Government Acquisitions: Understanding Commercial Products & Services, Schemes and Mind Maps of Business Accounting

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Market Research Gathering Information about Commercial Products and Services SD-5 Defense Standardization Program Office December 2018 STDZ Contents Foreword 1 Background 2 What Is Market Research? 2 Why Do Market Research? 2 When Is Market Research Done? 5 Who Should Be Involved in Market Research? 7 Program Manager, Technical Specialist, Project Officer 8 User 8 Logistics Specialist 9 Testing Specialist 9 Cost Analyst 9 Legal Counsel 9 Contracting Officer 9 Guiding Principles 10 Start Early 10 Define and Document Requirements 10 Refine as You Proceed 10 Tailor the Investigation 11 Repeat as Necessary 11 Communicate 11 Involve Users 11 The Market Research Process 12 Strategic Market Research (Market Surveillance) 13 Identify the Market or Market Segment of Interest 13 Identify Sources of Market Information 14 Collect Relevant Market Information 16 Document the Results 17 Tactical Market Research (Market Investigation) 18 Summarize Strategic Market Research 18 Formulate Requirements 18 Identify Sources of Information 20 Collect Product or Service Information from Sources 21 Collect Information from Product or Service Users 24 Evaluate the Data 24 Document the Results 28 Other Considerations 30 Amount of Information to Gather 30 Procurement Integrity Act 30 Paperwork Reduction Act 31 Cost of Market Research 32 Appendix A. Types of Information Available on the Internet 33 Appendix B. Examples of Tactical Information 36 ii 3 require agencies to conduct market research under the following circumstances: • Before developing new requirements documents for an acquisition • Before soliciting offers for acquisitions with an estimated value in excess of the simplified acquisition threshold • Before soliciting offers for acquisitions with an estimated value less than the simplified acquisition threshold when adequate information is not available and the circumstances justify its cost • Before soliciting offers for acquisitions that could lead to a bundled contract • Before awarding a task or delivery order under an indefinite-delivery/indefinite quantity contract for a noncommercial item in excess of the simplified acquisition threshold • On an ongoing basis, and to take advantage to the maximum extent practicable of commercially available market research methods, to identify the capabilities, including the capabilities of small businesses and new entrants into federal contracting, that are available in the marketplace for meeting agency requirements in furtherance of a contingency operation or defense against or recovery from a nuclear, biological, chemical, or radiological attack or for disaster relief. In addition, FAR Part 12, “Acquisition of Commercial Items,” requires that market research be conducted to determine the availability of commercial items or nondevelopmental items that could meet the requirements. This regulatory guidance implements the federal government’s preference for the acquisition of commercial items contained in Title VIII of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355). The above requirements apply to all federal agencies. For DoD, the Defense Federal Acquisition Regulation Supplement (DFARS) 210.001, adds two additional circumstances under which market research is required: • Before soliciting offers for acquisitions that could lead to a consolidation of contract requirements as defined in DFARS 207.170-2 • Before issuing a solicitation with tiered evaluation of offers (Section 816 of Public Law 109-163). Even if market research was not required by law and regulation, it would be a smart business practice to follow. Market research is a commercial business practice used by firms to identify trends, customer needs and wants, competitor practices, and sources for their purchasing needs. Market research plays a key role in the requirements determination and definition process. For example, when planning the acquisition of a new information technology (IT) system, DoD acquisition personnel receive the user’s requirements for the system’s performance, and sometimes the requirements are incompatible with each other or conflict with other systems. Through trade studies, market research can help users sort out what requirements can be 4 fulfilled, what requirements can be fulfilled within cost objectives, and what requirements can be fulfilled given schedule constraints. By addressing all of these issues, market research enables the user to make informed decisions about the tradeoffs among all of the alternatives. Users who fail to consider these issues when defining the requirements risk investing in a system that may encounter technical difficulties during manufacturing or operation, have long production lead-times, and be excessively costly to produce, operate, and support. DoD personnel involved in the acquisition process also need to use market research to optimize the potential use of commercial items, commercial services, and nondevelopmental items to meet agency needs. DoD no longer relies extensively on government-unique products and services to meet its needs. Commercial products and services are increasingly the preferred choice when DoD (and the federal government in general) makes purchase decisions. This reliance on commercial products and services is due not only to the acquisition regulations, which encourage the use of commercial products and services, but also to business reengineering and outsourcing. DoD is focused on its core mission, national defense, with many supporting functions being handled by commercial firms. In the service arena, many tasks that were once performed by DoD civilian or military personnel, such as maintenance and repair, logistics, and management support, are now performed by commercial contractors. In fact, the federal government, including DoD, awards more contract dollars each year for services than it does for products. Market research is essential for defining service requirements and learning about the capabilities of commercial firms to provide these services. For many products, DoD research and development (R&D) no longer leads the commercial market. With the rapid technical advances occurring in the commercial marketplace, it is vital for DoD to understand those markets, identify the sources, and insert those technologies into weapons systems. In a global marketplace where all nations have access to the same technology, the military advantage will belong to those who can identify and capture state-of- the-art technology, get it into weapons systems, and successfully field those systems first. Using commercial products in weapons systems will also lower acquisition costs and shorten development time. Market research plays a critical role in identifying commercial products and sources. In today’s dynamic acquisition environment, in which use of commercial products and services is increasingly important and necessary, market research is a process used for doing the following: • Understanding commercial markets, competitive forces, and potential sources • Finding solutions that satisfy agency requirements • Identifying opportunities for using commercial items or services to meet agency needs • Determining whether commercial products or services can be modified or adapted to meet the special needs of an agency • Determining the availability of other nondevelopmental items