Mar­ket inves­ti­ga­tion

Dur­ing the prepa­ra­tion for a pro­cure­ment pro­ce­dure, the con­tract­ing author­i­ty is rec­om­mend­ed to con­duct a mar­ket analy­sis in order to get a broad overview of the offers avail­able on the mar­ket. In this way, a smooth flow of com­pe­ti­tion can be achieved and all bid­ders are giv­en equal oppor­tu­ni­ties. It is there­fore impor­tant to pro­vide suf­fi­cient rea­sons as to which man­u­fac­tur­er can best imple­ment the client’s ideas. Direct award­ing of con­tracts plays a major role for some cus­tomers. This involves nego­ti­at­ing with just one bid­der. How­ev­er, this could have seri­ous con­se­quences for review bod­ies and cause a kind of dis­crim­i­na­tion against oth­er bid­ders.

What exact­ly is a mar­ket inves­ti­ga­tion and how does it work?

There is no pre­cise spec­i­fi­ca­tion of how a mar­ket inves­ti­ga­tion is car­ried out. One can say only that one inves­ti­gates, col­lects and doc­u­ments rel­e­vant infor­ma­tion for pro­cure­ment objects (goods, com­modi­ties, ser­vices) dur­ing a mar­ket inves­ti­ga­tion. Thus the deter­mined offers of the exist­ing mar­ket can be tak­en as a basis for the cal­cu­la­tion of the client, in order to be able to adapt invi­ta­tions to ten­der in the best pos­si­ble way to the pro­cure­ment desires of the pub­lic clients.

In most cas­es, a mar­ket inves­ti­ga­tion is car­ried out pri­or to an award pro­ce­dure. When con­duct­ing an award pro­ce­dure, it must be strict­ly observed that it is not only a cost and price deter­mi­na­tion for the pur­pose of mar­ket recon­nais­sance. Oth­er­wise, its imple­men­ta­tion is inad­mis­si­ble.

In addi­tion, a mar­ket inves­ti­ga­tion must not be con­fused with a pro­cure­ment. There­fore, it is essen­tial to clear­ly com­mu­ni­cate the non-bind­ing nature of the explo­ration from the out­set and to keep doc­u­men­ta­tion to back it up dur­ing the process. It is impor­tant not to unin­ten­tion­al­ly cross the thresh­old into a pro­cure­ment process. Obtain­ing infor­ma­tion is not a prob­lem if it does not result in the award of a con­tract or con­crete nego­ti­a­tions. This is to pre­vent a com­pet­i­tive advan­tage in favor of a par­tic­u­lar bid­der.

Why con­duct a mar­ket inves­ti­ga­tion at all?

In prin­ci­ple, it is impor­tant for the client to obtain the advan­tages and dis­ad­van­tages of var­i­ous prod­ucts and to com­pare them con­sci­en­tious­ly in order to obtain a suit­able offer. This infor­ma­tion can be researched by the client on the Inter­net or request­ed direct­ly from com­pa­nies. It is impor­tant to seek the advice of inde­pen­dent experts, author­i­ties, etc., in order to rule out dis­crim­i­na­tion against bid­ders. There are many rea­sons for con­duct­ing a mar­ket sur­vey.

Among oth­er things, a mar­ket inves­ti­ga­tion is very use­ful for deter­min­ing pro­cure­ment needs. How exact­ly this need is defined always depends on the con­cep­tions of the respec­tive clients them­selves. It is impor­tant for the client to describe the con­tract items in detail and clear­ly in order to com­pare the offers of the bid­ders with each oth­er in the best pos­si­ble way.

Fur­ther­more, the mar­ket inves­ti­ga­tion helps in the prepa­ra­tion of the ten­der doc­u­ments. Not only can it sim­pli­fy the draft­ing of a spec­i­fi­ca­tion, it can also help to deter­mine and define the rel­e­vant suit­abil­i­ty cri­te­ria of the com­pa­nies to be involved in the pro­ce­dure.

