Cooperative purchasing best practices from a seasoned procurement officer
Terry McKee, IT and Procurement Director at Knoxville’s (Tenn.) Community Development Corporation (KCDC) provided GPN with his views on suggested best practices for cooperative buys. McKee has been in public procurement management for a combined 29 years in the Knox County Schools and the Knox County government.
KCDC is the public housing authority for Knoxville and Knox County. The agency also serves as the redevelopment agency for Knoxville’s city government. The organization manages and rents more than 3,700 units across more than 20 properties and manages the application process and distribution of 4,000 Section 8 vouchers.
It’s critical, says McKee, that public buyers talk to their legal and finance teams to make sure the co-op contract under consideration meets requirements in their particular state. He says, while many states have now authorized the use of co-ops, not all have, and many have imposed restrictions. One example, says McKee is that while the Tennessee state government allows the use of cooperative contracts, they may not be used for several specific goods and services, including:
· Construction above $25,000
· Architectural/Engineering Services
· New motor vehicles (there are some qualifiers)
· Construction equipment
Another legal issue to be examined, McKee says, is whether or not a government entity is allowed to use another government’s cooperative contract if there was no specific mention of cooperative purchasing in the document. “Some agencies may use any governmental bid while other governments may only use awarded contracts if there was specific cooperative language in the document,” McKee tells GPN.
It’s important in the process, McKee says, that public buyers search extensively to find the best co-op agreement available for the commodities and services needed. He explains that it takes a tremendous amount of research to determine which co-op has the best deal for your agency. “There are so many co-ops now that it is not just a matter of ‘Let’s find a co-op so we don’t have to bid.’ It is now, ‘Which co-op, if any, offers my entity the best deal for the needed goods or services.’”
McKee explains that not only are there many cooperatives, but some cooperatives have multiple awards that may all cover the same items or services. It’s McKee’s view that the purchasing official has to determine which co-op to use and then which contract to use.
McKee says it’s crucial that public buyers resist the tendency to bargain against the contract’s fixed pricing. This best practice is also cited in the “Use of Cooperative Contracts for Public Procurement Guide” which is part of the NIGP: The Institute for Public Procurement’s Global Best Practices website. Go here to visit the site.
Many government officials, including those in operations and even some in public procurement, McKee says, assume that cooperatives automatically deliver products and services at the lowest cost to agencies. “A colleague of mine, new to procurement, recently told me that he thought a co-op meant the lowest price guaranteed and didn’t understand that it was not necessarily so. I have found many clients share this belief,” McKee tells GPN.
Public buyers, says McKee, are then shocked by the cost and try to negotiate or bargain with the vendor. He explains that this practice may not be appropriate if it is a firm fixed price contract. Another exception, McKee says, is if the agency is purchasing a high volume of the items in question.
Public purchasing officials, McKee says, should also think twice before they try to play local vendors against established co-ops in their negotiations and contract bargaining. The reason: this practice is usually not appropriate.
It’s a key best practice, says McKee, that public buyers have a checklist to aid in due diligence when investigating prospective co-ops. “A checklist for the usage of a co-op is very important for the procurement professional so that there is assurance that proper due diligence was conducted and that everything has been considered,” McKee says. Points that should be covered in the checklist include:
· Was the contract solicited by a public or a non-profit agency;
· Was the contract competitively bid;
· Do you have copies of all the documents;
· Was the award consistent with public procurement policies;
· Are the award terms and conditions acceptable;
· Did the bid contain preferences that your entity cannot use;
· Did the bid have any required preferences for your entity;
· If the project involves a grant, are the terms of the grant (such as Prevailing Wage and Section 8 requirements) met;
· Is the award still valid;
· How many years are left on the award;
· Are the ordering procedures acceptable;
· Are the payment procedures acceptable;
· Is the price good; and
· Is this a good business decision.
In a future co-op best practices installment, we’ll look at a useful cooperative purchasing guide that the Cooperative Committee of the NIGP Arizona State Capitol Chapter recently designed and built.