to meet agency 5 requirements (see SD-2, DoD Acquisitions Buying Commercial and Nondevelopmental Items) • Understanding product cycles and the way new technology is introduced into commercial products • Developing product descriptions, statements of work, and statements of objectives that allow companies to offer their commercial products and services in consonance with commercial practices • Shaping acquisition strategies, requirements, and tradeoffs • Understanding the costs of various alternatives • Developing support and test plans that accommodate commercial practices • Determining the extent to which commercial markets can support other federal government objectives, such as providing opportunities for small and disadvantaged businesses, meeting environmental goals, and using domestic sources • Crafting solicitation and contract terms, conditions, and evaluation factors that recognize commercial business practices and encourage competition. WHEN IS MARKET RESEARCH DONE? The answer to this question depends on the type of market research, as well as the type and complexity of the acquisition. Market research can be broken down into two interrelated, but distinct, types: strategic market research (market surveillance) and tactical market research (market investigation). Strategic market research involves a broad study of the market and sources, whereas tactical market research is focused on answering specific questions about products, services, or capabilities in the market. Both types of market research are discussed in more detail later in this document. Strategic market research is conducted continuously throughout the acquisition process. It may take place even before an acquisition program exists and continue after it ends. Strategic market research enables acquisition, engineering, project management, and other personnel to stay informed about overall market developments, trends, and capabilities. During strategic market research, any identified users’ requirements need to be kept in mind. Tactical market research is conducted at specific points during the acquisition process, which will vary with the scope and complexity of the acquisition. Tactical market research is designed to provide in-depth information to answer specific questions about the capabilities, products, or services available in the market. These questions are derived from the requirements definition. Users’ requirements need to be continually considered when doing tactical market research. In large, complex weapons systems, market research is done throughout the acquisition process, beginning with the initial capabilities document developed during the concept development phase. In early phases, both strategic and tactical market research can be used to shape the acquisition process. The information gleaned from market research will affect 8 research related to their area of expertise. Your participation may vary, depending on your organization and the types of products or services for which you are responsible. On large and complex acquisitions, a team effort is usually the best approach, because many functional areas may need information gathered during market research. Conversely, on small, low-dollar acquisitions, only one person may be involved in market research. Consider the factors that will affect the success of the entire acquisition when you identify who must have input to the market investigation. What information is needed to make the decision to buy or not buy from the commercial market? To prepare the product or service description, you need to know the performance characteristics upon which products and services are valued and distinguished from one another. If a product needs follow-on support, such as spare parts and repair, you will need to know the characteristics of the follow-on support system. Is third- party testing used? What business practices are standard? What practices are standard for the insertion of new technology? The market research process lends itself to a team effort because of the many aspects that may be involved. The team may be composed of the following specialists as appropriate. Program Manager, Technical Specialist, Project Officer Depending on the stage of the acquisition and the type of acquisition, this person may be the program manager, the technical specialist, or the project officer. The program manager defines and executes the acquisition strategy. He or she may join a market research team in the early stages of the acquisition, as the materiel developer representative, to better understand the analysis of alternatives and other market factors affecting the acquisition. The technical specialist or project officer has overall responsibility for market research after concept development. That individual may translate the requirement into a product description (commercial item description, statement of work, or specification). The technical specialist’s base of knowledge of the product and industry ensures that the product or service meets the identified need. Because he or she identifies the potential tradeoffs and product modifications that the users and the potential suppliers will consider, the technical specialist must be extremely conscious of the cost-quality tradeoff. User The user—the customer—must be satisfied with the product’s performance or the service provided. The user has four roles: • Make the requirements as clear and precise as possible during requirements definition • Evaluate whether the potential product can operate in the environment in which it must function (or whether the proposed service will satisfy the needs) • Refine the requirement and consider tradeoffs to allow for the purchase of commercial items, commercial services, or nondevelopmental items • Be actively involved throughout the market research process. 9 Market research is also important to the user during the preparation of initial capabilities and capabilities development documents. Market research enables the user community, in conjunction with the technical community, to identify acceptable risk or leading-edge technologies for systems to provide “leap-ahead” capabilities. Logistics Specialist The team may need a member who is experienced in support issues such as spare parts, maintenance, and warranties for the potential commercial product or service. Initiatives, such as contractor logistics support and performance-based logistics, are transferring many logistics functions to contractors. Market research may be required to address various aspects of procurements related to such initiatives. The logistics specialist can identify the information that needs to come from the market investigation on the existing support system and the support- related aspects of the product or service. Testing Specialist In a commercial item acquisition, the emphasis is on T&E and past performance, rather than on R&D. The testing specialist can use market research to obtain insight into the validity and relevance of outside testing results and to help specify the information that will be needed to address the criteria defined for operational testing. The testing specialist can also use market research to identify commercial entities that are capable of performing T&E services, as well as organizations that can accredit other quality assurance organizations. In addition, the specialist can evaluate whether a potential product can operate in the required environment. Cost Analyst The cost analyst can use market research to review and compare the affordability aspects of various alternative solutions to meet a DoD requirement. The cost analyst may perform market research on cost or price factors in order to assist the contracting officer with evaluating offers. Legal Counsel Legal counsel can perform market research to determine whether commercial business practices (such as the Uniform Commercial Code) conflict with federal government contract laws and regulations. Counsel may also investigate trade-related issues, export practices, patents and intellectual property rights, corporate ownership and merger issues, labor practices, and other legal developments in the market that may affect the acquisition. Contracting Officer The contracting officer can use market research to identify information on market conditions, general business practices, company information, pricing, and the contract terms and conditions needed to successfully carry out the acquisition. 