., ' CITY OF LOS ANGELES

DEPARTMENT OF GENERAL SERVICES SUPPLY SERVICES DIVISION

. MARKET RESEARCH

The purpose of market research is to analyze and evaluate the external marketplace as it

applies to product/commodity purchases, to better understand how business is done in

specific industries, and to develop improved procurement strategies to maximize value

for each taxpayer dollar spent. The following is an overview of the market research

process. Additional details and specific activities are identified in the Division's Strategic

Sourcing Toolkit, in Section 3, "Assess Supply Markets". Pages referencing the Toolkit

are identified in each activity below, and are identified by (x-x).

The key activities in market research are 1. Identify potential supply sources. 2. Evaluate the industry. 3. Identify viable supply sources. 4. Perform supplier assessments. (Optional) 5. Perform supplier comparisons. (Optional) 6. Identify supplier opportunities.

MARKET RESEARCH ACTIVITIES

Date: 6. -· r1...- 1?: ... Submitted in -~ b __ f: .. ~'e8ffiffiit\~~ Council File N~Ji r~.- 0_'-i.l .I

litem No.: . ?-_.,-Deputy: Adam-R-:-I:id---·

1. Identify potential supply sources. This includes current, alternative and non-

traditional suppliers by commodity (sourcing category) (3-3).

a. Identify source industries (3-4). b. Identify distribution channels (3-4). c. Identify potential suppliers (3;.5).

2. Evaluate the industry. This is an investigation of marketplace processes, trends

and influences (3-7). ·

a. Supplier practices (3-8). b. Other government agency purchasing practices (3-8). This includes

analysis of other agency contracts for potential cooperative purchasing

arrangements. c. Industry and market trends (3-9). d. Industry capacity and utilization (3-10). e. Pricing methods (3-10). f. Cost drivers (3-1 0). g. Market trends (3-11 ). h. Market cycles (3-11 ). i. Market timing strategies (3-11). j. Technology (3-11 ). k. Regulatory impacts (3-12). I. Safety, health and environment (3-13).

Page 1 of 2

July, 2004

CITY OF LOS ANGELES DEPARTMENT OF GENERAL SERVICES

SUPPLY SERVICES DIVISION

MARKET RESEARCH

3. Identify viable supply sources. This represents the companies where we can obtain best quantitative value, and would ideally prefer to do business with. In situations where qualitative evaluation (ability) is added to quantitative evaluation (price/cost), this is a critical step in the Strategic Sourcing process (3-14).

a. Compile source list (3-15). b. Identify MBE/WBE/DBE/SLB opportunities (3-15).

4. Perform supplier assessments. Conduct research on what suppliers are doing to meet their customer's demands and needs. This is optional in a Request for Bid/ Quotation, but is a critical activity in developing a Request for Proposal (3-16).

5. Perform supplier comparisons. Comparative analysis of supplier data, evaluation and ranking of supplier suitability. This is optional in a Request for Bid/Quotation, but is a critical activity in developing a Request for Proposal (3-46).

6. Identify supplier opportunities. Gain insight and determine the best fit between supplier(s), commodity(ies), and the City. This is also a factor to determine product/commodity groupings for a solicitation, or to determine if multiple solicitations are more appropriate (3-56).

a. Compare supplier capabilities with the City's needs (3-58). b. Identify supplier matches (3-59). c. Identify short-term opportunities (3-60). d. Identify long-term opportunities (3-61).

Templates for Market Research include a "Contract Analysis Overview", "Market Research Activity & Comment Log", "Renewal Confirmation Request", "Request for

Market Research Quote", and "MarketHesearch Contract Analysis Recap". The documents are available in the MARKET RESEARCH folder of the File Manager.

The documentation and a summary of the Analyst's research and recommendation to

renew or rebid is submitted in memo form to the Procurement Supervisor. Market Research documentation should be provided to the Procurement Supervisor a minimum

of 45 days prior to contract expiration. The Procurement Supervisor will review the

report, make corrections as necessary, then initial and forward the final recommendation

to the Supply Services Manager for review and approval.

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July, 2004

MARKET RESEARCH REQUEST FOR PRICE QUOT·E

THIS IS NOT AN ORDER!

DATE: _________ __ TIME: _________ _

This fax consists of ___ pages, including the cover page.

