Market and industry engagement

In determining how to approach the market, agencies must consider the following principles.

The overriding considerations are to ensure the method chosen:

  • will achieve value for money
  • is fair and transparent.

Agencies must also ensure:

  • there will be maximum competition in the market
  • the conditions of participation in the process are clear and concise
  • potential suppliers have time and capacity to respond to requests to the market
  • that the conditions of participation do not directly preclude potential suppliers on the basis that they have not had prior experience supplying to government
  • material submitted by potential suppliers can be managed confidentially.

The requirements are based on allowing for contemporary and simplified engagement processes to:

  • minimise red tape
  • ensure market engagement is aligned to the nature of the procurement
  • promote effective competition
  • support regional business and small and medium enterprises.

Open public tenders are no longer mandated as the default means for procuring goods and services for the public sector. Instead, agencies must consider the nature of the goods and services, the market for them, and applicable policy requirements.

When designing requirements for a procurement, agencies should consult internal rules for approaching the market (where the agency is accredited and has the systems and capability already in place) or should consult the market engagement requirements.

Design factors for market engagement

When designing a market engagement strategy, including market testing, factors agencies should consider include:

  • the nature of the goods or services being procured
  • respective risk of the goods and services and the procurement
  • contract period limits
  • timing requirements
  • capability of the market (such as the capability of suppliers to respond to a market testing process)
  • whether simple procurement methods can be used including two stage processes to reduce the resourcing impact on suppliers, especially small and medium enterprises 
  • capacity for innovative or alternative supply solutions
  • capacity of small and medium enterprises to respond, and eventually supply
  • prevailing market conditions (such as existing barriers to entry)
  • international obligations
  • legal requirements or existing public sector requirement (such as directions issued by the NSW Procurement Board).                                                                 

Engaging with industry

Better communication with businesses and enhanced transparency of government procurement actions increases industry awareness and supports industry planning to capitalise on government business opportunities.

With effective industry engagement, sourcing strategies can be better aligned with market structure and dynamics, and provide government with knowledge about new and innovative approaches, leading to improved procurement outcomes.

While industry engagement can and should occur at all phases of the procurement lifecycle, there are increased opportunities for innovation if this takes place at the earliest possible phase and prior to a specific procurement solution being requested from the industry.

The following principles are likely to apply in most industry engagements:

  • be well-informed right from the outset - a procuring agency needs to be an informed buyer. A solid and contemporary understanding of the relevant industry sector is integral to ensure the procuring agency targets their industry engagement activities accordingly.
  • have clear objectives - clear definable objectives provide a focus point and structure to industry engagement activities.
  • be broad based and not exclusive - engaging with the widest range of suppliers encourages innovation and refutes any suggestion of favouring particular suppliers or products.
  • be open about past procurement activities, but focus on the future - while potential suppliers will usually be assisted by understanding how the agency has approached the market previously, industry engagement is better focussed on future ways in which anticipated business needs may be satisfied.
  • be transparent, even-handed and consistent - to preserve the Government’s reputation and to ensure continued interest in government procurement activities, it is important that any industry engagement process is open and transparent.
  • have the highest level of probity and behaviour - it is imperative that procuring agencies maintain the highest standards of probity and behaviour throughout the industry engagement process so as to reinforce their neutral stance.
  • handle others’ intellectual property properly - dealing with intellectual property appropriately is an essential part of all engagement activities.
  • keep good records - good record keeping benefits the agency and suppliers as it promotes confidence in the industry engagement process and removes the evidentiary burden when it comes to justifying procurement decisions.

Further guidance, view or download the Industry Engagement Guide.

Examples of market engagement methods

Possible market engagement methods include:

Method

Description

Competitive Dialogue Process

This process is designed for particularly complex procurements, where the agency is not objectively able to define the ‘technical means‘ capable of satisfying its needs or objectives. The principal undertakes market testing, a prequalification process and invites short listed candidates to participate in a dialogue until the principal identifies one or more solutions that are capable of satisfying its requirements and then invites suppliers to respond.

Strategic commissioning

Strategic commissioning is broader than contracting, purchasing or procuring. It involves designing commissioning systems by which governments can access, deepen and develop supply markets for public services. These supply markets range across public, private and not for profit organisations. Effective commissioning typically requires strategic analysis of service needs, design of commissioning arrangements, and choice of procurement objectives, contracting models, and service delivery methods.

Request for Tender (RFT)

An engagement process whereby qualitative and quantitative specifications are communicated to the market. The market responses are evaluated for selection.

Request for Information (RFI)

Request for Proposal (RFP)

A formal request to the market to respond with information about a particular market, good or service. The next step is to obtain highly detailed information from a small number of interested, qualified suppliers using RFPs. RFIs differ from an Expression of Interest given they do not necessarily end with an assessed shortlist of suppliers or end in a contractual arrangement – see below.

Request for Quote (RFQ)

An engagement process whereby only prices are sought for a particular good or service. RFQs are generally used for low cost / low risk engagements; or where a panel contract or prequalification scheme has been established and the due diligence on risk has already been carried out and the terms and conditions have been pre-established. Risk assessment will be conducted by agencies.

Expression of Interest (EOI)

Used for the pre-registration of tenderers for a specific work, product or service. This process usually leads to the identification of a short list of tenderers which are invited to tender for the work, product or service. An EOI can be used to assess market capability and provide market input to the preparation of a subsequent market engagement.

Registration

A basic due diligence process, best achieved electronically, used for low risk procurement up to an amount considered appropriate for a respective category. Only basic commercial information and financial checks are required for a supplier to be registered. The supplier’s agreement to the registration process defines future transaction terms and conditions.

Prequalification

This builds upon the registration details and is best for low risk/high spend volume commitments. The Principal undertakes an assessment of the applicant, and puts the successful applicants on a panel for all future procurement. Extra level of qualification requirements will be added based on respective risk of category, i.e. more risk = more requirements. The Principal will only invite the suppliers listed on the panel to submit a quotation on its pricing. Contract negotiations are not allowed.

Where an agency is intending to conduct a tender (open, multi-stage or limited), the Market Approaches Guide (PDF, 603 KB) may provide useful guidance to identify the approach to market that best fits their procurement needs.

It is generally expected that before an agreement or contract is awarded, that either quotes or tenders have been evaluated and a preferred supplier has been identified, based on value for money.