10 Guiding Principles From the preceding discussion, it should be apparent that market research applies to a wide variety of products and services across the federal government and to both highly complex systems acquisitions and routine purchases. There is no “one-size-fits-all” approach; market research must be adapted to fit the circumstances. Here, we present some guiding principles to keep in mind when designing a market research effort. These principles apply to most market research efforts regardless of size, scope, or complexity. START EARLY Begin market research early, while the requirement is still flexible. In a major systems acquisition, begin market research prior to Milestone A, while the functional needs are being defined and in support of the initial capabilities document. Additional research will be performed later to identify subsystems or components during the design of development programs and to get more specific details about technical characteristics and market practices. On smaller, routine acquisitions, begin market research during the presolicitation phase when requirements are being developed and refined. Starting early helps to ensure that the user defines and documents the requirements appropriately. If you are a technical specialist, a project officer, or another individual responsible for a product or service area, you will need to keep current with the latest developments in the market. You should consider market research to be a continuous process, occurring whether or not an acquisition program exists. DEFINE AND DOCUMENT REQUIREMENTS Early market research results are invaluable when negotiating reasonable requirements with the user. Market research information can help the user understand technological limitations and commercial practices. Documenting the range of alternatives will help the user define a set of requirements that will both meet the need while being technically feasible to produce under the constraints of time and budget. REFINE AS YOU PROCEED The research should always proceed from the general to the specific. Start at the strategic level by examining the overall market, then move to the tactical level by using the information gained at the strategic level to focus your efforts. Acquire a little bit of information on many companies, and the products or services they offer, and a lot of information on the few products or services that seem likely to meet the requirement. The market research should be structured to acquire 13 information on the internet is free. However, some resources require subscriptions, per-use charges, or other fees; costs vary with the type of information provided, the number of services (resources) used, and the number of users in your group or office. Appendix A lists some of the types of information available on the internet; some types are useful for strategic market research, some for tactical market research, and some for both. Ultimately, the goal of both strategic and tactical market research is to provide acquisition personnel with enough knowledge about the market to make good decisions. Market research will have a significant impact on the acquisition strategy, the requirements, and the business processes needed to successfully contract for the desired product or service. Below, we address the specific steps required for both types of research. STRATEGIC MARKET RESEARCH (MARKET SURVEILLANCE) Strategic market research involves activities that result in a broad understanding of markets, technologies, business developments, and the products or services of interest. Strategic market research is an ongoing process and is usually not focused on a single acquisition. The goal of strategic market research is to develop a base of knowledge about the market area of interest and its products or services. This base of knowledge can then be applied to one or more acquisitions to help focus the more detailed tactical market research. Strategic market research helps you to stay abreast of the latest developments in the market area of interest, including the latest technologies, business trends, products, services, and business practices. By conducting strategic market research regularly, you will be better positioned to assess the capabilities of the market to provide the desired products or services. This knowledge is invaluable when developing the initial acquisition strategy, well before actual requirements are in place. Decisions made early in the acquisition process will shape all that follows, so conducting strategic market research is critical to the success of an acquisition program. Strategic market research has four major steps, summarized in Figure 4. Each of the steps is discussed in the following sections. Identify the Market or Market Segment of Interest The first step in conducting strategic market research is to identify the market or market segment of interest and to scope out the task. Answering the following questions will help get you started. Are you interested in a product or a service? At the strategic level, the research that you do will be similar regardless of whether a product or a service is involved. However, you will need to tailor the research somewhat. For example, when looking at product markets, you will want to investigate factors such as technologies, manufacturing and production processes, and logistics. For services, you will need to investigate the performance requirements that affect quality, labor factors such as availability and required skills, and the approach to delivering the service. 