In this series, Brian Alexander of CoProcure helps break down the ins and outs of public purchasing. CoProcure is an early-stage venture-backed startup optimizing local public procurement by helping local governments share contracts.
Cooperative purchasing is when two or more governments collaborate on purchasing by sharing contracts. Collaboration can happen up-front, when governments decide to run a competitive bidding process and generate a new contract together, or governments can share contracts after they’ve been created through piggybacking. Nearly any public agency can create a cooperative contract that can be shared with other agencies.
Sharing contracts can help governments save time and money; but finding cooperative contracts isn’t easy. That’s why we’re building CoProcure. We’re aggregating cooperative contracts from across the country, and across different levels of government, to help buyers in local government quickly find and compare cooperative contracts — for free!
Who creates cooperative contracts today? Cooperative contracts come from these public sources:
The Federal Government: General Services Administration (GSA)
The GSA works with suppliers to create competitively negotiated contracts. These contracts comply with the Federal Acquisition Regulations (FAR) and the Competition in Contracting Act (CICA). Select schedules are available for local agency use through the GSA’s cooperative purchasing program: schedules 70, 84, and 1122.
National purchasing cooperatives
National purchasing cooperatives or purchasing consortiums are organizations that help create and distribute cooperative contracts across the country. These organizations can be:
- Governmental organizations: Some national cooperatives, like Sourcewell in Minnesota and HGACBuy in Texas, are public entities and therefore have the authority to create their own contracts.
- Nonprofit or for-profit organizations that partner with local government(s): Other national cooperatives, like NASPO ValuePoint or Omnia Partners, are nonprofit or for-profit organizations that partner with public agencies to generate contracts. In this case, the national cooperative works with a specific “lead agency” to generate a contract; the cooperative then markets this contract to thousands of public agencies across the country.
Typically, national cooperatives operate by charging a small administrative fee on all transactions made on their contracts. If they have worked with a lead agency to create the contract, rather than creating it themselves, they’ll typically also share part of this fee back with the lead agency that authored the contract.
As cooperative purchasing has become more common, these cooperatives have achieved remarkable size and scale. For example, U.S. Communities, now part of Omnia Partners, connected members to more than $2.7 billion in goods and services last year. In some cases, government entities have been able to bring in millions of dollars a year by serving as lead agencies on these national cooperative contracts.
Cooperatives provide a valuable service to procurement staff. However, some purchasers have grown wary of their increasing size and breadth of offerings. Government agencies should weigh these and other factors when deciding whether to utilize cooperative contracts.
Regional purchasing cooperatives
Sometimes, multiple local government agencies will come together to form regional purchasing groups or cooperatives. These can take on a number of different forms, but the main goals are to aggregate the collective purchasing demand of members and share the administrative burden of buying shared needs. In the Kansas City Metro Area, the Kansas City Regional Purchasing Cooperative creates contracts on behalf of members and maintains a database of cooperative contracts created by member agencies. Arizona’s Strategic Alliance for Volume Expenditures (S.A.V.E.) connects more than 300 public agencies to shareable contracts, allowing members to upload their own contract documents and share best practices and advice in their online forum.
States
States frequently create contracts that cities, counties, and special districts in that state (and beyond) may use. For example, the Texas Department of Information Resources (DIR) originates a number of different contracts that government entities in Texas and other states can use to make IT-related purchases. In FY18 alone, the DIR contracts saved local Texas governments more than $50 million due to the volume discounts achieved by the State of Texas. Others, like Utah, Kansas, and Missouri make contracts covering a range of goods and services available to public entities.
Local agencies
Any local agency can create a cooperative contract by including cooperative language in the solicitations and contracts it creates through a competitive bidding process. Generally speaking, if this language is included, other public agencies can shortcut their own procurement process and take advantage of the due diligence and research conducted by the original government entity by buying directly off the existing contract.
Some local governments, including California’s Sacramento County, include this language by default, and others, including Tucson, Arizona and Loudoun County, Virginia work with national cooperatives to create and market contracts to other public entities across the country. Depending on how the contract is set up, the agency that created the contract can receive an administrative fee when other governments use the contract to make a purchase. However, given that most local governments do not make their contracts publicly available, it is difficult to know how prevalent the use of cooperative language is, and even in cases where it is used, other agencies will have difficulty finding the contract documents necessary to use them.
Putting it all together with CoProcure
Since contracts from national cooperatives and states are the easiest to find today, they tend to be the most commonly utilized cooperative contracts. CoProcure is aggregating contracts from all sources: national and regional cooperatives, states, and local agencies across the country. By providing a free, one-stop-shop for cooperative contracts, we aim to be able to help local governments find the most relevant cooperative contracts, compare contracts across sources, and make the purchase that best serves their agency’s needs.
Brian Alexander recently completed his Master of Public Policy from UC Berkeley’s Goldman School of Public Policy and a public policy internship with CoProcure. 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. He also helped expand the use of federal nutrition programs in Maryland with Share Our Strength, a national nonprofit working to end childhood hunger in America.