Cooperative Contracts Contribute to Time and Cost Cuts
Cooperative Contracts Contribute to Time and Cost Cuts
With so many choices, knowing what type of cooperative contract to choose can be a challenge——unless you prepare ahead of time.
It has often been reported that some of the biggest savings a government entity can achieve come from the efforts of the purchasing department. Buying a particular product or service for less translates into real dollars that can be spent elsewhere. This is fiscally responsible and makes better use of taxpayer money. For that reason, the competitive bid process is law for most public entities.
However, the purchase of a radio system or a fire truck, for example, may take up to a year and involve months of research, advertising in local newspapers, pre-bid conferences, sealed bids, evaluations, awards, document preparation, and contract signing. Plus, don’t forget the ever-present potential for a disenchanted bidder to file a grievance. When productivity is measured by the value and volume of purchases being made, the formal bid process can bring everything to a grinding halt.
The formal bid process is designed to ensure that a government entity get a particular product at the best possible price. The question is, is there a way an agency can achieve this “best value” without incurring the time and expense associated with the traditional bidding process?
Cooperative purchasing is rapidly becoming the best answer to this quandary. The decision to use a cooperative is now as common as the old “make-or-buy” decision that many organizations have faced.
However, the decision-making process does not end when procurement professionals add cooperative purchasing to their list of buying options. Today, there are many cooperative purchasing choices available: state contracts, cooperative purchasing programs, buying consortiums, and even piggybacks on other jurisdictions’ contracts. Without the right information, deciding which cooperative contract to use may take as long as just bidding it out in the first place!
Pool Resources to Increase Buying Power
Cooperative purchasing saves government agencies valuable staff time and money by pooling together the purchasing power of entities regionally or nationally. Benefits also include sharing experiences with other entities purchasing through the same contracts and increasing response from the vendor community. The growth of cooperative purchasing among governmental agencies continues to transform the face of public-sector purchasing from simple Xs and Os to a much more strategic environment.
When buying through a cooperative purchasing contract, an entity does not intend to circumvent the competitive bid process. Rather, the agency substitutes the bid process it would normally use for the process the cooperative purchasing program has already completed.
This does not mean that an entity must necessarily buy from a cooperative—itself a governmental entity— but it does mean that regardless of which program is used, the purchasing practices should be as thorough as, or more comprehensive than, those of the buying entity.
One must do some crucial homework on the various cooperative purchasing options before deciding which programs should be used. There are several key factors to consider in selecting any cooperative purchasing program.
Cooperative purchasing saves government agencies valuable staff time and money by pooling together the purchasing power of entities regionally or nationally.
Review the Bid Process to Find the Best Fit
The first factor to consider is the bidding or contracting process that a particular cooperative utilizes. Make sure that the cooperative’s bidding process fully meets the standards that would be used normally by the end user. Documentation should be requested from the cooperative program showing bids received, bid tabulation, and bid award. This is in contrast to a negotiated “catalog” approach in which one or more bidders’ entire catalogs are accepted without a true low bid or “best value” award having been made. If a cooperative is not itself a unit of government, then the contracts it has awarded may not have been subjected to a public competitive bid process. Look also to see if it is a governing body that approves all award recommendations in a publicly advertised meeting.
Figure Out Who Will Foot the Bill for Handling Fees
Another area to consider is the fee paid for purchasing through a cooperative contract. Since many cooperative programs are staffed by individuals whose jobs are to solicit, evaluate, and administer these contracts, there will be program overhead that must be compensated. The two most prevalent models are those in which the purchasing entity pays a fee to the cooperative or the vendor pays the cooperative the fee from its proceeds. It is a common misconception to think that a cooperative program is “free” when the vendor pays the fee. In this case, the vendor will simply add the cost into the price of the product or service.
The key aspect to review is what services the fee will cover. Are the savings and expertise realized by using the cooperative purchasing program worth the price of the fee? Both short-and long-term savings must be considered when making this calculation.
Piggybacking, or buying off another entity’s competitively awarded contract, is typically an instance in which there would be no fees involved. These purchases are usually negotiated directly with the vendor.
Probe Program Structure for Potential Problems
Program structure is one of the most important areas of cooperative purchasing to consider. This includes the format and structure of the cooperative purchasing program itself. An entity should ask questions about the longevity and history of the program, staff size and expertise, customer service, references, and contract administration capabilities.
Most everyone has experienced the horror of purchasing something from a company that folds up shop and leaves town when troubles arise. Equally frustrating is the dilemma of trying to get problems resolved from an organization that does not know much about the product or service it sells and is not interested in trying to assist the customer.
A quality cooperative purchasing program should be a buffer between the end user entity and the vendor when problems arise. Program staff should assist in resolving problems and be knowledgeable in the products and services sold through cooperative contracts.
Focus on Flexibile Plans for Customized Purchasing
One final point for consideration is the flexibility of the purchasing process. Too many times, entities that choose to go through a cooperative purchasing program or an existing state contract are forced to order an item exactly the way it was bid. This can quickly cause a discrepancy between the departmental requisition and the final product purchased.
Look for a cooperative contract that has bid not only base products, but also many priced options. This will allow for a more customized purchase that still takes advantage of a competitively bid contract.
Equip Entities for Procurement Prowess
When all these factors are evaluated on the front end, the cooperative purchasing programs that an entity will use can be determined before purchasing needs arise. This way, when a requisition for a particular product comes, the list of cooperatives and contracts that will be consulted has already been determined.
Remember, too, any decision of such major significance should be reviewed by legal counsel. Therefore, it is a good idea before joining and purchasing through a cooperative to have the legal department make sure that all necessary purchasing requirements are being met.
Using this approach, the myriad of decisions is reduced to a select few. This way, cooperative purchasing becomes just one more handy option in a procurement professional’s toolbox.
Bob Wooten is Coordinator of Program Development for the Houston-Galveston Area Council (H-GAC) Cooperative Purchasing Program. He may be reached via e-mail at [email protected].
The Houston-Galveston Area Council (H-GAC), TX, assists local governments in reducing costs through nationwide government-to-government procurement services. Visit: www.hgacbuy.com, or call 800-926-0234.