Procurement Tip

 

An ongoing series of tips provided by
experts  in the procurement arena


.

.

YES! Send me the Procurement Tips newsletter ...



PRIVACY POLICY

Market Sounding - A More Powerful RFI?

 by Vicki Parker

 Is "market sounding" the same as a Request for Information (RFI)? Yes. And no.

Organizations use market sounding to gather information from potential proponents, as they might with a traditional RFI. But market sounding usually involves a broader range of questions than what you might find in an RFI.

For instance, market sounding questions – perhaps even posed through an interview process – might ask for respondents' opinions on the project itself, say, about the prudence of building a proposed structure in a particular location. A market sounding might ask whether the respondents could make a reasonable return, if they were involved. The project's financial structure could be opened up to suggestions from participants. And, rather than asking for a company's experience for the purpose of qualification, a market sounding might ask if the company has had good experience with public-sector clients, and why or why not.

Essentially, market sounding takes advantage of industry intelligence to help design and decide on a best course of action, including the possibility of not going ahead with the project at all.

According to Partnerships BC, a key point is keeping that information, and the market sounding exercise as a whole, distinct from any formal competitive procurement process that may follow. In its market sounding document for the Northern Sport Centre at the University of Northern BC (UNBC) in Prince George, it stipulated that:

"Participation in this market sounding exercise is not mandatory for the following procurement process. The information received by the market sounding participants provides guidance to the project team and is recognized as suggestive only. Participation in the process and information received will not influence or impact the resulting procurement process for the NSC."

Sue-Ann Fimrite, a senior project consultant with Partnerships BC, was involved in the UNBC project. "Market sounding is usually completed in the very early business-case phase and is a way of finding out how the private-sector market will respond to the project," she said.

In fact, the scope of the research done for the Northern Sport Centre changed the initial direction of the project. Early discussions indicated that the project team should use a design-build model with partial financing and operation. "However, after extensive discussions and analyzing the project in more detail with the private-sector proponent," said Ms. Fimrite, "it was determined that UNBC and Prince George would receive better value for money retaining responsibility for operations and removing the requirement for partial financing."

Ms. Fimrite sees the key benefits of market sounding as allowing the project team to "request the market's reaction before a significant amount of time and money are spent in preparing procurement documents and a business case."

She also sees the downside: "The information we receive is from a business perspective and must be considered in relation to our public-policy responsibilities," she explained. "The project team is unable to interview every market participant. There is a potential bias in the nature of how we select the 'sample' of market participants that we interview. This could impact our analysis of the market sounding results."(At the other end of the scale, there's a possibility that a market sounding exercise may not elicit enough response or information to be useful.)

Market sounding is also proving useful in the human resources field. Judy Pryce is a private consultant who worked recently with the B.C. Ministry of Employment and Income Assistance using market sounding for employment programming. Market sounding gives you "real feedback from a wide variety of interested parties," said Ms. Pryce. She noted that it is particularly good if the market consists of a limited number of interested parties. On the negative side, "if there is a broad market, the process takes significant time and resources to craft the right questions, solicit feedback and process the information in a meaningful way."

There are no established steps for market sounding, but Ms. Pryce notes that the steps are "similar to putting together an RFI. The things that would be unique are the questions being asked, and the forum for gathering the information.

"The process needs to be designed to be as easy as possible for participants on one hand, and information-gatherers on the other," she said. "And, obviously, it needs to ensure fairness and transparency in accordance with privacy and procurement law.

"Bottom line," said Ms. Pryce, "it really is the same thing [as an RFI]," except that the focus "is on the deal structure – the commercial aspects of the deal that the marketplace would find attractive." Working with the ministry, she added, "We actually ended up renaming the process as an RFI just before we posted it, because we had a concern it may cause confusion with some players in the market."

Is market sounding a more powerful RFI? You decide: an Adobe Acrobat file with a list of the questions from Partnership BC's market sounding document for the Northern Sport is available by clicking on the link below.

 Market Sounding Insert,pdf

 Thanks to Sue-Ann Fimrite and Judy Pryce for their assistance with this article.

 © 2006 National Education Consulting Inc. Reprinted by permission.

This article originally appeared in The Legal Edge Issue 66, April - May 2006


 

.

  About Summit MagazinePrivacy PolicyContact UsThe Summit Group