Professional Development: Cooperative Purchasing
By Clint Pechacek
From the April 2014 issue of Today’s Facility Manager
In Texas, the Boles Independent School District (ISD) had a problem that many school districts across the nation face today. Over the last several years, student population had been growing faster than funding for new facilities could keep up, and after building several new additions to the high school and middle school, the district found itself in need of a new science building, but with limited funding. In an attempt to reconcile the two, the district’s facility manager (fm) turned to a tool that has been growing in popularity lately—cooperative purchasing. Working with one of its vendors through a cooperative purchasing contract, the district managed to build a fully furnished science building. By leveraging the purchasing power of a national governmental cooperative, Boles ISD was able to finish the project quickly and within budget.
In recent years, cooperative purchasing has become an increasingly accepted and popular method for public agencies and nonprofits to procure goods and services. Note: The cooperative contracts discussed in this article are governmental cooperatives that cities, counties, state agencies, public and private schools, charter schools, colleges and universities, and nonprofit organizations are eligible to use. Private businesses and for-profit organizations do not have to meet state legislated competitive bid requirements, and, therefore, the cooperative contracts discussed here do not apply to them.
Cooperative purchasing can be a confusing and difficult process to navigate, especially when it comes to facilities solutions. For many years, cooperative purchasing dealt almost exclusively with commodities. Now, however, many governmental cooperatives offer a variety of labor based solutions (such as Job Order Contracting services), and as a result cooperatives now offer fms a much more complete suite of potential solutions than in the past. Therefore, a general understanding of the process and the advantages of using cooperative contracts is essential for today’s fms.
So, what is cooperative purchasing? Simply put, it occurs when one public agency competitively bids and awards a contract that is then available for other government and nonprofit agencies to “piggyback.” Cooperatives are managed relationships where one entity will act as the lead agency by bidding and awarding contracts which can be used by other governmental and non-profit agencies that make up the membership. This concept brings higher efficiency to agencies because it allows there to be one procurement process rather than many. By using these contracts that have already been competitively bid, agencies can work together to save time and money. This is made possible by state laws that allow governmental and nonprofit agencies to use the work of other agencies across the nation to avoid duplication of efforts and resources.
The key is that governmental and nonprofit agencies must perform their own due diligence to make sure the competitive bid process used in awarding the cooperative contract meets all of their own state and local procurement requirements. One scenario where an agency might not be able to be part of a cooperative is if its local procurement statutes require it to take MWBE (minority and women owned enterprise) certification into account when evaluating a bid; if the cooperative being considered did not take those certifications into account for a particular contract, then the agency would not be able to use that contract.
There are multiple advantages that cooperative purchasing can present to an fm. The first and most obvious is that a good cooperative contract can save agencies money. Because vendors are bidding to provide services to many agencies instead of just one, they can afford to offer steeper discounts to the end users of a contract.
Cooperative contracts can also save fms from having to maintain a large warehouse of supplies and parts. Because the bid has already been completed for the products and services they need, and because many cooperative contracts offer next day delivery terms, they are able to keep less stock on-site and buy on a just-in-time basis. Finally, cooperative purchasing can save fms precious time. It takes a lot of time and effort to develop and solicit a bid; by using cooperative contracts, fms can focus on the execution of a contract rather than the process of writing it. Overall, cooperative contracts can save fms time and money.
Membership requirements differ depending on the cooperative. Most are free to join and free to use, and most do not require an agency to commit to exclusivity or to purchase a certain amount through the cooperative. The requirements for joining largely depend on what state an agency is located in and what the state statutes say about using cooperatives. All 50 states now allow for national cooperative purchasing, but state laws governing their use can differ. Some states, for example, require cities, counties, and school districts to sign an interlocal agreement before they can participate. In most states, however, the requirements are less stringent. While cooperatives can help agencies learn about the requirements in their state, agencies that want to use cooperatives need to conduct their own due diligence.
While cooperative purchasing is not the answer for every facility purchase, it can be a valuable tool to have available, as Boles ISD discovered when constructing its new science building. Cooperative contracts give agencies a tool that allows more flexibility while still maintaining compliance with procurement statutes. Using cooperative contracts can simplify the procurement process, and more and more fms are coming to see them as a useful tool for getting things done.
Pechacek has been a contract specialist with TCPN, The Cooperative Purchasing Network since he graduated from Baylor University in 2012. During his summers in college he worked as a junior auditor with the public accounting firm Belt, Harris, and Pechacek LLLP helping to audit public and charter schools. TCPN is based in Houston, TX.