14 What are the requirements? At the early stages in an acquisition program, the requirements may not yet be defined. In that case, you will need to take a much broader look at the market in order to identify alternatives. On the other hand, if you know the requirement will involve only reciprocating pumps, then you can limit your efforts to that market segment. Who are the participants in the market? Who are the sellers? Who are the buyers? Is the federal government currently a buyer? Are there dealers or distributors? Do industry or trade associations play a role? Do other markets affect or have a relationship with the market of interest, such as suppliers and transportation? Are there any consortia? Do nonprofit or educational organizations play a role? Are subcontractors used? Has outsourcing of the product or service taken place? Do any international organizations, including foreign governments, participate in the market? Are there lobby organizations? Are standards organizations involved in the market? Are other parts of the federal government involved in the market, for example, labor, health, environment, safety, or R&D labs? By answering these questions, you will identify the stakeholders in the market and help define the scope of your strategic market research effort. Identify Sources of Market Information Once you have some idea of the market you wish to research, you will need to identify sources of information to help answer the questions above. Much of strategic market research can be accomplished by using the resources available on the internet. If you’re not sure where to begin, searching on the product or service of interest using one of the many web search engines can lead to many useful links. Figure 4. The Four Steps of Strategic Market Research 1 2 3 4 Identify the Market Identify the Sources of Information Collect Information Document Results • Product or service? • What are the requirements? • Who are the users? • Who are the suppliers? • Are there related products and services? • Economic data • Associations • Standards • Journals and publications • Requests for information • News media • Conferences • Trade shows • Web searches • Determine information desired • Devise filing scheme • Conduct research • Extract key information from sources • Devise format for reporting results • Discuss findings with team members • Prepare report of strategic market research results • Communicate with others as needed 15 If you are very familiar with the product or service to be acquired, you are probably well prepared to do the market research using the various types of internet resources. However, if your time is limited or you are not very familiar with the product or service, then you might want to consider employing a professional research service. These services generally have access to more information than you can get through an individual search of the internet; however, a search service can be expensive. In addition to information available on the internet, you also should consider the following sources: • Other government customers. Do other agencies purchase the product or service of interest? These users may be very well informed and an excellent source of information. A general web search may uncover links to other government users, but you should also look at contracting resources such as the Federal Business Opportunities (FedBizOpps) website and the Federal Procurement Data System–Next Generation (FPDS-NG). You can search FedBizOpps for current and past requests for proposals (RFPs) and contract award announcements in all the product and service areas, and thereby identify any government customer. FPDS-NG, FedSpending.org, or a commercial subscription service that uses data from FPDS-NG can provide contract award information, including the awarding office, for all products and services that the federal government purchases. If you are looking at research programs, also consider searching the announcements at Grants. gov; although most announcements on Grants.gov will result in a grant as opposed to a contract, you may find agencies that are involved in similar research or programs. By using these resources, you will be able to identify other government stakeholders in the market, and find others, such as government laboratories, who can share their knowledge of the market with you. Examples of Strategic Information • Number of suppliers in the market and market share • Name, size, and annual sales of poten- tial suppliers • Availability of commercial items • Willingness of suppliers to modify commercial items to meet requirements • Past government work by potential suppliers • Other government agencies that are buying the same product or service • Existence of market research done by those other government agencies • Commercial business practices, terms, and conditions • Business, legal, trade, political, and other developments affecting the market • Existence of any new developments in the field of interest • Related areas that may affect the field of interest 18 • Recommended actions based on research findings, for example, - investigate a new manufacturing technology to determine its applicability to government acquisitions, - identify production issues that might affect future government needs, - train government personnel in a new commercial quality assurance process, or - alert other stakeholders to issues or new developments • Actions completed in response to the market research findings. Commercial markets are often fast paced and evolve rapidly. Using a structured approach to collect and document strategic market research results will enable DoD to gain the most benefit from commercial markets. TACTICAL MARKET RESEARCH (MARKET INVESTIGATION) Tactical market research involves activities that result in an in-depth understanding of a market. Tactical market research is conducted during an acquisition process to answer specific questions about the market, suppliers, products, services, and so on in order to shape the acquisition strategy. Tactical market research builds on the results of ongoing strategic market research, using those findings to help identify targets for more in-depth research. The tactical market research process has seven steps, as shown in Figure 5. Each step is discussed below. Summarize Strategic Market Research Part of the value of strategic market research is that you are better prepared to do an efficient tactical market investigation in the limited time you have when faced with an acquisition. The first part of a market investigation is to review and summarize what you already know from your strategic market research. In this part of market investigation, good documentation of your strategic market research pays dividends in time and cost savings. Considering your previous findings, you can now target the tactical market research to answer specific questions and to fill in gaps in information. Also, communicating requirements to industry is integral to conducting successful tactical market research. Information must reach industry early to give vendors an opportunity to identify potential commercial products or services. It is important to communicate requirements in a manner that industry can easily and fully understand. It is also vital to describe the operational environment because it may differ from the commercial environment. Formulate Requirements Before beginning the detailed look into sources to meet the requirements, you should formulate and define those requirements in greater detail. The results from early market research should be sufficient for acquisition personnel to determine whether the user’s initial concept and requirements are feasible. Early market research should also point to possible alternatives, either material or nonmaterial, to meet the user’s need. 19 Figure 5. The Seven Steps of Tactical Market Research Documenting the results from early market research will enable the user and acquisition personnel to discuss the various alternatives, assess risk, make tradeoffs, and negotiate and clearly define the requirements upon which the acquisition will be based. Clearly formulating the requirements through discussions and negotiations between the user and acquisition personnel will pay dividends in time and money saved as the acquisition moves from concept refinement through production and deployment, as well as in the operations and support phase. Clear and thorough requirements