July 2012
Market Research – More
Important Now Than Ever
By Gladys Gines
This Advisory explores
market research—
what it is, when to do
it, who does it, and
why it's important.
W
hether or not we are officially in the acquisition field, we are all buyers. We go
to the grocery store for food, the car dealership for our automobiles, and so on.
As private buyers, we usually perform some sort of market research for our
purchases. For example, when shopping for groceries we may compare prices at different markets, consider rebates (cutting coupons from the paper), or compare the prices of
similar items against our personal preferences (for example, locally grown versus mass
produced). We normally do these things, to some degree, in all purchases we make.
This same basic commonsense concept is instituted in part 10 of the Federal Acquisition Regulation (FAR) for conducting market research for government acquisitions.
Looking at the marketplace is a strategic step that assists in formulating the acquisition
strategy. Of course, market research for government acquisitions is more detailed than
for buying groceries, but its importance cannot be underestimated. Ineffective (or a lack
of) market research can result in a myriad of issues and problems down the road for agencies. For instance, inadequate market research can hinder an agency's ability to identify
qualified vendors, which in turn can lead to an inability to promote and provide for full and
open competition, which in turn can lead to higher (or unreasonable) prices. And the Government Accountability Office (GAO) has sustained several protests regarding the lack
of adequate market research when determining whether to set aside requirements for
small businesses1 (although we note that there are many more GAO protests upholding
the agency’s market research efforts in regard to small business set-asides).
Effective market research makes for a knowledgeable and informed buyer who exercises the market’s competitive forces to acquire the best products and services at fair
and reasonable prices, achieving the best value in meeting the agency’s needs. And isn’t
that what we all in the “acquisition world” aspire to achieve?
What is market research?
Market research is the continuous process of collecting and analyzing information to
maximize reliance on the commercial marketplace and to benefit from its capabilities,
technologies, and competitive forces in meeting an agency need. FAR part 10 establishes
market research as a tool “to arrive at the most suitable approach to acquiring, distributing, and supporting supplies and services.”2
What purposes does market research serve?
Market research fulfills many purposes, among them to:
1. Promote full and open competition
2. Ensure the government satisfies its needs in a cost-effective manner
Advisory
3. Determine whether commercial items are available to
meet the government’s needs
4. Determine customary commercial practices
5. Ensure maximum use of recovered materials and promote energy conservation and efficiency
6. Determine whether bundling is necessary and justified3
7. Facilitate development of the independent government
cost estimate
8. Assist with small business and other socioeconomic
determinations
9. Assist in determining the need for contract financing
In short, market research information is used to shape
the acquisition strategy and develop the most suitable
approach (not solution) to acquiring needed supplies and
services. It is not used to screen or rank potential offerors;
rather, the purpose is to gather information about the marketplace to educate the government on industry trends
and best practices.
Market research is particularly important for identifying
commercial items and standard commercial practices. The
Federal Acquisition Streamlining Act of 1994 (Public Law
103-355) created a statutory preference for the acquisition
of commercial items by federal agencies. Nonetheless,
there also is a preference for using existing equipment
(available for reassignment or use within the agency) and
required sources of supply (as detailed in FAR part 8) before initiating new acquisitions. Therefore, market research
should consider both government and industry sources.
Market research also is valuable when conducting a
performance-based acquisition, where the vendor has
the freedom to offer innovative, cost-effective solutions,
rather than performing the work exactly as directed by
the government. The sidebar above highlights information
market research can provide for performance-based acquisitions.
When does market research begin?
Market research begins for an acquisition when there is
“a description of the government’s needs stated in terms
sufficient to allow conduct of market research”—but not
so specific that technological alternatives (and potential
competitiveness) are constrained.4
Are agencies required to conduct market
research?