Please complete the information below and on the following page(s), and fax back to:

PIA NAME, Procurement Analyst

City of Los Angeles, Supply Services, Procurement Section

Fax:

Phone:

Company Name:

Quoted By:

Phone Number:

Payment Terms:

(XXX) XXX-XXXX

(XXX) XXX-XXXX

Delivery Time ARO: _________________ _

FOB Point:

Freight Cost:

The City of Los Angeles is conducting market research on the products listed below. These

products are currently purchased bythe City on a requirements contract. The contract has ·

renewal options. However, the City is interested in updating market information and pricing for

these products. The quantities listed are an estimated forecast of annual purchases. The City

will use the information you provide to determine whether to renew or rebid the contract.

To have your response considered, please complete and return this quote via fax

to the Procurement Analyst within 72 hours of the date and time listed above.

July, 2004

MARKET RESEARCH REQUEST FOR PRICE QUOTE

THIS IS NOT AN ORDER! '-' .... ;,: ....... .

· · Description .·.. . - : ~ I' ·. · . ····~~ '~' '-~·:;_ , ' '~\·: :~. ··, · .. , .:c/ ·:

· · QtY< uoM: _·Price: '~ExfJ;~ric~ _:. Line-· ·

TOTAL: $ __ _

THIS INFORMATION IS FOR MARKET RESEARCH PURPOSES ONLY. THE CITY

WILL NOT ISSUE ANY PURCHASE ORDERS FROM THIS QUOTE.

July, 2004

CITY OF LOS ANGELES DEPARTMENT OF GENERAL SERVICES-SUPPLY SERVICES DIVISION

MARKET RESEARCH ACTIVITY & COMMENT LOG

DATE ACTIVITY OR COMMENT AorC

JULY, 2004

CITY OF LOS ANGELES DEPARTMENT OF GENERAL SERVICES-SUPPLY SERVICES DIVISION

MARKET RESEARCH ACTIVITY & COMMENT LOG

JULY, 2004

PROCUREMENT OPERATIONS MANUAL

forms, and any addenda to the· BAVN using the "Post RFQ Docs to BAVN" and "PA Mailing"

procedures in the File Manager's STRATEGIC SOURCING AND BAVN MANUALS folder. . .

Requisitions for purchases greater than $10,000, and all requisitions for Requirements Contracts must

be managed in SMS through the Purchasing Agent's Strategic Sourcing Event RFQ process.

Strategic Sourcing Events should be Dispatched to Bidders and Vendors electronically in SMS or by

regular e-mail, but may be sent via U.S. Mail when e-mail is not available. The Analyst/Aide must

manually upload all RFQ documents (PDF and XML), including any supplemental specifications· or

compliance forms. and any addenda to .the BAVN using the "Post RFQ Docs to BAVN" and "PA

Mailing" procedures in the File Manager's STRATEGIC SOURCING AND BAVN MANUALS folder.

Additional information is available in the Strategic Sourcing and BAVN Procedure Manuals.

Requisitions valued at greater than $100,000 involve additional steps as determined by legislated,

executive, management and administrative requirements. These requirements will include but are not

limited to:

a) MBEJWBE/SBEIEBE/DVBE!OBE Business Inclusion Outreach Effort;

b) Advertising in media such as Newspaper, Business Journals, Television and the Internet;

c) Written Specifications; d). Enhanced Team Collaboration through the Deloitte & Touche Strategic Sourcing Toolkit, and

e) Management and Legal Review.

Fax and e-mail quotes are the most efficient method for low dollar value sourcing because the bidder

directly provides written documentation. The RFQ Bidder Recap and SLB worksheet, available in the

File Manager, is a critical tool for tracking supplier responses, analyzing quotations and documenting

awards. The Recap also provides data that can be used in building bidder lists for future use.

SMS Strategic Sourcing Events also provide for electronic bid analysis and reporting .. The processes

are explained in detail in the Strategic Sourcing Procedure Manual.

5.1.2.3 COOPERATIVE PURCHASE ARRANGEMENTS

Procurement staff may issue PO's or Contracts using other government agencies' contracts through a

Cooperative Purchase Arrangement (CPA), also known as a "piggyback". PO's or Contracts that are

awarded through a CPA and exceed $100,000 are subject to the outreach goals established by

Executive Directive 14 (Business Inclusion Program - BIP). These other government agency

contracts may be used even though they may not have been entered into through a competitive bid

process. Other agencies may include but are not limited to the City Departments of Water and Power,

Harbor, and Airports; the counties of Los Angeles, Ventura, Orange, Riverside, San Diego and San

Bernardino; special districts such as the Metropolitan Transportation Authority and the Metropolitan

Water District; and Federal, State, Municipal and other local agencies.

