Cooperative purchasing today

Exclusive research by Government Procurement (Go Pro) magazine confirms the popularity of cooperative purchasing as a component of the procurement strategy for the vast majority of government entities of all types. Results of Go Pro‘s online survey indicates that 95.2 percent of respondents already use cooperative purchasing, and the outlook is bright for even greater expansion of cooperative contracts in the future. Half of the survey respondents project their entity’s use of cooperative contracts will increase in the next three years. (See the end of the article for demographics and other information on the survey).

The biggest benefits of cooperative purchasing listed by survey respondents are time savings (89.4 percent of respondents) and expense savings (79.5 percent), with program rebates listed next most commonly at 35.4 percent. Other listed benefits included well-written contracts, expanded pricing tiers and better quality of service from vendors. One respondent noted that cooperative contracts provide the ability to “concentrate on solicitations to which we can add value.”

“One of the main purposes I personally will look at a cooperative over conducting a solicitation is because of the time factor,” said Peggy Hayes, a Yuma, Ariz., buyer who responded to the survey. “The solicitation has already been conducted and finalized. All I have to do is a due diligence review of the processes to be sure it complies with our own requirements, and then proceed. Price is important certainly, but occasionally time is even more crucial.”

“Many times we choose cooperative contracts to save time and money by forgoing the bid process,” added Susan J. Hyatt, senior buyer and purchasing card administrator in Grand Junction, Colo., another of the survey respondents. “Lack of service or delivery problems can easily override or negate any ‘savings’ we may have anticipated, whether the perceived savings are time or money,” she said.

Limitations of cooperative purchasing

In fact, pricing was the main complaint of survey respondents about cooperative purchasing contracts – 47.1 percent of respondents see “pricing not aggressive enough” as a limitation of cooperative contracts they have used.

“When everyone gets a contract, pricing may not be as aggressive as it could be,” notes Paul R. Edwards, purchasing agent in Hillsboro, Ore., another of the survey respondents. “A large bulk purchase going to a single location will generally beat the pricing of the cooperative purchasing agreements, which are generally priced for the one- to two-quantity purchase.”

The first table on p.14 lists limitations included in the survey. Other complaints include operational/logistical problems, choices that are too narrow and a lack of service. Notably, 27.1 percent of respondents said a limitation is that cooperative contracts “do not meet competitive solicitation standards.”

“When you have to do more with less, you appreciate efficient, timely service,” commented Hayes. “It is difficult to use a cooperative contract if the vendor frequently leaves you waiting for an answer. If the service associated with the contract is lacking, it defeats the primary purpose of using it.”

Edwards commented: “When buying anything that requires some level of maintenance, it is critical for the vendor to have a service department that can take care of the equipment when things don’t go well.”

Other complaints listed by respondents include lack of transparency (pricing not publicly available) and lax logistical guidelines or scope of work. A couple of respondents pointed to the fact that cooperative purchasing does not address sustainability or minority-owned, women-owned or small business requirements.

One unidentified survey respondent offered this comment: “The cooperative organization reaps the most monetary benefits and is not always concerned with the members’ results. Related to that, cooperative sales people often oversell to vendors and members, making things appear better than they really are. Poor recordkeeping for tracking cooperative purchases is also a problem.”

A popular procurement tool

Typically, cooperative contracts make up less than half of an entity’s entire spend, and the largest percentage of respondents (31.4 percent) in Go Pro’s survey estimated the percentage of spend related to cooperative contracts between 11 to 25 percent. The second largest group (23.9 percent) estimated that 5 to 10 percent of spend is related to cooperative purchasing, and another 15.7 percent estimated the share at 1 to 4 percent. On the higher end, 12.6 percent of respondents estimated the cooperative purchasing share at 26 to 35 percent, and another 10.1 percent estimated 36-50 percent.

Multiple reasons are listed for not using cooperative contracts in some circumstances, the major one being that respondents expect a better result through direct solicitation. There is also a handful of responses that cooperative purchasing is prevented by statute. “Other” reasons include the difficulty of coordinating with other government entities, the quantities needed to make a purchase, a desire to be in complete control of a contract and process terms, and “politics” (i.e., local vendors are often excluded from cooperative contracts). One response summarized a common approach: “We limit cooperative contract use to purchases below $50,000. We have found that we obtain better prices for higher-dollar purchases by issuing a competitive solicitation.”

The desire to purchase locally is often cited as a reason not to use cooperative purchasing. “We try very hard to purchase locally to support our community,” noted Hayes of Yuma. “That said, we also encourage our local vendors to participate in cooperatives. In these tough economic times, with short staff and less money, it is very helpful to have cooperatives to utilize when in a time crunch; but even better if your local vendors are an option on the cooperative.”