documents, which describe the user’s needs, are essential to a successful tactical market investigation. Only by understanding the requirement can you focus the tactical market research appropriately. Requirements documents may vary in format depending on the size and complexity of the requirement, but must clearly list or describe the user’s requirements in a structured or formal manner. Once you have reviewed the requirements 1 2 3 4 5 6 7 Summarize Strategic Market Research Identify Sources of Information Collect Information from Users Document Results • Review strategic mar- ket research data • Conduct additional market surveillance if needed • Summarize strategic market research findings • Determine areas for tactical market research • Government contractors • Web searches and websites • Other government offices • Conferences • Business publications • RFIs and notices • Associations • Advertisements • Company marketing • Obtain references from product or ser- vice suppliers • Locate other users independently if possible • Contact users and obtain feedback on the product or service • Devise format for reporting results • Prepare report of market research findings and recommendations • Communicate with others as needed Formulate Requirements Collect Information from Sources Evaluate the Data • Define requirements • Consider results of market research: available products and services, com- mercial practices • Identify acceptable risks • Negotiate needs • Document capability requirements clearly and precisely • Determine informa- tion to be collected • Devise data collection templates, databases, interview guides, etc. • Provide sources with information • Obtain information from sources • Extract key informa- tion from sources • Capture relevant information from research efforts • Discuss with team members and stakeholders • Compare findings to requirements • Follow up with addi- tional research if necessary • Refine the require- ments, if necessary 20 documents and have an understanding of the requirement, you can orient your tactical research to target specific types of information. Appendix B contains examples of the types of information you may need to collect. Identify Sources of Information If you’ve been conducting strategic market research regularly, you probably know many of the sources for the product or service you’re interested in. If not, you may have to conduct additional research to identify the firms that are potential suppliers. Some markets may have only a few or even just one source for the product or service. Other markets are highly competitive, so many sources may be available. The amount of time and effort you put into identifying sources is a judgment call. Consider the value of the acquisition and the potential benefits of locating a new source. Adding new potential sources to a list of suppliers increases competition, which can lead to better products at lower costs for DoD. If this is the first attempt to meet the requirement with a commercial item, more effort may be required to identify as many potential sources as possible. You may need new techniques to reach sources that have not previously dealt with the federal government. The list of sources starts with information obtained during market surveillance. Known suppliers and those who have bid on contracts in the past constitute a basic list. You can identify such suppliers by searching the contract award data in the Federal Procurement Data System– Next Generation or by using a commercial subscription service that packages FPDS-NG data into easily searchable databases. For some products and services, the General Services Administration schedules will identify sources. Announcements of “Sources Sought” or “Request for Information” in FedBizOpps often produce a good response; however, the announcement might be seen only by firms that have done business with the government in the past. To reach suppliers that have not previously bid on government contracts, try advertising on internet forums, through trade associations, or in trade publications, which are used by commercial firms seeking new business. Almost every industry has some established structure for helping buyers and sellers find one another. Advertise where the commercial buyers do. Commercial databases can also help generate a list of potential suppliers. Databases covering commercial products and suppliers may specialize in one industry or may include products from many industries. Dun and Bradstreet offers subscriptions to a web-based resource called Global Reference Solution, a database of millions of businesses throughout the world. ThomasNet is an online resource offering a directory of global industrial suppliers and product information. Several database products are based on the information contained in the Federal Catalog System. Those databases relate part numbers and national stock numbers to sources. Similar catalog databases covering commercial products are also available. Performing basic web searches for the product or service desired is another way to uncover commercial sources. You may find a great deal of marketing information, catalogs, and basic information about the product or service available from the company’s website. 23 one or two coats of paint be required? Should cleanup be addressed in the contract? Are the paint and other supplies included? Is there a standard for how long the job will take? The details of what is included in the service can make it difficult to compare the services from different companies. You need to be familiar with the government requirements for the task in order to describe the needed service to prospective sources and to evaluate the service offerings of different firms. In addition to a description of the product or service, you need to consider its quality. For products, quality can usually be described in objective terms based on product test results, tolerances, materials, and product history. For services, quality is more subjective and can be difficult to ascertain. Past performance is paramount. Service providers may have multiple levels of the same service, such as basic, standard, and premium. You will need to understand what distinguishes the various levels of service. Many service sectors are governed by regulatory standards or have their own standards to which they voluntarily adhere. These standards describe the minimum performance you can expect. So if the standard meets your requirement, you can be reasonably confident that a number of companies can provide the needed services. The standard will also provide acceptable quality levels, if they exist. An acceptable quality level establishes the maximum allowable error rate or variation from the standard. For example, a standard for maintenance services may require that a particular maintenance action be completed in 4 hours, with an acceptable quality level of 5 percent. That is, the service may take more than 4 hours only 5 percent of the time. This information is important because, unlike products, services can rarely be delivered 100 percent to standard. To verify the claims of the potential sources, you should request the names of current customers of the product or service. If the source had previous government contracts for the same or similar product or service, you should ask for the following information: • Contract number • Title and objective of contract • Contracting agency and point of contact information • Period of performance • Value of contract • Type of contract (fixed price, cost reimbursement) • Accomplishments of effort (products furnished or services provided). As you start collecting information from potential sources, you should also be thinking about how you are going to capture and organize the information. If you are collecting information from multiple firms, consider setting up a database or spreadsheet with fields to record the key elements. A database or spreadsheet allows you to sort and filter the data in various ways, which aids analysis. If the information you are collecting is mainly qualitative or narrative, a table in a document may be sufficient. If you plan on gathering data via phone conversations, an interview guide or template will help ensure that you cover all the areas you intended and will help you to capture the data. Whatever data collection methods you use, a good system for capturing and organizing the data will help you to analyze and document the results of your research. 