The CPA is a useful procurement option when the dollar value of an individual purchase by the City

does not achieve the best possible discount(s) or price(s) compared to what may be available to other

government agencies for the same item(s). The Analyst/Aide must coordinate with the City

department customer, .the agency that "owns" the contract, and the supplier to create and issue the

City PO or Contract.

.::1 The Analyst/Aide must perform market research and due diligence to determine that the City obtains

best pricing from utilizing a CPA and also, if applicable, to determine if the parent agency's outreach

requirements, if any, resulted in successful subcontracting opportunities with all available business

enterprises.

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PROCUREMENT OPERATIONS MANUAL

Prices for CPA's should be negotiated with the supplier based on the quantities to be purchased, the

City's delivery/shipping requirements and other related factors. For example, a company with multiple

shipping points must base its prices on shipping from its closest warehouse (ie; Salt Lake City instead

of Cleveland}. The City is otherwise bound by the items/products, terms, conditions, requirements

and specifications of the parent agency's contract.

When applicable, outreach requirements for a CPA must be verified with the parent agency by

ascertaining their goals and confirming that the awarding supplier met their requirements.

Documentation regarding the successful outreach performed by the supplier shall be obtained from

the parent agency and included with the CPA. If the lead agency does not require MBE, WBE, SBE,

DVBE or EBE outreach, the Analyst/Aide must then inquire with the supplier on their own internal

outreach goals. If the supplier has an acceptable outreach program, documentation describing their

outreach efforts shall be obtained and Included with the CPA.

If neither the parent agency nor the supplier has implemented outreach goals, then a BIP waiver must

be requested prior to awarding a PO or Contract that exceeds $100,000 through a CPA. The

Analyst/Aide must include a written summary of their findings regarding any outreach efforts

performed by both the parent agency and the supplier and must note the benefit of proceeding with

this procurement option. The Director of Supply Chain Services, or the Director's designee, shall

determine the applicability or validity of any submitted waiver request and approve the waiver prior to

the CPA award. ·

Procurement staff must prepare a summary of the parent agency's contract- independent of and not

a supplier prepared document - and submit it with the Purchasing Award Approval coversheet to

management for review and approval. .All CPA's are subject to review and approval by the Supply

Services Manager. The City Attorney's Office legal counsel is important in the cooperative purchase

process to confirm compliance with local, State and Federal Laws.

When a Cooperative Purchase Arrangement is implemented, the replacement Contract is placed in

effect prior to the expiration of the existing Contract to ensure product or service continuity to our

customers. A new City Contract is created in SMS based on the parent agency's contract. Copies of

the parent agency's complete contract and the summary are placed in the Contract file.

The Supply Services Manager must approve all Cooperative Purchase Arrangements regardless of

the purchase dollar amount. Purchases that exceed $100,000 require City Attorney Approval as to

Form.

5.1.2.4 SOLE SOURCE PROCUREMENT

A sole source supplier is the only supplier for a particular product or service. This is different from a

single source supplier where the product is manufactured by only one company (or its licensee), but

can be purchased from two or more suppliers, distributors, wholesalers or retailers.

In general, sole source procurement follows the same purchase methods as for other goods and

services that are competitively bid. The City Purchasing Agent is responsible for determining whether

a supplier is in fact a sole source supplier. When no additional bidders respond to an RFQ Event,

sole .source procurement must be documented in lieu of the bidding spreadsheet. This is generally

accomplished by a company's executive officer or legal counsel providing a written statement of

exclusivity on company letterhead. A letter from a company sales representative, agent or

general employee is not considered acceptable evidence of a supplier's sole source status.

The requesting department will usually identify an item or service as being sole source. One of the

primary goals of procurement staff is to get the best overall price for the City by competitively bidding

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PROCUREMENT OPERATIONS MANUAL

requirements among qualified, responsive bidders. Although the Analyst/Aide cannot necessarily

judge if the technical and operational needs of a specific purchase are being met, they can ensure

that the competitive bid process has been reasonably attempted. Procurement staff is also

responsible for assembling documentation to prove this effort.

