Market sounding is an important part of business case development. The aim of market sounding is to:
• obtain an understanding of the marketability of the project
• highlight potential commercial constraints
• begin to prepare the market for the project
• estimate or confirm the assumptions used to develop the partnership model.
The following points should be considered when undertaking a market sounding:
• the exercise must be explicitly carried out on a without-prejudice basis, and participants must be made aware that, at this stage, government has not yet approved the project. It is prudent to involve advisers with prior project experience in market sounding
• clear objectives must be set on what the exercise seeks to achieve and the type of information that is to be sought (refer to example below for general objectives)
• market sounding should canvass a broad cross section of the market. Industry representative bodies may be a useful vehicle through which market sounding may be undertaken
• think broadly about the project and about potentially interested parties, but also 'target' companies that may be interested
• before engaging in discussions with companies, ensure the aims of the project and of the market sounding are clearly established. It is important to provide sufficient information about the project to enable respondents to provide meaningful feedback. As those parties consulted may indeed be potential Bidders, it is important that information disclosed is sufficiently broad to enable respondents to gain an appreciation of the project. Information should not be so specific as to raise concerns regarding probity. It is essential that those consulted are not "spoon fed" information, but that they "do most of the talking" on the issues raised through the market sounding process
• consider holding a market forum to brief interested parties on the project, its objectives, the service requirement, public private partnership models under consideration and identified opportunities for added value (such as third party revenue)
• face-to-face meetings should be arranged with each of the companies on the contact list. Companies should be informed that the discussions will be informal and are not to be regarded as a part of the formal procurement process that may occur subsequent to the discussion
• if the project involves unusual or groundbreaking provisions/aspects, be prepared to openly discuss these if you wish to get meaningful feedback on the market's likely response
• keep an open mind and be prepared to listen
• respect confidentiality and intellectual property
• use this as an opportunity to 'market' the project as well.
| Market sounding objectives-example • Provide an outline of the project to those likely to bid; • Gain feedback from interested parties on the project, the process and the commercial structure; • Gather a wide range of views from those likely to bid; • Identify issues of concern for the private sector, so as to ensure these are addressed in a way that adds value; • Update the private sector on the indicative timetable. |
The results of market sounding should be evaluated and the project delivery options reappraised at the end of the exercise, as there may be potential implications for the scope of the project that may need to be revisited.