Benefits of using Co-Ops agreements
Working in public procurement isn’t easy. According to 2018 [ ] state and local government purchasers survey, over 40% of procurement staff feel overworked. A county-level procurement administrator we interviewed summarized trends that have made procurement work more challenging: “We’ve been struggling for the past decade with budget reductions and staff cuts while the amount of work is increasing.”
Local governments are increasingly buying cooperative contracts, faced with limited time and resources. Today, around 20% of local government spending goes through cooperative contracts.
As a public buyer, here’s what you need to know about the benefits of cooperative purchasing.
1. Cooperative contracts save time
Using a cooperative contract reduces the burden of administrative purchasing and speeds up the purchasing process.
When you use a cooperative contract, you depend on the work another agency has done to run a competitive bidding process. That process comprises market research, receiving and evaluating proposals, advertising the bid solicitation, writing the bid solicitation, receiving and evaluating proposals, and negotiating a contract.
Running a highly competitive bidding process typically takes 4–24 months; an internal audit of Philadelphia’s procurement practices found it took 2.5 months to create the bid solicitation, not to mention collect and evaluate proposals or negotiate and award the contract. Reducing the time purchasing staff spend generating new contracts and managing new solicitations, especially for services or products that don’t require much customization, saves months of administrative effort and time.
In addition, to technology and “smart cities” categories especially, local governments are branching out into unfamiliar territory. These new tech services or solutions are even more challenging to research and scope. In 2018, it was estimated that cities in the United States spent close to $25 billion in support of “smart city” initiatives.
Cooperative purchasing and a general collaboration ethos will help governments determine best-in-class products, expedite purchases and share research findings without requiring additional operating budgets or staff time. Sharing contracts also shortens the sales cycles drastically for smaller firms that may not otherwise be able to access the government market.
2. Cooperative purchasing saves cost
Cooperative purchasing can help agencies get more competitive costs by aggregating government purchasing power. Let’s have a look at the employee statistics.
The Kansas City Regional Purchasing Cooperative (KCRPC) has helped its members achieve nearly $12M in savings by fostering more cooperative purchasing. A 2017–2018 San Mateo County Civil Grand Jury Report identified potential cost savings of between 5% and 15% for San Mateo County and its 20 cities if they worked more collaboratively to share contracts or run joint solicitations.
If those savings were realized, the 21 entities could have as much as $108 million to reinvest into other priorities each year by collaborating better locally.
Smaller governments can achieve price-saving advantages by purchasing off a contract in place by an agency with greater purchasing power.
The cost-saving benefits of cooperative purchasing are particularly salient for smaller government agencies that cannot buy goods or services in large quantities. Suppose those governments can use a contract negotiated by a more significant entity demand with other small, neighboring groups. In that case, they will often be able to achieve better cost prices than they could on their own.
For example, the Texas Department of Information Resources estimates that in FY18, the Department’s cooperative contracts for technology saved public education agencies and local governments in the state more than $120 million just in product pricing alone.
3. Decrease Costs for your suppliers
Governments spend trillions of dollars a year (~$1.6T at the local level in the United States), so the way they award contracts can hugely impact which types of businesses grow and succeed. When a supplier is awarded a contract that comprises of cooperative purchasing language, that supplier can turn that contract award into multiple contracts, especially with other regional governments.
Using an existing contract instead of running a new competitive bidding process can decrease the cost of doing business with governments for suppliers. This is specifically meaningful for small, women-owned, and disadvantaged businesses, which may struggle to steer through the high costs of selling into the government sector.
It’s not just the bottom dollar you need to consider when purchasing. Your city likely needs contract flexibility, local purchasing preferences, sustainability and social responsibility goals, and more.
A reputable cooperative purchasing organization considers this when awarding supplier contracts.
Look for the following in awarded contracts:
- Contract flexibility.
- Terms and conditions.
- Compliance.
- Local preference.
- Support of social goals.
4. Easy to use and flexible to fit your needs
Cooperative purchasing programs are often free to use, have no obligations or minimums, and offer flexibility. Think of awarded contracts as master agreements that you can customize to meet your city’s specific needs. You can add your own terms and conditions and subsequent agreements. You can choose from several cooperative purchasing programs.
Be sure to choose one that puts your needs first, values service, and strives to assist you and your city in purchasing smarter.
Conclusion
Leveraging the experience, expertise, and procurement work of thousands of governments across the country using Cooperative purchasing can help you save time, achieve cost savings, and access local and/or diverse suppliers faster.
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