The requisltioner should identify the reasons for sole source in the requisition notes or on a .

supplemental written statement. For example, reasons may include: 1) process protected by patent

or copyright; 2) only item which can interface with an existing system; 3) only product tested meeting

threshold minimums; or similar reasoning. However, procurement staff is ultimately responsible for

·making the determination to use a sole source supplier.

Procurement staff should take a leadership role in negotiating prices, delivery, payment terms, and

other general terms and conditions of any sole source procurement Contract or PO (see Chapter 15 -

NEGOTIATIONS). The Analyst/Aide should also perform market research and due diligenee to

determine that the City obtains best pricing when entering into a sole source procurement. Technical

support Is provided by the customer departments to define and, if needed, help negotiate technical

requirements. The City Attorney's Office legal counsel is critical in any negotiation process to confirm

compliance with local, State and Federal Laws.

The Supply Services Manager must approve all sole source purchases regardless of the purchase

dollar amount. Purchases that exceed $100,000 require City Attorney Approval as to Form. · ·

5.1.3 BUSINESS ASSISTANCE VIRTUAL NETWORK(BAVN)

The Business Assistance Virtual Network (BAVN} is a free service provided to bidders and

potential suppliers to the City of Los Angeles by the Mayor's Office of Economic Development. All

City Purchasing Agent procurements must be posted to BAVN.

Posting bid opportunities on BAVN allows the City to advertise bid opportunities to thousands of

registered bidders listed in the BAVN database··as well as make it easier for bidders to download

documents, find information about job meetings and find potential subcontractors, all on-line.

All Procurement staff is registered to use BAVN. Instructions for uploading SMS and non-SMS

RFQ's, including attachments, are located in the STRATEGIC SOURCING AND BAVN MANUALS

folder in the File Manager.

The Analyst/Aide must manually upload all RFQ documents (PDF and XML), including any

supplemental specifications or compliance forms, and any addenda to the BAVN using the

"Post RFQ Docs to BAVN" and "PA Mailing" procedures in the File Manager's STRATEGIC

SOURCING AND BAVN MANUALS folder. Interest (NAICS) Codes1 Pre-Bid, Pre-Award, or other

meetings identified in the Event must also be added separately. A screen print of the on-line

BAVN listing must be included with the PO/Contract file (see Appendix C).

5.1.4 BUSINESS INCLUSION PROGRAM (BIP}- EXECUTIVE DIRECTIVE 14

The Mayor's Executive Directive 14 dated January 12, 2011 implements a· Business Inclusion

Program (BIP) which replaces Executive Directive 2001-26, the City's MBEIWBEIOBE Good Faith

Effort program. The BIP process is designed to ensure, for purchases in excess of $100,000, that all

available business enterprises, including MBEs, WBEs, SBEs, EBEs, DVBEs, and OBEs have an

equal opportunity to compete for and participate in City contracts. BIP documents are included in the

File Manager's COMPLIANCE FORMS, BIP-BAVN Outreach Program folder.

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PROCUREMENT OPERATIONS MANUAL

Manager. The cover sheet is a check list that contains all of the City Purchasing Agent's

requirements for awarding any PO or Contract. ( The "PURCHASING AWARD APPROVAL" cover sheet must be fully completed for every purchase · ..

award, submitted with the RFQ/PO/Contract file, approved by the appropriate supervisors and

managers, and included in the final PO or Contract file.

7.3.2 PURCHASE ORDER CHANGES, AND CONTRACT AMENDMENTS

A RFQ addendum is used to modify, change or delete any material condition of a RFQ. A Purchase

Order Change is used to change or modify a PO of any size or value that has already been

Dispatched. A Contract Amendment is used to change or modify the terms of a Contract.

Procurement staff modifies a PO or Contract based on a customer's need. This generally affects

form, fit, function and/or the requirements of the Agreement. It is highly recommended that

procurement staff discuss changes with Procurement Supervisors and not blindly accept any request

to modify quantities, prices or general product categories since this could subvert the competitive

bidding process and compromise the legality of the original Award, the PO, or the Contract.

7.3.2.1 PURCHASE ORDER CHANGES

Purchase Order Changes are processed directly in SMS. The procedure for processing a Purchase

Order Change is found in the SMS Purchasing Manual, located on the SMS Intranet web site.

7.3.2.2 CONTRACT MODIFICATIONS/AMENDMENTS

Some requirements may not be originally included in a Contract. Requirements may be added and a (

Contract may be modified after it has been Issued. For example, line items, legislated supplier ·

compliance requirements, or a Contract assignment may be added/deleted during the Contract term.

