Is a Cooperative “Program” Really Necessary?

The secret is out. The beans have been spilled. The emperor has no clothes. At least, that’s what a recent blog post from Mariel Reed, CEO of CoProcure, and the 2019 launch of the contract exchange site PPEx by cooperative industry veterans, Steve Hamill and Dave Trudnowski suggests to me.

Like the boy who states what should be obvious to everyone but isn’t (or at least “everyone” won’t say it), Reed points out that “all public agencies including local governments can create cooperative contracts” by including cooperative use language in both the solicitation and contract documents. For cooperatives that have been so successful leveraging the lead public agency (LPA) model, in particular, this candid observation hits a tender spot.

Cooperatives have worked hard over the past 15-20 years to establish their value and differentiate their programs and their contracts from their peers. The prevalence of cooperative programs and similar contract options feeds a view of these offerings as commodities. Pointing out that creating a viable piggyback-able contract is a straight-forward matter reinforces that view. If all competitively awarded agency contracts are piggyback-able, it becomes that much more difficult for programs to promote themselves and their contracts’ value on the basis of scarcity, uniqueness or quality (by whatever measures are important to an agency).

For cooperatives’ customers, what is important is that a contract they piggyback on is legally compliant and meets their operational requirements. If all cooperatives tout their contracts on the basis of compliance and “meets your needs,” where’s the differentiation? What’s the difference in one contract over another? Differentiation comes only at the level of scrutiny needed by each agency to determine a right-fit. That makes mass-communication of each contract’s relevance to a potential user agency extremely difficult.

Given this state of cooperative contracts as marketplace commodities, the success of a contract provider — be it a cooperative program or an individual public entity — substantially depends on the effectiveness of their promotional efforts and business models. This is another unspoken truth of the cooperative industry. The value of an LPA program may be less about the contracts offered than about how effectively they go to market; how effectively they attract customers to their contract catalog portals and inspire trust in their contracts to drive contract spend volume.

Contracting Convenience Portals

LPA cooperative programs have been the dominant influencers of cooperative agency practices at the national level for two decades, but the combination of their success advocating the practice and educating the marketplace, together with advances in procurement, finance and e-commerce technologies have evolved their customers’ needs beyond legislative compliance, practice understanding and awareness of contract alternatives[1].

In general, if agencies are just trying to find cooperative contract options as quickly as possible, then being able to easily search and compare contracts from many contract sources is the new value proposition. Going serially from coop or agency website to another is laborious and time-consuming. Given a resource that sidesteps this pain, wouldn’t agencies prefer to use it at the outset of a contracting event? This is what newer procurement-facing companies like PPEx and CoProcure recognize and what gives them the base to challenge cooperative programs, whether LPA or self-contracting.

For Whom the Bell Tolls

But wait. Don’t sound the death knell for coops just yet. Contract portal providers like PPEx and CoProcure are yet in building mode, growing their repository of contracts through outreach to agencies and government contract-holders. And really, at this point, the value of another contract directory is not particularly high given the number of existing portals and directories, a.k.a. cooperative programs.

In this contract-rich environment, for all cooperative programs and contract portal providers, the key to success comes down to having their contracts in a readily accessible, interactive catalog, effectively promoting it and making it as easy as possible to generate greater contract volumes. In other words, how easy does a cooperative contracting entity make it for agencies to execute a contract and transact with their awarded suppliers?

As yet, neither CoProcure, PPEx, nor the vast majority of LPA cooperatives provide the kind of marketplace environments for their contracts that would provide substantially greater value to agencies than their current passive directories. The functionalities that could truly set them apart from their slower-to-adapt competitors are a reality. Consumer-like marketplaces are already being implemented at the agency level to support their specific contracts. Cooperatives and contract exchange providers need to accept this growing change in customer capacity. To sustain, much less strengthen, ongoing relevance, these organizations need to ensure that their contracts are included in agency environments while also providing e-commerce environments for their customers with more limited procurement infrastructure.

Newer technology offerings that support other areas of procurement practice add to the pressure on cooperatives to elevate their level service. Agency practices like line-item bidding facilitated by low-overhead solutions make it increasingly simple for organizations to achieve in-the-moment, market-best pricing. This further chips away at the value attributed to market-aggregation-based programs. To continue to deliver on the promise of cooperative contracting value, the organizations whose livelihood depends on ensuring their customers realize its full benefit must adapt with the market.

The transformation can begin today.

Ready to start? Don’t believe it?  Let’s talk.

 

Brent Maas
Vice President of Marketing
bmaas@equallevel.com

 


[1] For more perspective on the evolution of the cooperative marketplace and how GPOs need to adapt, check out “Grasping the Grail of Cooperative Program Differentiation.”

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