Cooperative Purchasing: The Most Prominent Buying Method (You’ve Never Heard Of)

Posted on August 14, 2018

cooperative purchasing

Brian Alexander is a summer research fellow at CoProcure and a first-year Master of Public Policy candidate at UC Berkeley’s Goldman School of Public Policy. Previously, he served as a Senior Policy Analyst at the Maryland Governor’s Office for Children with a focus on reducing the impact of parental incarceration on children and families. 

From filling potholes to funding public schools to providing social services, we all rely on local governments for the same basic things. Cities and counties have different governance structures, budget sizes, or political affiliations, but nearly all stand to benefit from collaborating with each other. How do we break down silos across many local governments, even as governments struggle to connect agencies working at opposite ends of the hall?

Fortunately, when it comes to saving staff time and money, local governments have been willing to play nice for a long time. Many jurisdictions share procurement processes through cooperative purchasing. Cooperative purchasing enables public agencies to utilize one shared competitive bidding process instead of running redundant processes for similar needs. Local governments can run a solicitation together up-front or leverage a pre-existing contract that another local government has created through a competitive bidding process.

We’ve spoken to hundreds of government staff and startup vendors about procurement; we were surprised to hear that few of them had heard of cooperative purchasing. Admittedly, even though I worked on procurement-related projects at the State of Maryland, I was not aware of cooperative purchasing during my time in government. Below, I share how cooperative purchasing works and who coordinates purchasing. Once we’ve reviewed the basics, read on to understand why cooperative purchasing matters for you as a government employee or startup vendor.

How does cooperative purchasing work?

Generally, there are three common ways that governments utilize cooperative purchasing. First, governments can work together up-front to issue a joint solicitation for bids. This allows participating governments to share the administrative burden of negotiating prices and contracts and combine their purchasing power up-front to negotiate competitive pricing with vendors. If governments are able to anticipate shared needs and collaborate in this manner, the cost and time-savings can be significant. Large cooperative purchasing organizations, like NASPO Value Point, Sourcewell, and U.S. Communities often coordinate these types of cooperative purchasing initiatives on behalf of many government agencies.

Second, some public agencies are able to shorten procurement timelines by pre-qualifying vendors through what’s called a Multiple Award Schedule (MAS). By utilizing a MAS, a public agency (usually the state or federal government) can create a shortcut for other public agencies by conducting a competitive solicitation to contract with multiple possible vendors for a given product or service. Other public agencies that want to buy a category of goods or services can share a scope of work to pre-qualified vendors and select a vendor based on responses. This is often used to save time and money in situations where individual agencies or units of government are running frequent solicitations for the same (or similar) products.

Even if governments don’t coordinate a purchasing process up-front, they are often still able to benefit from sharing procurement processes and pricing with public agency peers though “piggybacking.” Piggybacking is when one government agency is able to utilize a contract that has already been competitively awarded by another agency. On the face of it, piggybacking might sound like a violation of local procurement laws. However, in many instances, a contract that has been negotiated and signed through a competitive bidding process originated by one government is perfectly viable for others to use. (You can find state statutes on cooperative purchasing or intergovernmental purchasing here.) Contracts can generally be tweaked in small ways to insert language that meets local procurement requirements or regulations, but they provide a viable starting point and a way for purchasing agencies to take advantage of the due diligence conducted by their public sector peers.

Who coordinates cooperative purchasing?

If you’re a cynic, you may be wondering how governments collaborate even as cross-departmental work in a single locality can be a struggle. There are a few different types of organizations that have either expanded their roles to coordinate purchasing or mobilized to fill a need in the market.

Government procurement offices

Some intrepid procurement offices (like Fairfax County, VA and Tucson, AZ), or government collectives (like the Los Angeles Region Imagery Acquisition Consortium), have taken it upon themselves to originate contracts on behalf of other government agencies. They can either solicit needs from other governments in their regions to negotiate with aggregate demand, or they negotiate the contract themselves but include a clause that makes it clear to both the vendor and other potential buyers that other governments can purchase under the negotiated terms. The procurement office can do this on behalf of a cooperative (we discuss this below) or market their own contracts. Either way, most collect a fee from the vendor on the contract whenever another jurisdiction uses it, making it a potential source of revenue for procurement offices willing to do the initial administrative work involved in running a competitive bid process.

Regional Development Organizations or Councils of Governments (COGs)

There are approximately 550 Regional Development Organizations (known by many names, like Councils of Governments, COGs; Regional Councils; Government Associations, etc.) in the United States. These associations are multi-jurisdictional, public-based regional planning and development organizations. Of the nearly 39,000 local governments in the U.S., about 35,000 are served by these kinds of organizations. Among other activities, these regional development organizations often coordinate purchasing for their member jurisdictions. For instance, in the Sacramento, California region, the Sacramento Area Council of Governments (SACOG) offers shared fuel and HR service contracts to members; SACOG has also helped coordinate other purchases like aerial imagery. In other places, governments work together to buy road salt or alternative fuel vehicles. Since these organizations have a specific mandate to support collaboration, cooperative purchasing fits well into their organizational ecosystem. The process, however, remains mostly manual and high-touch. The organizations sustain cooperative purchasing efforts with an administrative fee charged to members and/or a small commission on sales to the vendor when cooperative contracts are utilized by public agencies.

Purchasing cooperatives

Finally, there has been significant growth in the size and scope of purchasing cooperatives, which seek to make the procurement process more convenient for government buyers. These cooperatives vary in terms of their governance structure and legal authorities, but they work with governments to originate new contracts to share with members, in some cases actually originate contracts themselves, and aggregate and market existing contracts to governments. Vendors pay cooperatives a small commission on the contracts executed with cooperative members (see fees below). The larger cooperatives like Sourcewell and U.S. Communities coordinate billions of dollars worth of annual purchases, making even a small commission worth millions in annual revenue.

Figure 1: Administrative Fees for Sample of Large Cooperatives

Cooperative Administrative Fee
NASPO ValuePoint 0.25%
General Services Administration 0.75%
U.S. Communities 1 to 2.5%
National Joint Powers Alliance (SourceWell) 2%
The Cooperative Purchasing Network 2%
National Intergovernmental Purchasing Alliance 2.5 to 3%

So what?

If you’re working in local government or trying to sell a product or service to government, what does cooperative purchasing mean for you? Our next post shares recommendations about how and when to cooperative purchasing.

CoProcure makes it easier for local governments to find, buy, and share high-quality technology products from a more diverse set of vendors via streamlined, cooperative purchasing. With CoProcure, governments save time and money, access new technologies faster, and engage new types of businesses. Want to learn more? Say hi: [email protected].

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