24 Collect Information from Product or Service Users Following up with the references provided by the product or service sources is the next key step. Feedback from the actual users of the product or service allows you to assess how well the product or service performed in the past and to identify any issues. One approach to collecting information from product or service users is to interview them either in person or by phone. In some cases, email correspondence may be sufficient. Private-sector users are often willing to discuss good and bad features of products or services. DoD experts can question their private-sector counterparts to get additional technical knowledge and to make an informed judgment on whether it meets DoD’s need. For example, the logistics representative on the team could interview maintenance personnel who have experience with the product to determine what their maintenance philosophy is, how much maintenance is needed, whether parts are easy to replace, and so on. Because a source is unlikely to knowingly provide you the names of users that are dissatisfied with the product or service, you should also attempt to independently identify users. Information collected from them may be far more useful for verifying the sources’ claims. You can also review customer satisfaction data from reliable sources like government databases, consumer protection organizations, and user groups. Keep in mind that at this point, the goal is not to select or eliminate any potential sources. That will be done during the acquisition process when offers are evaluated. Another way to verify a source’s claims about a product is to test samples. When it is feasible to do so, personnel should test the product in the field to determine whether it meets performance claims and operates satisfactorily. The military service or component may wish to rotate the product through several units to get feedback from a number of people. To verify a source’s claims about a service, you may be able to visit a user’s facility to see the results of the service. Evaluate the Data After you’ve completed the data collection process, you need to evaluate the data to determine whether the information received is sufficient to determine whether the product or service meets the needs of the requirement. It is not uncommon to get incomplete or erroneous data from suppliers. In some cases, you may need to contact an applications, field service, or design engineer for clarification of issues. You may also need to appraise the data using market surveillance information, analyzing market trends to fill in missing data. For example, you can estimate the length of a product cycle for a product for which you have no data by analyzing comparable products for which data exist. As a result of your data collection efforts, you may determine that • a commercial product or service is not feasible, • commercial products or services meet the need as stated, • commercial products or services can meet the need if certain requirements are relaxed, or • commercial products or services could be modified to meet the requirement. 25 Table 2. Examples of Market Research Focus Areas for Products and Services Products Services Product data. Product performance and interface charac- teristics; applicable regulatory, commercial, and de facto standards; open system definitions; product-differentiating factors; cost-driving factors; test results; samples; product literature such as product data sheets, independent test reports, and product instructions. Service data. Tasks included in the service; service levels; acceptable quality levels; use of government, industry, or company standards; related or ancillary services; costs; labor. Supplier capability. Number of suppliers in the market, production capacity, producer’s capability to meet surge and mobilization demands. Service delivery. Geographic coverage (local, regional, national, or international), actual service provider (company employees, subcontractors, or independent consultants), availability of service (for example, round-the-clock or business days only). Market acceptance data. Annual sales, market share, product maturity, returns on warranty, other data related to whether the product meets government needs. Market acceptance data. Annual sales and growth trends, market share, number of customers using the service. Support data. Product support records, experience, and support system; warranties; repair histories; policies and procedures on repair and replacement; support of or upgrades to discontinued models; length of time that par- ticular products will be produced or supported; approach to providing upgrades. Customer support. Inclusion of onsite customer service representatives, dedicated customer representatives, help lines, availability to meet sudden changes in customer needs. Test data. Test results (from the supplier’s or an indepen- dent laboratory), regulatory or third-party testing or certi- fication (for example, Federal Aviation Administration or Underwriters Laboratories, Inc.). (Test data can be used to validate suppliers’ claims regarding product performance. In some instances, test data can eliminate or reduce the need for further testing.) Training and certification. Company, industry, state, and national training or certification requirements for the personnel performing the service; use of the latest business processes or technologies to improve the service and provide value to the customer. Business practices. Standard commercial contract terms, conditions, and pricing arrangements for commercial acqui- sitions using procedures in FAR Part 12; factors affecting how products are sold or distributed in the market (such as commercial supply chains). Business practices. Standard commercial contract terms, conditions, and pricing arrangements for commercial acquisitions using procedures in FAR Part 12; structure of service contracts such as use of performance-based statements of work, performance metrics, performance incentives, and quality assurance plans. References. Entities using the product. (The references are used to verify the information submitted by the supplier and to get other users’ views on how the product performs.) References. Entities using the service. (Service quality is crucial, so checking references of current service users is vital to understanding how the service provider is performing.) To easily evaluate the data you have gathered about a product or service, you should use a table, database, or spreadsheet. Here, we provide two simple examples. The first is for a product, a handheld receiver for a global positioning system (GPS); the second is for pest removal services. 