How buying co-ops add value to purchasing
When Dan Marran began working in purchasing for Sparks, Nev., four employees purchased buying services and equipment for the city. While the workload in purchasing has not diminished, the number of people who buy has been reduced by 75 percent. He now runs the operation himself.
But with the help of government cooperatives, Marran says, he can still find good prices for the wide range of products and services that keep the city of about 500,000 running.
“There’s just one guy doing the job,” he says. “Co-ops help save time and provide efficiency. There’s an economy of scale that we wouldn’t see if we did all our bidding ourselves.”
With local government still managing with fewer dollars and full-time staff, those governments are depending more than ever on cooperative buying practices that help them save time on their purchasing cycle and, in many cases, money on their purchases. Aided by ever-increasing access to information through the Internet, purchasing officials can scan the entire nation for their best prices and sometimes learn that the best deal is closest to home.
“Co-ops have proven a wonderful asset for us,” says Adam Boeche, director of public works and engineering, in Mundelein, Ill. “We can participate in procurement as a larger player.”
While a University of Wisconsin study estimated that there are more than 11,000 cooperatives in the United States, with over a million members, those catering to public sector governments is a small fraction of that number. NIGP: The Institute for Public Procurement, a Herndon, Va.-based industry group for public procurement officials, lists 19 cooperative purchasing programs on its website.
Broadening the term beyond formal cooperatives finds that procurement officials often look to “piggyback” contracts that allow other governments to gain the same items and price as the originator of the contract. As an example, several states, such as North Carolina, pass through their contracts to the state’s municipalities. Individual municipalities also make available unused portions of their contracts to other entities. For example, if a city signs a contract for 10 buses but only buys eight of them, another community looking for a similar item might buy the other two at the same price.
A regional coop group in South Florida has been saving money for its 25 members for over 30 years, says Angelo Salomone, the purchasing administrator for Coral Springs, Fla., a long-time member of the group. Not only do the members buy together, they also have monthly meetings and discuss projected purchases so they might find efficiencies.
“It’s a true cooperative,” he says. “It’s a clearinghouse for sharing information. There’s a lot of synergy. We kick ideas around. Our contract list has grown 50 percent in 20 years.”
In all, a recent American City & County survey found that over 90 percent of respondents buy through some form of cooperative arrangements. Procurement officials like cooperative buying for several reasons, in addition to gaining access to deals that they could not find as a smaller operation. For one, they trust that the originator of the contract has gone through a formal process that will satisfy their own government’s bidding rules.
“You feel that you know the products,” Marran says. “There’s no low-ball products. I see that as very valuable.”
In addition, there are usually strong warranty and price guarantees, so the government can be assured of a good quality and pricing. “If it’s a state schedule, it’s pretty easy,” says Joseph Procop, procurement manager, of the Central Arkansas Transit Authority. “We can save a lot of time and administrative work. It has already been competitively bid.”
And, purchasing through a cooperative means that the government can save considerable time by not having to write a request for proposals, evaluating them and then awarding the bid. “There’s a quick turnaround,” says Boeche. “There’s a real efficiency in purchasing.”
John Holmes, who is a buyer in La Plata County, Colo., says that purchasing through the state represents a conservation of effort. “They do the due diligence,” he says. “We don’t have to duplicate the effort. It’s already been through the competitive bid process and the cheapest price at the time presented. We can feel fairly confident that we have a good deal as opposed to piggybacking on to another state.”
Another advantage is the wide selection that available through the largest cooperatives. “They put out many products and throw it open to the world,” Salomone says. “It works well for some areas.”
Despite the many advantages of cooperative purchasing, officials warn against assuming that a price from a cooperative is always the lowest or that the best price means that it is the right deal for a particular community. They say that the cooperative arrangement is just one tool that is available for purchasing the right product at the right price, and, like any tool, it must be used correctly.
NEXT: The future of government purchasing cooperatives
Robert Barkin is a Bethesda, Md.-based freelance writer.