Yes. FAR 10.001(a)(2) requires agencies to conduct
market research:
•• Before developing new requirements documents for an
acquisition
2
July 2012 For performance-based acquisitions,
market research allows you to:
• Learn about possible solutions to your problem
• Learn about potential problems and how to mitigate
those risks
• Learn about industry standards and performance benchmarks
• Discuss possible incentive strategies
• Analyze the requirement to remove any unnecessary
constraints and tasks
•• Before soliciting offers for acquisitions with an estimated value in excess of the simplified acquisition threshold
(currently $150,000)
•• Before soliciting offers for acquisitions with an estimated value less than the simplified acquisition threshold
when adequate information is not available and the circumstances justify its cost
•• Before soliciting offers for acquisitions that could lead
to a bundled contract
•• Before awarding a task or delivery order under an
indefinite-delivery, indefinite-quantity contract (e.g., government-wide acquisition contracts, multiagency contracts) for a noncommercial item in excess of the simplified acquisition threshold
•• On an ongoing basis, to take advantage (to the maximum extent practicable) of commercially available market
research methods to identify the capabilities of small businesses and new entrants in federal contracting that are
available in the marketplace for meeting the requirements
of the agency in furtherance of—
►► A contingency operation or defense against or recovery from nuclear, biological, chemical, or radiological attack
►► Disaster relief, to include debris removal, distribution of supplies, reconstruction, and other disaster or
emergency relief activities
Is market research useful in other
situations?
Absolutely! There are many stages when market research can be useful (see Table 1 on page 3). Market research can be conducted as a continuing, ongoing activity
in support of agency strategic planning. In such cases, the
focus of the research often is on trends and technological advancements that may affect an agency’s long-term
plans and strategies. This type of research sometimes is
called “market surveillance.”
ASI GOVERNMENT
Advisory
Table 1: Iterative Market Research Activities by Life Cycle (Areas of Focus)
Strategic Planning
•
•
•
•
•
New Suppliers
New Products
Trends
Emerging Technology
Estimating Future Costs
Acquisition Planning
•
•
•
•
•
•
•
General Capabilities
Technologies
Suppliers
Competitiveness
Cost Drivers
Support Capabilities
Laws and Regulations
Market research can be used prior to award to check
references and past performance information, and after
award to monitor the contract’s continued acceptability
compared to current market offerings and prices. Taken
together, these types of market research provide valuable
information on existing products and services, current and
potential suppliers, desirable technology, market­place
competition, and levels of performance and quality.
How does market research relate
to a feasibility study?
One of the main purposes of market research is to
establish feasibility. Sometimes called a feasibility study,
this part of market research determines if technology exists that can satisfy the requirement. Issues of feasibility
involve three aspects of a project: technical, operational,
and financial.
•• Technical feasibility refers to the capability of current technology and methods of operation to meet user
requirements. Technical feasibility should include consideration of the state of the technology—for example, is
the technology “leading edge” (with commensurate risk)
or is the technology “mature” (with associated industry
standards and lesser risk).
•• Operational feasibility refers to the ability of the enhanced system to fit the operational pattern and resources of the organization.
•• Financial feasibility refers to the ability of the organization to fund the acquisition.
The Office of Management and Budget (OMB) addresses feasibility in terms of risk.5 The issue facing agencies is this: What is the technical feasibility and risk of
the project? Risk may be in such terms as maturity of the
market, size and scale of the project, and anticipated acceptability of the technological solution to customers and
stakeholders. So it is important to consider technical feasibility in today’s terms—in terms of risk. This may be done
Contract Award
& Administration
Solicitation Development
•
•
•
•
•
Product Characteristics
Product Differentiation
Commercial Practices
Industry Standards
Cost Estimates
•
•
•
•
•
•
Past Performance
Reference Checks
Contract Modifications
Technical Insertion
Current Market Costs
Exercising Options
independently or as part of the market research and analysis of alternatives.
Aren’t there prohibitions against
contacting vendors before a solicitation
is released?
No. In fact, contact with vendors and suppliers for purposes of market research is encouraged. FAR 15.201(a)
specifically promotes exchanging information “among all
interested parties, from the earliest identification of a requirement through receipt of proposals.” The main parameters are that prospective contractors be treated fairly and
impartially and that standards of procurement integrity be
maintained.6 In addition, FAR 15.201(f) notes that before
release of a solicitation “general information about agency
mission needs and future requirements may be disclosed
at any time.”