28 As demonstrated by these two examples, you may conclude from your evaluation that a commercial product or service is not feasible, that commercial products or services meet the need as stated, that commercial products or services can meet the need if certain requirements in the original statement are relaxed, or that commercial products or services could be modified to meet the requirement. You may also determine that additional steps are needed to properly evaluate the products or services identified through market research. For example, environmental or conformance tests may be needed to determine whether the product meets particular aspects of the requirement, or site visits may be needed to determine whether the supplier can provide a consistent product or service. Document the Results Documenting the results of the market investigation is a critical aspect of the process. FAR Part 10 states that agencies “should document the results of market research in a manner appropriate to the size and complexity of the acquisition.” The results should also be documented in a manner appropriate to how they might be used in the future. That is, the type and amount of information you keep should be based, in part, on how you expect it will be used in the future. Documentation serves several purposes. First, it provides a historical record of the market research effort and provides evidence that proper market research was conducted for the acquisition. Second, other market research teams investigating similar products may use it to get a feel for what might be available and to get ideas on where to start their investigation. Third, the contracting office working on the solicitation for your acquisition may use it to further determine appropriate contract terms and conditions. Early market research must also be documented during development of the technical opportunities and user needs prior to Milestone A and further documented in the capabilities development document prior to Milestone B. DoD Instruction 5000.02, “Operation of the Defense Acquisition System,” indicates that market research is a statutory information requirement for both Major Defense Acquisition Programs (MDAPs) and Major Automated Information System Acquisition Programs (MAIS). This instruction requires the evaluation of requirements based on the potential of the commercial market to meet the users’ needs. There is no standard format for documenting your market research results. The Office of Defense Procurement and Acquisition Policy provides a market research template and glossary of select resources in “Market Research—Report Guide for Improving the Tradecraft in Services Acquisition.” You should follow your organization’s or program’s guidance for preparing your report. The following are topics that you should consider addressing in the report: • Background for the market research effort • Time frame in which the market research was conducted • Team members and other stakeholders involved in the market research 29 • Description of the requirements • Estimated time frame or schedule for the requirement • Summary of strategic market research findings, including trends, competition, recent developments, and issues • Summary of the scope of the market research effort, including the questions to which answers were sought, the information requested from potential sources, and methods used to obtain data • Discussion of potential suppliers, including recent government contracts for the same or similar product or service • Discussion of product or service characteristics obtained through data collection, including any shortfalls in meeting the government requirement • Discussion of commercial business practices, procedures, terms, and conditions • Discussion of cost or price factors uncovered during the investigation • Discussion of quality factors, including such issues as past performance, references, product testing or evaluation, customer satisfaction, warranties, and quality problems • Actions taken as a result of the market research • Recommendations. 30 Other Considerations During your market research, you should keep several things in mind. AMOUNT OF INFORMATION TO GATHER The scope, extent, and documentation of a market investigation depend on such factors as the anticipated dollar value of the product or service, its complexity, its criticality, and the number of items needed or extent of the service required. The generic market research process described in this document is sufficiently detailed to apply to complex, high-value products or services. However, not all parts are necessary for all acquisitions; the process should be tailored to the specific market information needs of your acquisition and the potential for commercial products or services to meet requirements. In general, you should stop collecting information when you have enough data to make informed decisions about the acquisition strategy. Commercial markets are dynamic, complex, and competitive. It is not reasonable to expect that you will learn everything about a market. Companies are interested in furthering their sales opportunities and will usually cooperate with your information request, but they may not reveal everything due to competitive reasons. Some individuals are comfortable making decisions based on limited information, which poses a risk of making the wrong decision based on insufficient research. Others put off making decisions while they await more data, which poses a risk of unnecessarily delaying the acquisition. At some point, you will reach diminishing returns during your market research. Sharing your results with team members can help keep the market research effort on track and reasonable. PROCUREMENT INTEGRITY ACT During your discussions with potential sources, you should be aware of certain restrictions on what you may discuss. The Procurement Integrity Act (41 U.S.C. 423) prohibits personnel “participating personally and substantially” in a federal agency procurement from • soliciting or accepting jobs or business opportunities from competing contractors, • asking for or receiving things of value from competing contractors, • disclosing bidder proposal information to competing contractors, and • disclosing to competing contractors any source selection information that has not already been made public. 33 Appendix A. Types of Information Available on the Internet This appendix identifies some of the types of information available on the internet. Some types are useful for strategic market research, some for tactical market research, and some for both. PRODUCT AND SERVICE INFORMATION The following are examples of product and service information available on the internet: • Available products and services, and the companies that provide them • Part manufacturers • Salient characteristics (shape, size, performance specifications) • Part identification (such as the national stock number) • Parts that meet government specifications • Ordering information • Procurement histories with unit prices. Product or service catalogs—or databases—from commercial suppliers are a valuable source of information. Government parts databases, although limited to items that the government has already bought, are helpful in locating items that fall within the broad definition of nondevelopmental items—items that are available in the market and do not require additional development. Cross-referencing within product databases enables you to search for a specific part by using any known piece of information about that part. Some product databases provide the ability to cross-reference between commercial parts and similar government parts. You can also search for products or services that meet a particular set of characteristics. SUPPLIER LISTS Supplier lists can be general—surveying a wide field—or specific to a particular category. If a specific list does not give you the data you need, try e-mailing or calling the parent company to inquire about related lists. 