Market research – communication between public clients and the free market

Legal framework: Section 28 VgV / Section 20 UVgO - market exploration

Market explorations can be freely designed, for example through workshops, written enquiries or bilateral discussions.

According to Section 28 VgV / Section 20 UVgO - market exploration, implementation is optional:

1) Before launching a procurement procedure, the contracting authority may conduct market consultations to prepare for the procurement and to inform companies about its procurement plans and requirements.

Market consultations serve to prepare the procurement procedure, clarify requirements and increase transparency. They can be used strategically to minimise misunderstandings in the tender specifications and ensure that the tender is in line with market requirements.

Objectives of market exploration

Market exploration has three main objectives:

1. To prepare the contract award

Public clients use market exploration to identify potential solutions and to prepare the contract award.

The need for the contract award arises from Section 31 (2) no. 1 VgV – service description as follows:

[...] 1. in the form of performance or functional requirements or a description of the task to be solved, which must be formulated as precisely as possible so that they convey a clear picture of the subject matter of the contract and allow sufficiently comparable offers to be expected that enable the contracting authority to award the contract [...].

Section 26 (1) UVgO - Service description regulates the readiness for award as follows:

The subject matter of the contract must be described as clearly and exhaustively as possible in the service description so that the description can be understood by all companies in the same way and the offers can be compared with each other. The service description contains the functional or performance requirements or a description of the task to be solved, knowledge of which is necessary for the preparation of the offer, as well as the circumstances and conditions of the service provision.

2. Preparation of the service description

By asking targeted questions, clients can analyse their planned requirements. For example, the following questions could be important for software development:

• Which existing systems need to be integrated into the solution?
• Which specific security requirements need to be taken into account?
• Who are the main users of the solution?
• What are the special requirements or needs of the target group?
• How will the solution be maintained and further developed in the long term?
• Are future expansions or adaptations planned?
• Which additional services, such as operation or maintenance, are relevant?
• Should the solution be operated on-premises or in the cloud? In addition, questions could be used to determine market-driven suitability and award criteria:

Can the market provide comparable references or is the solution too new?

• How could alternative suitability criteria be used to verify professional and technical performance?
• Which award criteria are useful for identifying a high-quality solution?
• Which deadlines are appropriate for complex tenders?
• Which contract models are useful?

3. Market preparation

Informing the market about planned procurements at an early stage increases the quality and diversity of the offers. This also reduces the number of questions bidders may have about the upcoming procurement process, since the requirements have already been formulated in line with market conditions.

Forms and scope of market research

Forms

• 1. General internet research: The internet offers a quick and cost-effective way to get an overview of potential bidders and their offers. Manufacturer websites, industry portals and rating platforms are also useful here.
• 2. Catalogues and advertising material: Printed or digital product catalogues and advertising material can provide valuable information about the available products and services.
• 3. Obtaining price lists: Requesting price lists directly makes it possible to obtain initial comparative values and develop a sense of market prices.
• 4. Visiting trade fairs or conferences: Trade fairs and industry conferences are an excellent opportunity to get to know companies in person, discuss technical details and identify current trends in the industry.
• 5. On-site meetings at the bidder's premises: Meetings directly on the service provider's or manufacturer's premises provide a deep insight into the company's working methods, the quality of its products and the bidder's performance.

Depth and scope

The scope depends on the information needs of the client. For complex IT projects, a detailed market exploration may be necessary to identify specific technical solutions or products.

Limits of market exploration

• 1. No exclusive negotiations: After the market exploration, no exclusive negotiations may take place with individual companies.
• 2. Prohibition of direct award: Direct award to a company that was involved in the market exploration is not permitted.
• 3. No de facto award: Market explorations must not be misused to determine costs or prices (§ 28 VgV / § 20 UVgO- Markterkundung).

(2) It is not permitted to carry out procurement procedures solely for the purpose of market exploration and for the purpose of determining costs or prices.

Myths put to the test

Despite the legal freedoms, various myths surrounding market exploration persist. The most common ones are dispelled below and put into perspective.

Myth 1: There is only one bidder on the market

This statement can and may only be confirmed by an EU-wide market survey. In this process, the specific unique selling points of the companies must be documented in detail in order to clearly demonstrate that there is no competition.

Myth 2: Market surveys are prohibited

Budgetary law explicitly allows market surveys, especially if the market overview is insufficient.

Myth 3: A limited number of participants is not permitted

The number of companies surveyed can be flexibly determined as long as the criteria of the tender remain open to the market later.

Myth 4: Participating companies must not be awarded a contract

Discussions as part of the market exploration are allowed as long as they are transparently documented and no (contractual) promises are made.

Myth 5: Details of the solution sought must not be disclosed

It is permissible to discuss requirements and solution options in order to better define the tender. Non-binding price information can also be obtained.

Summary

Market research is a valuable and permissible instrument under public procurement law for designing tenders that meet market and demand requirements. They offer public clients flexibility and transparency, but require a clear distinction from procurement procedures in order to meet legal requirements. There is also no need to worry about participating in a market exploration request. There is no harm in providing information to the customer. This does not give adesso an advantage for the tender itself, but it does allow our company to demonstrate its expertise.