Procurement

Trends in Cooperative Purchasing

• By Sarat Pratapchandran
• 07/01/20

School safety, violence prevention products and sustainability are trending in the cooperative purchasing space, say industry experts.

“School districts continue to leverage cooperative purchasing as part of their overall sourcing strategy,” said Sue Peters, Executive Director, K–12 Market Development at E&I Cooperative Services.

According to Peters, the K–12 sector is expanding ties with local and regional government entities in areas relating to school safety and security, disaster preparedness and in some cases health and social services.

This makes cooperatives like E&I help members take a strategic approach to school security needs that vary from IT and cyber security to campus policing, background checks, and emergency response readiness.

Another trend is the way school purchasing teams have transformed their operations. Their traditional roles as buyers have evolved into directing cost management, ensuring quality, supplier evaluation and other areas, said Rob Amundson, K–12 Membership Development Administrator at Sourcewell, a service cooperative.

School districts are adding cooperative language to their RFP processes and asking suppliers to respond to national purchasing contracts. They also use e-procurement and utilize online catalogs and other systems to integrate their purchasing decisions.

“We assist our members in reducing costs, improving operational efficiencies and maximizing effectiveness by providing high quality, cost-effective contracts, services and strategic solutions for education and related communities,” Peters said.

K–12 is a fast growing market

K–12 is the fastest growing member category for E&I, founded in 1934. With 5,100 institutional members today, the organization was founded as the “purchasing organization for education.”

More than 99 percent of the company’s contracts have been awarded in a competitive solicitation process that has been validated by NIGP: The Institute of Public Procurement.

Meanwhile, Sourcewell, a member-focused public cooperative, has been in existence for over 40 years and has provided contract purchasing services for more than 20 years serving more than 50,000 member institutions nationwide.

“Sourcewell is averaging 25 percent growth in member utilization of contracts each year for most of the last decade,” Amundson said.

Besides cooperative purchasing entities, large online retailers like Amazon offer their large, competitive online marketplace to lure school districts.

“Personally, I view Amazon as a shopping experience, not a strategic player and not a competitive contract solution. We have members that are investing in building out e-procurement systems with their existing ERP or using dedicated e-procurement platforms. The benefits of creating a customized online e-procurement solution include centralized spending control (reigns in maverick spend), online catalogs, integration of accounts payable and procurement, supplier registration, contract management, solicitation management and of greatest benefit — visibility and reporting!” said Peters.

According to Amundson, school districts see value in using cooperative purchasing entities as they get a steady, predictable pricing structure and supplier source. Sourcewell offers fixed pricing for better clarity on price structure, including minimum discounts and ceiling-based pricing and also allows members to purchase from local vendors whenever possible — helping local economies thrive.

Sustainability is at the forefront

Sustainability ranks highly on the list of cooperative purchasing done by school districts. National level suppliers are “encouraging consolidated deliveries with minimum thresholds,” Peters said.

Sustainable products get promoted online, increasing awareness and making it easy for school districts to make purchasing decisions. This is specifically seen in energy management and building automation. School districts are into retrofitting lighting, and use of occupancy sensors for heating, cooling and lighting, and these spaces are also good learning tools, according to Peters.

Members consider the environmental impact of the products and services they purchase and “green” characteristics are evaluated positively and reflected in the “value added” area of the evaluation at Sourcewell.

Perhaps the greatest benefit that school districts get in using purchasing cooperatives is the ease of doing business. Most school districts can get out of a complex RFP process that is resource and time sensitive. “Time to market is huge and with any one of our 125 contracts, they can just buy it off from day one, with no obligation or minimum spend commitment,” said Peters.

According to a position paper published by NIGP: The Institute for Public Procurement, “cooperative procurement is one form of strategic sourcing and cooperative contracts leverage value-added pricing, vendor services levels and advantageous contract terms.” Cooperative contracts offer the government purchaser access to quality products at competitive prices, beneficial delivery and contract terms.

Supplier diversity is key

Supplier diversity is a key area in cooperative purchasing. E&I supports their members’ diversity spend initiatives by providing members opportunities to work with suppliers that qualify as minority-owned, women-owned, disadvantaged, and local business enterprises.

“When soliciting new contracts, it is our goal to identify and include various diversity suppliers who can serve our members’ business requirements,” said Peters.

To qualify, suppliers must be at least 51 percent owned, operated, and controlled by an individual or individuals within nationally recognized diversity supplier qualifications. In addition to direct relationships, many E&I suppliers partner with third-party diversity suppliers who can then collaborate with members to discuss the potential for creating a formal minority/diversity program.

Sourcewell also “grants positive consideration for a variety of sustainability factors in the evaluation process.” We recognize that our members may have targets, goals, or preferences for purchases from historically underutilized businesses. Proposals by women and/or minority-owned business enterprises (WMBE), small business enterprises (SBE), and other historically underutilized businesses, along with proposals offering green or sustainably produced products, are eligible to receive value-added point consideration in our scoring matrix.

Transparency, ease of use helps them thrive

Cooperative purchasing organizations offer a level of transparency for their members to engage in business transactions. Members across the country have worked together to develop E&I’s competitive RFP Process and it has been validated by NIGP: The Institute of Public Procurement.

One of the greatest advantages they offer is consistency and ease of use for busy K–12 purchasing cooperatives to make purchasing decisions. They also leverage collective knowledge and the purchasing power that delivers a large collective market. This is something a single school district will find difficult to navigate on it’s own.

“The increased expectations have procurement teams looking increasingly to already-solicited cooperative contracts to help gain some efficiencies. One of the contract areas that has really grown is construction — job order contracting — for repairs and small, routine projects,” said Amundson.

Cooperative contracts now use a variety of creative financing ideas and incorporate leasing and purchasing into their awards. This helps schools in maximizing their budgets and get help for continued maintenance, and the product/service life cycle is more readily refreshed.

Procurement teams are continuing to be part of the strategy team at the district level. Examples of closer collaboration, and specialization with procurement having category expertise and working closely with aligned departments.

As a government agency, Sourcewell’s procurement team “sits next to district procurement staff at trainings, they aspire to and attain the same professional certifications, and they live in the same procurement world as the members using our cooperative contracts,” Amundson said.

This gives them a strategic advantage as they are also empowered to reinvest in the communities they serve and aim to offer contracts for the long list of purchasing needs in their district.

Sourcewell membership is available at no-cost, no obligation, and no liability to public agencies, school districts, state colleges and universities, and local governments. Tribal governments, nonprofit organizations, and other similar entities may also join.

Despite all the benefits cooperative purchasing offers, the NIGP: The Institute of Public Procurement in their position paper states that sometimes the contract pricing may not be “optimal due to the inability of the public body to accurately predict order quality and time.”

Large-scale cooperative purchasing initiatives may also hinder opportunities for local, small or disadvantaged suppliers. Market research and due diligence are critical in evaluating cooperative purchasing initiatives.

Meanwhile, the US-China trade war hasn’t yet made a big dent in the world of cooperative purchasing. “Like many, we have been keeping a pulse on potential impacts from the US-China trade wars and listening for feedback from districts and awarded vendors. Certainly, there are some pockets of concern, but for the variety of contracts we have available, we have not noticed any markable trends in the use or feedback relative to pricing,” said Amundson.

This article originally appeared in the July/August 2020 issue of Spaces4Learning.