Fur­ther­more, through the analy­sis of the mar­ket, the best price-per­for­mance ratio is to be deter­mined. This is achieved by deter­min­ing award cri­te­ria, such as qual­i­ty, price, prof­itabil­i­ty, tech­ni­cal val­ue, etc.

Anoth­er rea­son is the con­tract val­ue esti­mate. This involves deter­min­ing whether the con­tract val­ue is above the thresh­old val­ue (EU pro­cure­ment law) or below the thresh­old val­ue (nation­al pro­cure­ment law). Based on the expect­ed total remu­ner­a­tion, the con­tract val­ue of the ser­vices to be pro­cured is esti­mat­ed.

Last but not least, it should be men­tioned that a mar­ket inves­ti­ga­tion is also impor­tant for deter­min­ing the right type of award pro­ce­dure and the pos­si­ble group of can­di­dates and/or bid­ders.

Duty or no duty?

Whether or not there is an oblig­a­tion to con­duct a mar­ket inves­ti­ga­tion is high­ly con­tro­ver­sial in case law, par­tic­u­lar­ly if the con­tract­ing author­i­ty wish­es to invite ten­ders on a manufacturer‑, process- or prod­uct-spe­cif­ic basis.

On the one hand, the Ros­tock High­er Region­al Court and the Düs­sel­dorf High­er Region­al Court decid­ed not to assume any oblig­a­tion to con­duct a mar­ket inves­ti­ga­tion. On the oth­er hand, the Jena High­er Region­al Court, the Celle High­er Region­al Court and the Low­er Sax­ony Pro­cure­ment Cham­ber have decid­ed the oppo­site. They are of the opin­ion that it is essen­tial to obtain an overview of the mar­ket and final­ly to doc­u­ment the deci­sion in detail on this basis.

The pre­vail­ing opin­ion does not require the con­tract­ing author­i­ty to con­duct mar­ket inves­ti­ga­tions or mar­ket analy­ses pri­or to a con­tract spec­i­fi­ca­tion with the aim of inves­ti­gat­ing whether oth­er prod­ucts are pos­si­ble or “whether oth­er — alter­na­tive — tech­ni­cal approach­es are con­ceiv­able”. If, how­ev­er, a nego­ti­at­ed pro­ce­dure with­out a com­pet­i­tive bid­ding process is to be car­ried out, stricter require­ments must be imposed due to the spe­cial jus­ti­fi­ca­tion require­ments for the choice of this pro­ce­dure, accord­ing to which a mar­ket inves­ti­ga­tion must always be car­ried out. In this respect, the effi­cien­cy effects of the free mar­ket must be uti­lized in order to have exten­sive knowl­edge of alter­na­tive prod­ucts. How­ev­er, there may be a nego­ti­at­ed pro­ce­dure with­out a com­pet­i­tive bid­ding process in which no oblig­a­tion to con­duct a mar­ket inves­ti­ga­tion is required. This occurs in excep­tion­al cir­cum­stances where there are no alter­na­tives with regard to the sub­ject mat­ter of the pro­cure­ment.

In prin­ci­ple, there is no stan­dard­ized oblig­a­tion for a mar­ket inves­ti­ga­tion, but it should nev­er­the­less be car­ried out and doc­u­ment­ed in detail pri­or to the ini­ti­a­tion of an award pro­ce­dure.

What is the IBV?

The IBV (Inter­essen­bekun­dungsver­fahren or Expres­sion of Inter­est Pro­ce­dure) has many mean­ings, which is why the con­nec­tion to the mar­ket inves­ti­ga­tion must be made clear here. On the one hand, it describes an infor­mal pro­ce­dure for mar­ket explo­ration, in which con­cept pro­pos­als or solu­tions are pre­sent­ed by inter­est­ed par­ties. Here an instruc­tion is essen­tial, with which it emerges that it con­cerns no pro­cure­ment inten­tion, but only a mar­ket analy­sis.

