Researching the Market for the Latest Pricing Information
- What is market research?
- What market research information regarding a proposed option should the COR submit to the CO?
- What types of market research should the COR consider conducting?
- What if market research information is not available?
- Documenting the Option in the COR Contract File and Providing Written Data to the CO
- What kind of documentation about an option should the COR develop and provide to the CO?
What is market research?
Market research is performed by the COR to collect, organize, analyze, present, and maintain data for the purpose of maximizing the capabilities, technology, and competitive forces of the marketplace to meet an organization's needs for supplies or services. When the government must decide whether or not to exercise an option, market research provides information regarding pricing and availability of the additional requirements on the open market. This information is needed to determine the most advantageous method of fulfilling the requirementexercising the option or purchasing the requirement on the open market. Refer to Chapter 3, Conducting Market Research, for additional information on market research.
What market research information regarding a proposed option should the COR submit to the CO?
The COR will submit to the CO market research data that confirm that:
The option price is lower than prices currently offered by other vendors on the open market
The option otherwise represents the most advantageous method of fulfilling the need, price and other factors considered.
The following other factors should also be considered in determining whether the option is economically advantageous:
Any economic price adjustment clause included in the contract that affects the option price
The need for continuity of operations
The potential cost of disrupting operations.
The CO must consider the current market price for the requirement and whether the option price is compatible with current market conditions. The option price does not have to be the lowest available price in order to exercise the option. The CO may decide that the need for continuity of operations, and the potential cost of disrupting those operations, might override the advantage of a lower price in certain circumstances. Remember, if the CO decides not to exercise the option in order to pursue a lower price on the open market, a new contract requirement must be developed, awarded, and delivered. There is always a possibility that problems with that process could arise, in terms of delayed delivery or even non-delivery. Therefore, even if the COR were to find a lower price for the requirement on the open market during market research, it may still be more advantageous to exercise the option, all things considered.
What types of market research should the COR consider conducting?
To obtain information on the latest commercial market pricing and industry trends, the COR may employ one of three types of market research:
Continuous market research. This type of research is performed on an ongoing basis and is not related to a specific acquisition. It can provide the COR with current knowledge about:
- Changes, advances, and trends in technology
- Products of interest
- Industry capability (i.e., the state of the art in a particular industry)
- Product availability
- Competitive market forces
- Alternative sources.
Initial market research. Initial market research is related to a specific acquisition and can determine whether sources of commercial items are available to satisfy the specified need. The COR can also use information gleaned from initial market research to determine whether the government's requirement could be modified (to a reasonable extent) to allow the use of commercial items.
Subsequent market research. Subsequent market research is conducted prior to the solicitation of offerors. This research helps the COR determine if the requirement fits existing market conditions by identifying the standards and practices of commercial firms.
What if market research information is not available?
The COR should notify the CO when needed information cannot be obtained through market research.
Documenting the Option in the COR Contract File and Providing Written Data to the CO
What kind of documentation about an option should the COR develop and provide to the CO?
The COR's written documentation should justify the COR's position and can be in the form of a letter, memorandum, or report. The documentation should include:
A rationale for exercising the option
The option period, as stated in the contract
A technical evaluation that indicates that the option meets the government's requirement
A funding document or form that certifies that funds are available to exercise the option.
The COR should submit this information to the CO within the timeframe specified in the contract.