The Contract Amendment procedure is located in the File Manager's CONTRACT DOCUMENTS I

Contract Templates and Procedures folder, and consists of the following steps:

a} Creating a Contract Amendment letter in MS!Word; b) Attaching a scanned PDF of the signed Amendment to the Contract in SMS using the

"Uploading and Viewing Attachments to SMS Contractslt found In the File Manager; and

c) E-maillng the scanned PDF to the supplier and Payment Services, and including the original signed Amendment with the document file.

7.3.3 CONTRACT PRICE ADJUSTMENT REQUEST PROCEDURES

A supplier's request for price adjustment usually involves a price increase, although price decreases

as well as a combination of increases and decreases can be requested. Procurement staff is

responsible for confirming the legitimacy of any price adjustment request. The City should not be

receiving a greater price increase or less of a price decrease than other government agencies, or than

the open market in general. Procurement staff is responsible for conducting price adjustment reviews

(Market Research) whenever a supplier requests a contract price adjustment.

The "Price Adjustment Request Procedure" identifies the steps Procurement staff should take prior to

approving or rejecting supplier requests for Contract price adjustments. The price adjustment

procedure is located in the CONTRACT DOCUMENTS folder of the File Manager. Procurement staff

is required to conduct market research for industry trends and contact other government agencies to c·· compare current pricing and determine if prices are competitive and adjustments are reasonable and

equitable. The market research forms, afso in the File Manager, should be used for this process.

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PROCUREMENT OPERATIONS MANUAL

Quick action and response are critical factors in the contract price adjustment review process. Time is

of the essence in providing quality customer service to City departments, responsiveness to requests

from SMS Payment Services, and to supporting our suppliers. For these reasons, this Price

Adjustment Request Procedure must be completed within 1 0 working days of receiving the supplier's

request.

7.3.4 CONTRACT EXTENSIONS AND CONTRACT RENEWALS

A Contract extension is used to temporarily lengthen the contract term to accommodate an

administrative issue. The most common example of a Contract extension is when a replacement

Contract is planned but time will not permit the bidding process to be completed before the Contract

expires. Supply Services Manager approval is required for any Contract extended up to six months

beyond original Contract expiration. City Attorney approval is required for any Contract extended

beyond six months of expiration.

A Contract renewal is the exercise of an existing Contract option that specifically relates to continuing

the Contract for an additional period beyond its original term. Typically, Contract renewal options are

added in yearly increments, i.e. the first option for the first renewal year, the second option for the

second renewal year, etc. Multiple year renewals may be established beyond the initial Contract

period, such as a five year Contract with a renewid option for an additional five year period, or a three

year Contract with a renewal option for two additional three year periods.

The Analyst/Aide is required to conduct a Contract review before exercising a renewal option. Newly

mandated terms and conditions might take effect upon a Contract's renewal or extension. A

comparative analysis of changing market conditions, requester needs, and procedural or legal issues

is necessary to maintain the Contract. The Contract file may contain legal and other requirements

that are no longer applicable. The review is an important part of the Contract management process,

and provides benchmarks that can be used in future Contracts.

Contract extensions and renewals are exercised by issuing a Contract amendment.

7.4 EMERGENCY, URGENT NECESSITY AND CONFIRMING PURCHASE ORDERS

7.4.1 EMERGENCY AND URGENT NECESSITY PURCHASE ORDERS

Emergency and Urgent Necessity Purchase Orders have very limited use as a result of City Charter

changes passed by Los Angeles voters In 1999 and implemented July 1, 2000. Only the City Council

has the authority to determine and approve emergency and urgent necessity purchases. Until such

time as Council delegates these authorities to the City Purchasing Agent, the only application of

emergency purchases relates to local emergencies declared by the President of the United States, or

proclaimed by the Governor of California, the Mayor, or the City Council. For further information, see

CHAPTER 13- LOCAL EMERGENCY PURCHASING RESPONSE.

All other purchases that bypass the Purchasing Agent's procurement process are considered

Confirming Purchase Orders, and are handled by Procurement staff as detailed in Section 7.4.2

below.

7.4.2 CONFIRMING PURCHASE ORDERS

Confirming Purchase Orders must be tightly controlled and monitored by Procurement staff and

supervisors. Ordering department Executives (General Manager or Assistant General Managers)

must document and note the existence of a critical need. Ail Requisitions for confirming PO's must

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