One survey question asked what type(s) of cooperative contracts the government entity has used in the past three years. Unfortunately, because of a programming error in the survey, multiple answers were not allowed (as pointed out by several respondents). For what it’s worth, the results show 34.4 percent of respondents use national contracts, 40.6 percent use state contracts, 8.1 percent use regional contracts and 16.9 percent use local contracts (based on joint solicitation with neighboring jurisdictions). If multiple responses had been allowed, the results would have been different.

“We actually use all of the above, depending on the project or items being purchased,” said Hyatt of Grand Junction. “It does us a great service by having many to choose from. That way we can find the best fit for our needs.”

“I think most agencies will use any qualifying cooperative contract that will meet their immediate need,” said Hayes of Yuma. “If they qualify to use ‘all of the above,’ I believe most of them do. State contracts are generally a safe bet since you know they are meeting your state’s statutory and regulatory requirements. Other cooperatives require more careful scrutiny to be assured of compliance.”

Common cooperative categories

There is a long list of products and services for which cooperative purchasing agreements are used, with the largest being office supplies, which applies to 67.9 percent of respondents. Other big areas are electronics equipment (64.2 percent), transportation equipment (63.6 percent) and furniture (53.7 percent). The table at left lists the various products and services included in the survey. Among the “other” categories, respondents listed food products and janitorial supplies. Also mentioned were drugs and pharmaceuticals, “scientific products” and classroom supplies.

Construction is a category where cooperative purchasing lags. Notes Edwards of Hillsboro, Ore.: “Since a large part of our spend is for construction (streets/water/sewer/structures) I do not expect cooperative purchasing to exceed the 25 to 30 percent range.”

The survey also asked what additional functions/features cooperative contracts should provide. Survey respondents favored more information on green compliance and sustainability (62.4 percent) and also involvement of small, women-owned and/or minority-owned businesses (52.5 percent). Other ideas mentioned by respondents include more emphasis on regional contracts, more payment options, simplified methods of evaluation and cost comparisons, addition of local vendors into the mix and industry-specific categories (i.e., water/wastewater chemicals, equipment, supplies and services).

“It would be awesome if we could rate our overall satisfaction for delivery, customer service, product quality, and so forth,” said Hyatt of Grand Junction. “Then have that rating from all the customers used as a negotiating tool for renewal of the contract or to determine if the rating warrants contract continuation. Many times, an inferior product or vendor is our only choice, and I feel it would improve overall satisfaction if the vendors knew they had to perform or lose the contract.”

“In this age of electronic information, it is crucial that these cooperatives and all of their associated documents and contact information be made available online for download,” added Hayes. “That way it is transparent and anyone wishing to use the cooperative can do a thorough examination of it before determining the appropriateness of use.”

Getting the word out

Spreading the word about cooperative purchasing is an important element in its continued growth. When asked how they receive information or do research on cooperative purchasing, 77.3 percent of survey respondents report they depend on the Internet and Web sites. A more old-fashioned sharing of business information, through word of mouth and networking, was the second most common method, used by 73 percent of respondents. Additional common techniques included print advertising (19.6 percent) and attending trade shows (45.4 percent). “Other” methods listed include purchasing listservs and communications through professional associations. Respondents also reported working systematically with other state governments and depending on state-sponsored procurement training and events. Vendors were also listed several times as a source of information about cooperative agreements.

• Read the “Secrets to Using Cooperative Purchasing Agreements Successfully” sidebar to learn secrets from the survey respondents.

About the author

Larry Anderson is the editor of Go Pro.

About the survey

The online survey was conducted using SurveyMonkey, and two invitations to participate were sent to names on Go Pro’s email list. A total of 168 responses were received, including a breakdown of government unit types as follows: 30.5 percent city/municipality; 18 percent county/region; 16.2 percent school district (K-12); 10.8 percent college/university; 12 percent state agencies, divided equally between central procurement agencies (6 percent) and other state agencies (6 percent); 9 percent special district/authority (such as health, utility, housing, transit or airport), 0.6 percent federal agencies, and 4.8 respondents chose “other” (not specified). The survey also asked each respondent about their entire organization’s total expenditures: 21.1 percent reported less than $25 million; 11.2 percent said $26-50 million; 16.1 percent estimated $51-100 million; 13 percent responded $101-250 million; 11.2 percent said $251-500 million; 5.6 percent answered $501 million to $1 billion; and 7.5 percent estimated $1 billion-plus. “Don’t know” responses were 14.3 percent.

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