What is a Public Sector Purchasing Cooperative?

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The first in a series of articles exploring public sector cooperative contracting practices, the organizations that make up the cooperative ecosystem, and the strategies and resources that realize maximum value outcomes.

If you’re new to the world of government contracting, whether as a government official or a supplier, it won’t be long before you trip across terms like cooperative purchasing, piggybacking, and lead agency, and flounder in the Acronym Sea of organizations whose reason-to-be is founded on the principles and practices that these terms relate to.

The history of cooperative contracting and rise of public sector purchasing cooperatives makes for a good story and we will share that at another time. In the moment, what is important to recognize is the substantial role and significance of cooperative programs in the conduct of government business.

Collectively, U.S. state and local governments’ annual consumption spending topped $1.9 trillion at the end of 2019((Bureau of Economic Analysis. State and Local Government Current Receipts and Expenditures. Rev. April 29.2020. https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&1921=survey&1903=86)). Research into these governments’ purchasing behavior showed that over 90 percent utilize cooperative contracts and, on average, around 20 percent of total consumption spending occurs through cooperative contracts((NIGP: The institute for Public Procurement. Public Procurement Benchmark: 2017 Survey Report. 2017. nigp.org; Onvia Market Research. 2018 State & Local Government Contracting Forecast. 2017. https://www.onvia.com/market-research/special-reports/2018-state-local-government-contracting-forecast?utm_source=web&utm_medium=blog&utm_campaign=2018SLEDForecast_BrentMaasNIGP)). In other words, in 2019, it is likely that some $380 billion of goods and services were acquired using a cooperative agreement. And where did the agencies find those contracts? Public sector cooperative organizations.

What is a public sector cooperative?

The short answer is that public sector cooperative organizations (“co-ops”, “cooperatives”) provide a catalog or schedule of public entity-established contracts that include language allowing for use of those agreements by other government agencies. In some cases, cooperatives are established by statute and, thus, are public entities. Others are private companies.

Regardless of whether the organization is a public entity or not, what is important is that the contracts they offer are established by a public entity through a competitive solicitation and award process — a minimum standard common to all procurement codes. All states, the District of Columbia and Puerto Rico have existing statutory language providing for cooperative contracting methodologies.

In practice, cooperative organizations do more than just provide a schedule of contracts. Typically, they will facilitate market research to identify relevant suppliers and other agencies who may benefit from a new contracting initiative. If they are a public entity, they may conduct the actual solicitation-evaluation-award event. If not, they may serve as a communication channel in support of the contracting agency’s announcement of opportunity.

Cooperatives vary in the degree of contract management, supplier management, and customer service support resources provided, but they all share a common purpose: to promote the cooperative use of government contracts and grow spend volumes through these contracts. Successfully doing so intends to drive down price and administrative cost to agencies while increasing business opportunities for the supplier at a lower cost of sale.

The cooperative purchasing model applied on national scale has been underway for a little over 20 years. As the government spending numbers suggest, today’s cooperative market is robust, to say the least. There is no question of the model’s success both as a procurement tool and as a business opportunity for all parties to a cooperative contract.

Still, with so many cooperative programs and contracts for agencies to use, how do you identify and evaluate the “best” programs and contracts to use? What if a best price or best value solution is not available through a single cooperative contract, but could be achieved by optimizing an order across multiple contracts and suppliers?

In a separate post, we’ll explore the practicality of pursuing this strategy and identify what it would take to realize a maximum-value purchase for each requisition.

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