On the oth­er hand, the IBV means that pub­lic con­tract­ing author­i­ties con­sid­er hav­ing future tasks per­formed by pri­vate par­ties. There­fore, pri­vate providers are giv­en the oppor­tu­ni­ty to demon­strate whether and to what extent they can per­form pub­lic tasks or eco­nom­ic activ­i­ties serv­ing pub­lic pur­pos­es as well or bet­ter than the pub­lic sec­tor itself.

What is direct pro­cure­ment and when may it be used?

In the case of direct award, nego­ti­a­tions are con­duct­ed exclu­sive­ly with one bid­der, which means that no com­pet­i­tive bid­ding process is car­ried out. This makes it all the more impor­tant to be able to show good rea­sons for award­ing the con­tract. There are indeed some pos­si­bil­i­ties where a direct award is rec­om­mend­ed or even nec­es­sary. For exam­ple, if no suit­able bid is sub­mit­ted in a pro­ce­dure or if the require­ments of the con­tract­ing author­i­ty are not met, the con­tract can be award­ed by direct award. The same applies to urgent awards, to sup­plies for research and devel­op­ment pur­pos­es, and to con­tracts which could lead to dis­pro­por­tion­ate dif­fi­cul­ties (e.g. the pur­chase of dif­fer­ent tech­ni­cal fea­tures). Anoth­er rea­son could arise if only one com­pa­ny can ful­fill the order (e.g. unique work of art).

As a mat­ter of prin­ci­ple, you should always ensure that there is enough evi­dence of the excep­tion­al sit­u­a­tion and detailed doc­u­men­ta­tion in the case of a direct award. It is impor­tant to avoid unlaw­ful direct awards. How­ev­er, if this is the case, claims for dam­ages may have to be expect­ed.

How do I com­pen­sate for a com­pet­i­tive advan­tage?

A client is free to decide how to obtain an overview of the mar­ket. For exam­ple, infor­ma­tion can be obtained from com­pa­nies or researched on the Inter­net. In doing so, it is impor­tant not to vio­late the prin­ci­ple of com­pe­ti­tion. This is because the prin­ci­ple of com­pe­ti­tion states that a fair mar­ket can only exist with equal oppor­tu­ni­ties and that the pro­cure­ment process should be unbi­ased and free from dis­tor­tion. If a com­pa­ny obtains spe­cial knowl­edge, either inten­tion­al­ly or unin­ten­tion­al­ly, as a result of the mar­ket inves­ti­ga­tion pri­or to the award pro­ce­dure, appro­pri­ate com­pen­sato­ry mea­sures must be ini­ti­at­ed by the con­tract­ing author­i­ty. There are a num­ber of ways to com­pen­sate for these advan­tages. For exam­ple, the results and how they were obtained can be dis­closed to all poten­tial bid­ders and the bid dead­line extend­ed accord­ing­ly. Like­wise, the con­tents of the dis­cus­sions between the respec­tive com­pa­nies and the con­tract­ing author­i­ty should be com­pre­hen­sive­ly doc­u­ment­ed. If this infor­ma­tion is dis­closed in the award pro­ce­dure, it is no longer pos­si­ble to speak of a com­pa­ny hav­ing an advan­tage. If all pos­si­bil­i­ties for com­pen­sa­tion fail, the pre­qual­i­fied com­pa­ny can be exclud­ed from the award pro­ce­dure as a last resort.

Mar­ket inves­ti­ga­tion — Pub­lic Pro­cure­ment Law Ency­clo­pe­dia

*This legal tip is no sub­sti­tute for legal advice in indi­vid­ual cas­es. By its very nature, it is incom­plete, it does not relate to your case, and it also rep­re­sents a snap­shot, as the legal basis and case law change over time. It can­not and does not cov­er all con­ceiv­able con­stel­la­tions, serves main­te­nance and ini­tial ori­en­ta­tion pur­pos­es and is intend­ed to moti­vate you to clar­i­fy legal issues at an ear­ly stage, but not to dis­cour­age you from doing so.