The more prepared a contracting authority is when launching a new contract award procedure the better the potential outcome.  A key part to this is fully understanding the market players and market conditions.   A major challenge in this space is to ensure the understanding derives from fair and open engagement and thankfully the European Commission envisaged this and catered for this in the procurement directives.

Preliminary market consultations, also known as market dialogue, market soundings or even technical dialogue, are addressed under Article 40 of the EU Public Sector Directive (2014/24/EU). These consultations are valuable for achieving optimal procurement outcomes but must be handled carefully to avoid issues down the line and ensure compliance with the legal framework.

The best way to manage potential issues is to carry this out via public advertising using a Pre-Market Consultation (PMC) process on eTenders supported by a publication of a Prior Information Notice (PIN) on eTenders and OJEU.  The PMC lets you engage interactively with the market asking for information from market players, while the PIN gives maximum publicity to the process.

The helps gather information on market capacity, availability and ability to meet the contracting authority’s requirements. Consultations typically occur after identifying the authority’s high-level needs but before preparing tender documents and deciding on procurement procedures, as the dialogue outcomes inform these decisions.

Market dialogue is extremely useful in enhancing the contracting authority’s market knowledge, especially in innovative or rapidly changing markets. It supports a more informed decision on procurement design based on the market response.  Moreover, it is useful for pre-testing the needs and requirements of the contracting authority against market capabilities, including against cost assumptions and impacts.

It can also be beneficial in informing the market on the contracting authority’s needs and goals hence promoting capacity building among suppliers. This is even more important when the contracting authority wants to achieve sustainability or innovation goals.  Additionally, the value of a preliminary consultation provides advance warning to the market of a potential upcoming procurement to maximise participation and competition.

However, notwithstanding the clear benefits, there are also some risks that must be considered.

The prior involvement of a candidate or tenderer in such a preliminary activity can distort the competition. Hence, as required by the Directive (Art. 40), the contracting authority must take all the necessary actions to prevent any situation that may give rise to competitive advantages. This includes advertising the market soundings exercise appropriately and sharing consultation information with all interested parties.

Favouring suppliers who participated in the process or allowing them to influence specifications is another risk. This can be mitigated by ensuring everybody in the process is heard and not tailoring the future procurement requirements to what only one or a few operators can offer, thus preventing any competition distortion.

Market dialogue can lengthen the procurement process, however, good time management and appropriate planning are key to ensure that the procurement is carried out effectively. Market dialogue can be time-consuming and may involve resources and it is important to choose the most appropriate dialogue method so not to waste time and money. For simple procurements, the completion of short, focussed questionnaires combined with online meetings may suffice,  whereas for more complex procurements in-person meetings and even workshops may be appropriate although group sessions should be managed for the risk of revealing competitors, posing risks of collusion and market distortion.  One-on-one meetings are the most effective means of engagement.

In conclusion, while preliminary market consultations offer significant advantages in enhancing market knowledge, shaping procurement procedures, and promoting competition, they must be conducted with caution to mitigate potential risks. Ensuring transparency, preventing competitive distortions, and managing time and resources effectively are crucial for a successful and compliant market dialogue. By balancing these factors, and managing well, contracting authorities can leverage market dialogue to achieve optimal procurement outcomes, fostering innovation and sustainability while maintaining fair competition.

Written by: Francesca Novello, Procurement Consultant, Greenville Procurement