Market Analysis Before Procurement: Why It Matters and How to Do It

Market analysis — a structured assessment of the supply market before a procurement commences — is the foundation of a successful procurement strategy. Without understanding who the potential suppliers are, what solutions are available, what the realistic price range is, and what the market's capacity and appetite for the requirement might be, an authority risks issuing a specification that no supplier can meet, setting a budget that bears no relationship to market prices, or structuring a contract that no reputable supplier will bid on the terms offered.

EU Directive 2014/24/EU Article 40 explicitly provides for pre-market consultation (referred to as preliminary market consultation in the Directive) and sets out the conditions under which its results may be used in the procurement. The Directive recognises that well-conducted market research improves procurement outcomes without distorting competition, provided appropriate safeguards are applied. Irish OGP guidance reinforces this position and encourages authorities to invest in market understanding before designing their procurement approach.

A comprehensive market analysis for a significant procurement should address: the identity and characteristics of potential suppliers (number of firms, size distribution, Irish vs international presence, specialist vs generalist); the solutions available in the market and their fitness for the authority's need; the commercial models through which the services or products are typically provided (e.g., subscription vs licence vs purchase; lump-sum vs time-charge vs output-based); the range of market pricing and the basis on which costs are typically built up; capacity constraints or market concentration issues that could limit the competitive field; and sustainability characteristics of the supply market.

The analysis should be documented and should feed directly into the procurement strategy decision — the choice of procedure, contract structure, term, lot structure and evaluation criteria. A procurement strategy that is not grounded in market evidence is a significant risk: the OGP and C&AG have both cited poor procurement strategy as a root cause of procurement failures. The market analysis document should be retained in the procurement file as evidence of the authority's pre-procurement diligence.

Where market analysis involves direct engagement with potential suppliers — through requests for information, industry days, or one-to-one meetings — the authority is conducting a preliminary market consultation under Article 40 of the Directive. This is entirely permissible, but the authority must ensure it does not distort competition. In practice this means: treating all participants equally; not sharing one supplier's proprietary information with another; documenting all meetings and communications; and building in safeguards to ensure that suppliers who participated in the consultation are not advantaged in the subsequent competition.

Where a supplier who participated in preliminary market consultation has prepared documents used in the procurement — for example, a specification drafted by a potential supplier, or a cost model developed by a consultant with a conflict of interest — the authority must take measures to ensure competition is not distorted. This may include sharing the documents with all tenderers, adjusting time limits to allow all tenderers equivalent time to understand the documents, or excluding the participant from the subsequent competition where no other measure would address the distortion.

Two common formats for preliminary market consultation in Ireland are the industry day and the request for information (RFI). An industry day is a structured presentation and Q&A event, typically held at least six months before a major procurement, where the authority presents its anticipated requirements and invites market feedback. Industry days are most effective for complex or novel requirements where the authority is still forming its procurement strategy and wants to understand market capabilities and commercial models before defining the specification.

An RFI is a written process where the authority issues a structured questionnaire to potential suppliers seeking information about their capabilities, solutions, pricing models and views on the proposed specification. RFIs are useful where the authority wants breadth of market coverage (many potential suppliers) and a written record of market responses that can be analysed systematically. For routine or repeat procurements where the market is well understood, an abbreviated market analysis reviewing contract notices and award data from the OGP and TED may be sufficient without formal supplier engagement.