As part of OMB’s 25-point plan for improving federal information technology management, the Office of Federal
Procurement Policy (OFPP) launched a “myth busters”
campaign in 2011 to address misconceptions about communications with industry during the acquisition process
(see Table 2 on page 4). “Early, frequent, and constructive
engagement with industry is especially important for complex, high-risk procurements including (but not limited to)
those for large information technology (IT) projects,” stated then OFPP administrator Daniel Gordon, adding that
vendors are the best source for the kind of market information needed to develop and conduct efficient, effective
procurements. “Productive interactions between federal
agencies and our industry partners should be encouraged
to ensure that the government clearly understands the
marketplace and can award a contract or order for an effective solution at a reasonable price,” he noted.7
Clearly, the more you can learn about the marketplace,
the better you can hone your requirements to reflect the
efficiencies and realities of what the market can provide.
ASI GOVERNMENT
July 2012
3
Advisory
Table 2: OMB’s Myths and Facts about Communicating with Industry
Myth
Fact
FAR Reference
1
Officials cannot meet one-on-one
with a potential offeror.
Officials generally can meet with potential offerors individually as long
as no vendor receives preferential treatment.
FAR 15; 15.201
2
Additional communications with
vendors require substantial
disclosure burdens.
Disclosure is required only in certain circumstances, such as for meetings with registered lobbyists, and even when required, the disclosure
burden normally is minimal.
FAR 31
3
Protests should be avoided at all
costs, even if it means limiting
communication with industry.
Restricting communication will not prevent a protest, and actually could
increase the chance of one, in addition to depriving officials of potentially useful information.
4
Conducting discussions or
negotiations after proposals are
received will add too much time
to the schedule.
Avoiding discussions solely because of schedule concerns may be
counterproductive, and it may cause delays and other problems during
contract performance.
FAR 52.215-1
5
Meetings with vendors may
encourage submission of unsolicited proposals, delaying the
procurement process.
Submission of an unsolicited proposal should not affect the schedule. Generally, the unsolicited proposal process is separate from the
process for a known agency requirement that can be acquired using
competitive methods.
FAR 15.6
6
Debriefings aren’t required when
the agency awards a task or
delivery order using the Federal
Supply Schedule (FSS), so they
shouldn’t be done.
Providing feedback is important, both for offerors and the government,
so agencies generally should provide feedback whenever possible.
FAR 8.4
7
Industry days and similar
events are of low value because
vendors will not provide useful
information in front of competitors and agencies don’t release
new information.
Well-organized industry days, as well as presolicitation and preproposal
conferences, allow agencies to provide the maximum amount of information on their requirements, answer questions, and gather feedback
that can help improve a solicitation. Such events also provide prime
contractors and subcontractors—especially small businesses—with opportunities to develop relationships and teaming agreements that can
benefit contract performance.
8
If the program manager already
talked to industry while developing the technical requirements,
the contracting officer doesn’t
need to do anything else before
issuing the request for proposals.
The technical requirements are only part of the acquisition; getting
feedback on terms and conditions, pricing structure, performance
metrics, evaluation criteria, and contract administration matters
will improve the award and implementation process. As a result of
early communication, the contracting officer may adjust the planned
acquisition approach to increase competition, improve small business
participation, lower pricing, or provide a better definition of the technical requirements.
9
Giving vendors only a few days
to respond to a solicitation is
acceptable since the agency has
been talking to industry about
the procurement for over a year.
Providing only short response times may result in the receipt of fewer
or poorly developed proposals, which can lead to a flawed contract and
signal that the government isn’t really interested in competition. Allowing offerors additional time to prepare their proposals will likely yield
better proposals, streamlined evaluations, and a reduction in the need
for (or scope of) discussions.
10
Obtaining broad participation
by many different vendors is too
difficult; officials are better off
dealing with their established
vendors.
The government loses when competition is limited. Agencies need to
look for opportunities to increase competition and ensure all vendors,
including small businesses, get fair consideration.
