procurement team can use a Request for Information (RFI) to acquire information from suppliers prior to conducting the procurement. This method is typically used in lieu of informal discussions with suppliers when a procurement team requires more information to develop key elements, such as specifications, scope of work, performance measures, or evaluation criteria for a procurement and when a more formal method is preferred.

The RFI is not a competitive solicitation method and does not satisfy the requirement for competitive bidding. The purpose of the RFI is limited to information gathering. A procurement professional should ensure that the procurement warrants the use of this method, that the information gathered will be useful in the development of the solicitation document, and that the RFI is issued to all suppliers of the particular product or service.

If the procurement team has developed an initial specification or scope of work, it may provide this in the RFI and ask that suppliers validate the requirements and provide feedback and comments that will help the state reach its procurement objectives. Suppliers are not required to respond to an RFI and failure to respond does not prohibit the supplier from responding to a competitive solicitation that may result from the RFI.

An RFI is a useful way for a procurement team to gather information to prepare a competitive solicitation, however, the team must exercise caution not to incorporate unique features of a single RFI that will limit or restrict future competition on a resulting solicitation.
An agency can conduct a pre-solicitation conference to present its plans for a future procurement and seek input on current industry practices from members of the supplier community. A pre-solicitation conference is held prior to the release of a formal solicitation. An agency can select from a variety of conference types, including webinars, video conferences, telephone conferences or other methods.

A pre-solicitation conference is particularly useful when an agency has a complex program or project where multiple contracts of varying scope and magnitude will be required to complete the project. Pre-solicitation conference goals include:
  • Ensuring collaboration between the agency program office and suppliers.
  • Incorporating supplier comments into the solicitation development process.
  • Communicating program requirements and schedule.
  • Gaining a better understanding of recent industry or market developments.
  • Providing updates to suppliers on future program developments and procurements.
  • Providing a forum for suppliers to network with potential subcontractors and the small business community for upcoming procurements.
If a procurement professional is not familiar with the product or service or needs to learn more about the market for their product or service, trade organization white papers, conferences, and other events are a prime source of market information. A procurement professional can attend lectures or trainings on trade topics of interest and meet directly with organization members and suppliers to ask questions and learn about an agency’s procurement need.