34 INDUSTRY INFORMATION Internet market research can help you identify market capabilities and customary practices of a particular industry, such as the following: • Industry-standard terminology • Product modifications and tailoring • Distribution and support options • Representative incentive provisions • Warranties • Product obsolescence • Spares provisions • Pricing practices • Methods for ensuring reliability • Other capabilities of the marketplace. NEWS AND PUBLICATIONS Almost any recent, publicly available information is likely to be accessible through the internet. The types of publications that are available through the internet include newspapers, trade journals, government publications, announcements of new products, press releases, and annual reports released by individual companies. Internet search engines—such as Google, Bing, Yahoo, Ask.com, AOL.com, Baidu, Wolframalpha, and DuckDuckGo (to name a just few)—enable you to locate articles by using keywords, product names, services, or the name of a particular company. Search Engine Guide offers lengthy lists of search engines, organized around subjects areas, such as business, news, the arts, and real estate. Many electronic publications contain either the full text or an abstract of published material and include bibliographic references. Some electronic publications cover a broad range of business and economic information across all segments of the economy. These publications can be helpful in assessing the health of particular industries or even past performance of specific companies. Others specialize in one kind of information, such as announcements of new products or services. GOVERNMENT CONTRACT DATA For contract actions over $3,000, the Federal Procurement Data System–Next Generation (FPDS-NG) has data on government-wide contract information databases. The FPDS-NG includes the following information: • Contractor names, addresses, and DUNS codes • Identification of the awarding agency and office 35 • Federal supply codes and names for the products and services purchased • Locations of contract performance • Identification of small or minority-owned business awardees • Contract types, dollar values, and dates • Competition information. The FPDS-NG allows searches on the basis of any data field or item of information. Although most of the FPDS-NG data come from the government, commercial suppliers of contract information databases usually add information or cross-references that expand the use of the FPDS-NG data. Federal Business Opportunities (FedBizOpps) is the single government point of entry for federal government procurement opportunities over $25,000. In addition to being the portal through which government agencies publicize their business opportunities, FedBizOpps is useful for historical information. A search of archived documents yields solicitation and award information, contracting agency points of contact, and supplier contact information. Past performance information also is available on the internet. The merging of the Contractor Performance Assessment Reporting System (CPARS) and the Past Performance Information Retrieval System (PPIRS) (www.cpars.gov/ppirs/ppirsmain.htm) has created a government- wide application that provides timely and pertinent information about the past performance of contractors. The federal acquisition community can use this information when making source selection decisions. 38 • List of similar users currently using the product or service in the kinds of environments for which the researcher intends it to be used Business Data • Distribution practices • Minimum order quantities • Typical contract terms and conditions • Financing practices • Warranty procedures • Potential conflicts of interest (for services) • Historical information • Dates of past acquisitions for the supplies or services • Prevailing market conditions at those times • Quantities solicited and acquired for past acquisitions • Number of sources solicited for past acquisitions • Names of specific sources solicited • Number and names of offerors for past acquisitions • Any significant differences between government requirements documents for prior contracts and those for the current requirements • Length of past delivery or performance period, in days, weeks, months, or years • Months during which the supplies were delivered or the services performed • Whether the contractor met the delivery targets • Free-on-board point • Need for premium transportation to ensure timely delivery • Costs of ownership associated with past acquisitions • Past acquisition methods employed • General terms of past contracts • Significant differences between terms of past contracts and those recommended for the current acquisition • Problems encountered during past contract performance Pricing Factors • Prices paid for the supplies or service, and changes in the supply, service, or market since then • Historical differences between prices paid by the government and those paid by other buyers, and reasons for such • Whether additional suppliers are expected to enter the market • Relationship of the quantity the government intends to buy and the quantity that other entities buy • Whether the planned volume will justify a lower-than-market price as a result of the seller’s increased economies of scale • Whether the planned volume will be so large as to drive the sellers to or beyond full capacity, resulting in unanticipated inflation • Whether the acquisition is for items that are at the leading edge of market demand (market demand is increasing) or at the back end (demand for the item is dropping) • Whether demand will be higher or lower at the time of award • Whether supply capacity is expected to keep pace with demand 39 • Whether there is a cyclical pattern to supply and demand for the supply or service • Whether awarding 6 months in the future would result in lower prices than an immediate award (or if it would be better to stock up now at today’s prices) • What forces (strikes, labor shortages, subcontractor bottlenecks, energy shortages, other raw material shortages) might drive up prices in the near future • What forces might lead the government to expect lower prices in the future • Pricing strategies of firms in the market • Implications for expected prices • Availability of discounts for quantity buys • Which firms in the market are most likely to submit offers to a government solicitation • What features distinguish one service or item of supply from another • Which commercial supplies or services match most closely the government requirements document (as it currently reads in the purchase request) • Apparent tradeoff between features and price DEFENSE STANDARDIZATION PROGRAM OFFICE 8725 John J. Kingman Road, Stop 5100 Fort Belvoir, VA 22060-6220 (703) 767-6888 dsp.dla.mil