people sitting in a row holding blank signs

Risk-Hacking: The Benefits of Market Soundings

By John Estey | November 10, 2022

Imagine throwing a party, but nobody comes. In light of ongoing uncertainty in the Canadian construction market, a growing number of constructors, suppliers and design consultants are taking a more cautious approach to major project procurements. Project owners who have not adjusted to this recent market shift may face a variety of negative scenarios when procuring construction services, including a lack of responses; prices that come in significantly over budget; a project riddled with disputes, claims, and cost or schedule overruns; cancelled procurements; or even damaged reputations.

It’s important for project owners to consider the current competitive landscape, capacity, risk tolerance, and level of market interest well before initiating a competitive procurement process. Certain aspects of your project, or the procurement process itself, may deter competent, capable constructors from even considering participation. Sparking the desired interest in your project, however, can be as simple as conducting a market sounding.

What is a market sounding?

A market sounding is an exploratory, intelligence gathering exercise designed to help you understand how your project will likely be received by the local construction market, and identify facets of the project that may cause concern. This is not a procurement opportunity but rather a means to acquire information. Market soundings give you an opportunity to generate project interest by freely engaging in a dialogue with constructors, suppliers, design consultants and lenders before formal project procurement activities begin. Best suited to owners developing complex, multi-stakeholder, or atypical projects, market soundings are highly beneficial, especially for those considering alternative forms of project delivery, such as Design-Builds or, more broadly, Public-Private Partnerships.

A market sounding can be very structured, employing data rooms, project presentations, questionnaires, or one-on-one meetings, but it can also be more casual and conversational, such as conducting a telephone survey. The level of formality, amount of project information shared, and type and number of questions asked, is completely up to you. However, it’s always a good practice to document everything and be transparent in your approach and overall objectives to avoid issues surrounding fairness and relevant procurement rules.

Ideally, you should time a market sounding after you have sufficiently developed the project concept and are able to fully communicate its scope and scale. By establishing the technical requirements, financing and proposed delivery method, you can provide a clear description of your project, but also have enough flexibility to take advantage of constructive feedback and adjust the project as needed. If you wait until the project is fully defined, it leaves little opportunity for the market to provide useful input. Key players may also be less likely to participate if they believe they have little to no influence on project development and procurement.

Market sounding benefits

At its core, a market sounding is a proactive approach to managing risks. Whether you’re concerned about interest, capacity, budget, technical challenges – or simply want to gain a greater understanding of key industry concerns – a market sounding can help you:

  1. Generate early awareness and interest in your project
    A market sounding opens the door to conversations that bring awareness to your project. It enables you to connect directly with industry players to solicit ideas, generate interest and make your project more feasible or appealing to the market. Engaging in these open conversations in the pre-procurement phase offers you a chance to explore alternate options and better plan your project.

  2. Select an appropriate delivery methodology
    The delivery model you choose can make or break your project. In a struggling economy, it can be especially important to find affordable, sustainable project solutions. As more collaborative, risk-distributing delivery approaches emerge, such as Progressive Design-Build and Integrated Project Delivery, constructors, suppliers, and design consultants have the option to expand their knowledge base and services to accommodate these new methods. A market sounding can give you a sense of how many key players have experience or interest in alternative delivery approaches.

  3. Increase transparency surrounding project scope, risks and known challenges
    The more you know about your project, the greater your chances of success. When it comes to project management, being able to identify and mitigate risks is arguably the most important skillset you can possess. When you bring a project to the marketplace with transparency about your concerns, the known risks, and perceived challenges, you gain the opportunity to strategize. Key industry players can provide feedback that may help you find affordable or timely approaches to mitigate risks.

  4. Open the door to discussions around industry trends and new technologies
    As a project owner, it can be challenging to keep up with new technologies that save time and money, and ultimately provide better project outcomes. By engaging industry players with a market sounding, you bring together the minds and experiences of a larger pool of experts that can suggest new, innovative solutions to more complex, atypical projects. A tunnel boring machine, for example, is a high-demand resource that can greatly impact the schedule, cost and feasibility of a Light Rail Transit project. Although it’s possible to dig tunnels without boring machines, it is often more cost-effective in the long run to schedule projects around their availability. A market sounding may provide insight on when the machines might be available for a specific project, which might then influence the timing of that project.

Under normal conditions, market soundings might feel like an unnecessary step. However, with growing uncertainty in the world and ongoing impacts to supply chains, labour, inflation and regulatory regimes, a market sounding can indicate a need for a course-correction relatively early on in the project. Will a market sounding provide you with an abundance of useful information or guarantee project success? Not necessarily. But it does offer a relatively inexpensive ‘risk-hacking’ exercise that can help you avoid costly procurement delays or considerably greater costs during construction, commissioning and operations.