Early Market Engagement – Why It’s Important For Government Procurements

May 3, 2022

Good procurement is about delivering business outcomes. Governments that embrace early market engagement encourage innovation and empower the market to deliver value against these outcomes.

I’ve said this before and I will say it again. Government procurements typically benefit from early market engagement – and, sadly, we are not seeing enough of it.

What do I mean by early market engagement? It’s the process by which the government buyer seeks input from the market (i.e. the suppliers) to inform aspects of the procurement before the procurement is released. The market holds the expertise in producing solutions and delivering them. It stands to reason that government buyers can benefit from this knowledge and run a better procurement.

To understand the full value of early market engagement we first need to understand what makes a good procurement.

Ultimately, good procurement is about delivering business outcomes. Yes, government procurements must adhere to processes that ensure transparency and fairness for all businesses. But the end goal is still to buy a product or service that provides maximum value to government and best delivers the desired business requirements.

Importantly, buyers should encourage innovation and alternative solutions, which may drive better business outcomes – and this is where early market engagement comes in. By actively seeking input from the market early in the procurement process, the procurement can be structured to be inclusive of a broader range of options.

Even so, I’ve been involved in many recent procurements where market engagement has been kept at arm’s length. Further, the procurements have been run against highly detailed specifications and designed to knock suppliers out – not keep them in.

The outcomes of this approach have been sub-optimal and haven’t necessarily driven business outcomes.

The governance of procurement

Just as all organisations recognise the importance of strong governance structures for project delivery (or they should), procurements need strong governance as well.

Any business will be more successful if it aligns its procurement practices to its business strategy. To ensure procurements successfully enable business outcomes, the same types of questions need to be asked as you would for the development of a project business case:

Attaining answers to these questions is a step often skipped for procurements – perhaps because it involves a significant amount of work and evidence, including market engagement. 

For complex procurements, we sometimes see a procurement plan that answers some of these questions. However, I rarely see procurement outputs described in terms of organisational benefits – and they should.

The beauty of linking procurement outputs to organisational benefits is that you open your thinking to different ways of achieving something. 

For example, a large government agency was retendering its printing contract. Once they thought of how printing supported organisational outputs they completely rethought the model of this contract. 

When considering the need for a printing contract, they agreed it was largely about the need for communications: how government communicates internally and externally. Considering the procurement in this context opened the way for more innovative solutions – such as digital forms, broader use of service platforms (think Service Victoria), QR codes (we are all familiar with them), etc. By focusing on the desired business outcomes, the humble printing contract was transformed into something else entirely.  

This rethinking of a procurement only comes about from understanding ‘why’ government is doing a procurement, rather than ‘what’ government is buying. And when the buyer goes to the market with the ‘why’, this opens the way for market innovation.

As for preferred options and recommended solutions, these should be informed by stakeholders (the end-users) and the market. But, while government does stakeholder engagement well, government currently doesn’t do early market engagement at all well.

The market is expert in delivering a solution. Government should be expert in defining its business needs and benefits. Bringing these two aspects together should result in strong innovation.

Stages of early market engagement

Market dialogue

Entering into a dialogue with the market can be a tremendous way for government to understand how business benefits can be achieved, and in turn help to firm-up business requirements.

One of the best examples of market dialogue I saw was when the Victorian Government sought to procure a network manager. This was a complicated service that hadn’t been implemented by many other government jurisdictions.

Armed with the problem statement, desired benefits and options to achieve them, the government publicly sought interest from suppliers to participate in a dialogue around delivery of a network manager.

Open competition was ticked. Probity was managed. Great dialogue happened and government was able to form options.

The outcome of this early market engagement was actually to NOT proceed with the procurement. Through the market dialogue, it became clear that what government was trying to do would be very hard to replicate independently. It also helped to form government’s role in this space.

I often wonder, if we hadn’t proceeded with this early market dialogue, how much time and money would have been spent defining, releasing and managing a tender process that ultimately wouldn’t have delivered an outcome.

Market assessment

When government has a good understanding of business requirements, they are able to undertake a market assessment to understand the market dynamics associated with a product or service. 

A market assessment might also be used to understand the best way to approach the market – looking at cost effectiveness for all parties, for instance. Or considering opportunities for local businesses, and small to medium-sized enterprises.

I recall being involved in more than one government procurement where we released a RFT only to receive no responses or only partial responses. Had we conducted a market assessment, we would have understood the market simply couldn’t respond to our tightly wound specifications.

Market-focused Requirements

One of the most important aspects of a RFT or RFQ are the Requirements. Requirements tell the market what you want them to provide and should be firmly focused on business outcomes.

The best Requirements describe how something is to be used (related to functionality) and the impact it will have (related to outcomes), rather than how an item is to look. These are what I call market-focused requirements.

Requirements should be formed in consultation with stakeholders and also in consultation with the market. After all, as we have said, the market is the expert in how something can be achieved.

To illustrate this, I often use the concept of a train station. The business requirements relating to functionality and outcomes include passenger numbers, efficient routes, economic development (support of local businesses), creation of transport hubs, etc. These are the Requirements the tender discusses, not the number or colour of bricks, or definitive station dimensions. 

In this scenario, the market tells government, via tender responses, how best to build that train station to deliver the prescribed outcomes.

By specifying how a product or service will be used in terms of business requirements, government invites innovation – market suppliers have the freedom to nominate a solution that best meets the need. 

Overly specifying an item has the opposite effect of constraining market options for supply, and often driving up prices.

With market-focused requirements taking centre stage, a procurement can then be well positioned to ensure the business requirements can be delivered and supported over the longer term. Risks are identified, innovation is encouraged and the market is empowered to deliver value.

Early market engagement will help ensure a strong outcome for government. Furthermore, we contend it’s important for government to open a dialogue with the market as early as possible. 

Deirdre Diamante

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