FAR 10.002
Source: “Myth-Busting: Addressing Misconceptions to Improve Communication with Industry
during the Acquisition Process,” memorandum, Office of Management and Budget, February 2, 2011.
4
July 2012 ASI GOVERNMENT
Advisory
Who should be involved in market
research?
Because the range of information addressed by market
research is so broad—covering technical, cost, and contractual information—responsibility properly belongs to
members of the acquisition team, not to the program or
acquisition office alone. This requires that the acquisition
team’s activities be planned in advance to address the essential requirements and timing of the research, assignment of market research elements to individuals (such as
checking past performance), standard methods of contacting vendors, and standard information to be given and
obtained from vendors.
How is market research conducted?
There is no specific procedure for conducting market
research; however, it should be tailored or adjusted to
each acquisition and will depend on the complexity of the
required item or service, the dollar value, urgency, and
past experience. The acquisition team should determine
what information is needed but be open to receiving information in the course of conducting market research that
has not yet been considered by the agency.
Methods of conducting market research outlined in
FAR 10.002(b)(2) include, but are not limited to:
•• Contacting knowledgeable individuals in government
and the private sector regarding market capabilities, commercial offerings, and business practices
•• Reviewing recent market research reports for similar
requirements
•• Reviewing the supplies and services available to order
from other agency contracts, such as federal supply schedules, Department of Defense e-Mall, or government-wide
acquisition contracts
•• Obtaining source lists (such as Thomas Register, other
program or contracting offices, state and local governments, and trade associations)
•• Participating in interactive, on-line communication among
industry, acquisition personnel, and customers
•• Publishing formal requests for information, sources
sought synopses, draft performance work statements or
statements of objectives
•• Reviewing catalogs/product literature and trade journals
•• Conducting market surveys to obtain information from
potential sources
•• Attending trade shows, conferences, and symposia
•• Querying government databases that provide relevant
information, such as the Central Contractor Registration
•• Using Internet tools and performing Web searches
Elements of a Market Research Plan
• Objectives of the market research
• List of individuals, organizations, companies, and/or
agencies to be contacted
• Processes for gathering data, including roles and responsibilities for various acquisition team members
• Schedule for collecting information
• Methods for analyzing data gathered
What types of information should be
collected?
The specific information will depend on the acquisition,
but the following are examples of the types of information
that may be collected:
•• Availability of the supplies or services suitable as is, or
with minor modifications, for meeting the need
•• Availability of vendors to perform the work required, including their socioeconomic status
•• Terms, conditions, and warranty practices under which
commercial sales of the supplies or services are made
•• Requirements of controlling laws and regulations, including local requirements (such as historical preservation
requirements for construction projects)
•• Distribution and support capabilities of potential suppliers, including alternative arrangements
The key is to use good judgment in determining how
much market research is required and the best method
for conducting it. It may be useful to develop a market research plan (see sidebar above) to help focus the research
so that relevant, useful data is collected.
Can we collect pricing information?
Yes, but be careful not to solicit (or be perceived as
soliciting) a price quotation or proposal for the actual supplies or services to be acquired. We advise close coordination on the scope of the market research with acquisition
team members to avoid any potential misunderstandings.
Not only is this involvement critical to the acquisition process, but it could preclude the government taking an action that might cause a vendor to incur costs.
Do you have any recommended do’s and
don’ts for conducting market research?
Yes! Of course, the manner in which market research
is conducted and your specific requirement will affect how
ASI GOVERNMENT
July 2012
5
Advisory
contact is initiated and what information is collected, but
Table 3 below shows some recommended do’s and don’ts.
How is market research information
used?
In large part, the results of market research help decide
the acquisition approach. Specifically, market research
may assist the agency with:
•• Ensuring the proposed specification, statement of
work, performance work statement, or statement of objectives encompasses all acceptable supplies or services,
if any, in the market
•• Determining when to buy
•• Establishing realistic delivery schedules in terms of
market conditions and practices
•• Formulating the independent government cost estimate
Table 3: Recommended Do’s and Don’ts of Market Research



Recommendations
Details
Don’t permit vendors to turn the market
research session into a marketing opportunity.
