In 2019, the Texas state government was able to save over $200 million by simply utilizing cooperative purchasing contracts. That is $200 million that can go back into the budget and back to the taxpayers.
A cooperative showing these numbers is not a rare or outlying figure. They consistently do and because of that, you should know when and how to use cooperative purchasing to its full benefit.
The Function and Benefits of Cooperative Purchasing For Higher Education
The core definition of cooperative purchasing is “two or more government agencies purchasing under the same contract.”
In this case, it would be universities or the formation of university networks that contain any number of universities within a state or within multiple states that form a network.
Pricing Advantage
When a purchasing cooperative contract is formed, several factors that go into pricing are affected. The biggest of these factors is providing a stronger ability to negotiate.
Vendors see a cooperative as the opportunity for a large number of contracts and because of that, they will offer lower prices. Think of it in the way that ordering bulk saves a great deal over ordering piecemeal.
When contracts are needed from each of the members for different vendors that have already been used, there are processes already in place. They essentially have a template for vendors that have been vetted.
Flexibility
Because of an option built into cooperative purchasing, there is a level of flexibility offered that wouldn’t be there if a higher education organization pursued a private contract.
An organization can enter into a piggybacking contract within the co-op. They add themselves to a larger contract without being a part of the contract holder’s organization.
However, they do not have any power at the negotiation table. This leaves them mid-road. They would be getting a better deal than they would on their own and yet not the best deal possible on the market.
Efficiency
Piggybacking is one of two types of co-op contracts, the other being joint solicitation. With this relationship, parties involved develop an agreement to maximize their purchasing power.
There are many resources available for higher education organizations to connect into pre-existing co-ops based on their location and their focus.
When working with a co-op, much of the administrative overhead is reduced and/or streamlined.
A university must run through a request for a proposal (RFP) process when restocking their supplies. This purchasing process can turn out to be at times lengthy and tedious.
The university must:
- Write up details for all the items needed
- Writing up the process itself
- Read proposals from suppliers
- Determine top offers
- Negotiate contracts and eventually sign
The procurement process is cut down to a couple of steps when purchasing within a cooperative purchasing program. There are already existing vendors that hold contracts with the large organization and do not require a further proposal or negotiation process.
Stability
A cohesive unit carries a lot more clout. It represents a lot more to lose if the needs are not met as well. Vendors will listen to the cooperative much more quickly than if it were a single entity contract voicing concerns.
It is in the interest of both the individuals that make up the cooperative as well as the vendors that they remain in this type of relationship. The needs of the many will be addressed. Not only that, but the vendors will also have continued work streams flowing in.
A cooperative purchasing group is a network at its core. And while financial resources are a big part of why purchasing cooperatives exist, other resources allow for assistance when the time rises.
Hidden Gems
These cooperatives are for more than just supply runs though. It has been shown that many schools in the past may not have been aware of that.
Some of the biggest benefits that would be of use to larger schools are ones that they are taking the least advantage of.
Purchasing cooperatives can very easily and effectively be used for insurance coverage options and large scale construction projects, just like ones that would be needed on remodel and repair projects at a large university.
Large scale projects, like the High-Safety Roof Replacement needed by the city of Youngstown, OH, reflect the strength of the use of cooperative purchasing contracts.
The timelines of these projects are reduced by months at a time, saving huge amounts of money.
How To Become Involved
As each purchasing cooperative is its separate entity, they will all have varying regulations and requirements.
A national association who is a strong partner in the cooperative field is Omnia Partners, and they just require a simple registration and tax information. Other collectives may have different requirements, so it’s important to research before applying.
With an increase in spending resources of $5.5 billion since 2018 and over 60,000 participants involved in at least one contract or more. They have a nationwide network and also have the resources to be less stringent on who is allowed to be in the cooperative.
Universities will almost always have a regional network that makes up a purchasing cooperative, such as the Virginia Association of State College and University Purchasing Professionals.
Local government officials are a good resource to reach out to as well. They will be able to point you in the correct direction if not able to help you themselves.
Stronger Together Than Alone
After learning how beneficial a purchasing cooperative can be and how much stronger you can stand compared to being alone, it is time to find the nearest one to become a part of.
We have a relationship with multiple purchasing cooperatives. From this experience, we know what the process of working with these groups is like and how best to serve schools, government buildings and others.
Get in touch and we can begin a discussion about how we can serve your establishment as well.