Ensure firms you contact are aware that the purpose of the session is to assess
the marketplace, not provide a marketing session or an invitation to compete for
the requirement.
Do prepare an invitation to market
research.
Clearly state the session as market research and not an invitation to compete.
An invitation to a market research session does not guarantee an invitation to
compete.
Do clearly state the information you are
seeking to obtain.
If you prepare an invitation, firms will be able to properly prepare and have the
information readily available for you.
Do contact the right people from
industry.
You don’t want to deal with a large marketing team, but subject-matter experts
and individuals knowledgeable about your requirement and your specific market
research needs (such as financial people for cost information).
Do allow for a free flow of information.
While it is good to have an agenda, remember that it is simply an outline. The
most effective market research sessions are less formal and more informative,
with the vendor freely providing information on the marketplace, commercial
practices, metrics and measures, and service delivery.
Do ensure that technical issues important to the program office are covered.
In some cases, the program office may have specific technical issues that will
help in shaping the acquisition strategy and also test the marketplace for new
and improved ways of dealing with the issues.
Don’t direct the questions to one
solution.
Allow industry to provide suggested solutions.
Do ask the vendors if any of the information they are providing is considered
proprietary and, if so, how they want it
handled.
We recommend advising vendors that the government does not wish to retain any
proprietary information at this point in the process. If vendors bring proprietary information, return it to them at the end of the market research session or provide
it to the contracting office for safeguarding.
Don’t share one vendor’s solutions
with another vendor.
There should be no leveling of the playing field at any point in the process. This
may direct a vendor down a single path or stifle creativity. Further, there is more
risk of revealing trade secrets or proprietary information.
Do ask about intellectual property rights.
When acquiring intellectual property of any kind, such as software, be sure to ask
about usage rights and any restrictions.
Do conduct market research at a
government or neutral site.
Conducting market research at the vendors' locations enables them to spend
valuable time marketing their companies rather than focusing on the discussion
topics.
Do send a thank-you letter to vendors
and agencies that participate.
Be sure to acknowledge the time vendors and agencies have taken to provide
market research information.
6
July 2012 ASI GOVERNMENT
Advisory
•• Suggesting sources for the source list
•• Determining whether to purchase or lease
•• Identifying quantity breaks
•• Determining whether sources capable of satisfying the
requirements exist
•• Determining whether commercial items are available
•• Determining the extent to which commercial items
could be incorporated at the component level
•• Determining the practices of firms engaged in producing, distributing, and supporting commercial items, such as
terms for warranties, buyer financing, maintenance, packaging, and marking
•• Identifying appropriate evaluation criteria
•• Ensuring maximum practicable use of recovered materials and promoting energy conservation and efficiency
•• Determining whether bundling is necessary and justified
•• Assessing the availability of electronic and information
technology that meets all or part of applicable accessibility
standards
It is important to keep in mind two important factors.
First, the results of market research may be used in subsequent acquisition documents, such as the acquisition
plan, requirements analysis, analysis of alternatives, and
solicitation document. Second, market research is necessary to define the requirements and the acquisition, but
it should not be applied in a manner that presupposes a
solution or unduly limits competition. Those are properly
functions of the marketplace.
Must the results of market research be
documented?
FAR 10.002(e) states that agencies “should document
the results of market research in a manner appropriate to
the size and complexity of the acquisition.” Documentation serves several purposes. First, it provides an historical record of the market research effort and evidence that
proper market research was conducted for the acquisition. Second, it may be used in the future by other market
research teams investigating similar products to get a feel
for what might be available and to get ideas on where to
start their investigation. Third, it may be used by the acquisition office working on a solicitation to further determine
appropriate contract terms and conditions.
The market research report should describe the issues
discussed, significant findings, and recommendations for
actions based on the findings. All stakeholders should
have an opportunity to review and comment on the market research report. This will assist in solidifying the acquisition strategy.
Are there market research resources
available?
Yes, there are a variety of ways to collect market research information. We’ve listed the most common
sources in Table 4 below.
Table 4: Common Sources for Market Research
Name
Description
Link
Central Contractor
Registration
Information on socioeconomic size status as well as capabilities
http://www.ccr.gov
Dun & Bradstreet
Information on company history, financial status, and outstanding legal
and financial issues
http://www.dnb.com
Federal Procurement
Data System – Next
Generation
Provides information on products and services acquired by government
agencies; excellent for locating agencies purchasing similar products
and services to gather best practices/lessons learned information
https://www.fpds.gov/fpdsng_cms/
GovLoop
Directory provides a place to research products and companies
http://directory.govloop.com
Standard and Poors
Information on corporate equity, financial standing, various industry
indices, and a wealth of market information
http://www.standardandpoors.com
Thomas Register
Searches in an alphabetical list of companies, either by product or
service or by company name
http://www.ThomasNet.com
Towers Watson Data
Services
Information on salaries across the country
http://www.towerswatson.com/services/Data-Services
ASI GOVERNMENT
July 2012
7
Advisory
Conclusion
Successful market research is an iterative process. Initial market research related to a specific acquisition helps
determine the ability of the marketplace to meet the need
with existing (commercial) items of supply or service. Subsequent market research can support development of a
solicitation that responds to current market conditions and
practices, such as warranties, financing, and maintenance.
It is important for the entire acquisition team, not just the
program or acquisition office, to take part in the market
research effort. This enables the members of the team
to share an understanding and knowledge of the marketplace—an important factor in development of the acquisition strategy—and a common understanding of what features, schedules, terms, and conditions are key.
♦
Endnotes
1 For example, see Matter of: Information Ventures, Inc. (B-294267), October 8, 2004; http://www.gao.gov/assets/380/372412.pdf. The digest reads:
“Protest challenging agency determination not to set aside procurement for small business concerns is sustained where the decision was based on
an unreasonably limited search of the potential small business market, and the contracting officer did not consider the responses of several small businesses to the presolicitation notice in making her determination.” Also see Matter of: DNO, Inc. (B-406256, B-406256.2), March 22, 2012; https://www.
gotovao.com/index.cfm?action=comment&id=0410047171000443; and Matter of: Sigmatech, Inc. (B-296401), August 10, 2005; https://www.gotovao.
com/index.cfm?action=comment&id=0410022495000443.
2 FAR 10.000.
3 Bundling is defined in FAR 2.101 as the consolidation of two or more requirements for supplies or services, previously provided or performed under
separate small contracts, into a single solicitation for a single contract that is likely unsuitable for award to a small business due to the diversity, size,
or specialized nature of the anticipated contract; the aggregate dollar value of the anticipated award; and/or the geographical dispersion of the contract
performance sites.
4 FAR 10.002(a).
5 OMB Circular A-11, Appendix 300A, “Planning, Budgeting, and Acquisition of Capital Assets” (1997).
6 FAR 3.104.
7 “’Myth Busting: Addressing Misconceptions to Improve Communication with Industry during the Acquisition Process,” memorandum, Office of
Federal Procurement Policy, February 2, 2011; http://www.whitehouse.gov/sites/default/files/omb/procurement/memo/Myth-Busting.pdf.
This Advisory is an update to an Advisory originally published in April 1998 by Ann Costello.
ASI Relevant Resources
Get a jumpstart on your market research with these ASI templates:
• Market Research Project Plan
• Market Research Invitation Letters
• Market Research Memorandum
Need more resources? Check out the "Market Research" keyword on the
Virtual Acquisition Office (VAO) Web site at www.GoToVAO.com.
The Advisory is published as part of the Virtual Acquisition Office™ subscription service, made available by ASI Government,
1655 North Fort Myer Drive, Suite 1000, Arlington, VA 22209, 703-253-6300, fax 703-253-6301, www.GoToVAO.com.
Information and opinions are based on best available information, but their accuracy and completeness cannot be guaranteed. Layout by Julie Olver. Contents ©2012 by ASI Government. All rights reserved. Single copies and volume discounts
are available from ASI Government.
8
July 2012 ASI GOVERNMENT