How to leverage Cooperative Procurement?

Cooperation is empowering, and the concept of cooperative procurement is premised on cooperation.  By leveraging cooperative purchasing (where it makes sense), you can enjoy the benefits of economies of scale and greater efficiency in obtaining goods and services. The idea behind such a program is to combine the requirements of several entities to obtain conditions on pricing, volumes, terms, and conditions that you would not obtain otherwise.

Catch up with these two procurement experts to get a deep understanding of the benefits of this approach, under what circumstances you should leverage it, and what challenges you may have to encounter on the way.

Key Takeaways

Cooperative purchasing is a program where a group of agencies shares and utilize commonly completed contracts, such as for vehicles, office equipment, information, technology, professional services, and much more.

Some cooperatives are specific to certain areas of business, such as for government, for information technology, healthcare, telecommunications and law enforcement.

The biggest hurdle is making sure your entity can procure from cooperative organizations. In other words, there needs to be enabling laws for this type of purchasing.

Cooperative purchasing is a great tool to have in your procurement toolbox. It’s not the end all be all for all procurements. It can help in ways where competitive solicitation may not fit.

Transcript

Hélène:

Welcome to the procurement game changers, the podcast for leaders that make a difference. Today, we’ll be talking about cooperative procurement, and to discuss that topic, I have the pleasure to host Bob Perkins.

Bob is a Procurement Professional with 25 years of experience currently working for ADA County, which is a governmental entity, demonstrating fiscal responsibility and professional excellence while providing innovative and proactive solutions for our communities through open and accessible government.

Hélène:

So welcome to the show, Bob.

Bob:

Oh, well, thanks for having me, Hélène.

Hélène:

So, Bob, could you tell us what led you to procurement?

Bob:

Well, like a lot of government professionals, I sort of fell into this position. I was a recent college graduate working as an auditor for a local chain of convenience stores. And really didn’t like what I was doing.

It wasn’t really my calling, but one evening in a restaurant, I was discussing with a friend of mine. You know, my displeasure of the work I was doing when the deputy director of environmental quality here in Idaho overheard our discussion and mentioned that they were hiring for a buyer, and he encouraged me to apply.

And I did. And the rest, as I say, is history. I didn’t know, know it at the time, but what I thought would be a short stint in procurement ended up being a lifetime career. And the buyer position really sparked that passion in me to make a difference as a civil servant.

And I spent 15 years with the department of environmental quality and served the last 12 years as a director of procurement for ADA county in Boise, Idaho. So it’s been a wonderful 27 year career.

What is Cooperative Procurement?

Hélène:

Wonderful. So today, we are talking about cooperative procurement. So it’s a terrific approach to improve the value of your procurement department, and it’s becoming increasingly popular among government agencies.

So the idea is to combine the requirements of several entities to obtain conditions on pricing, volumes, terms, and conditions that you would not obtain otherwise. So, in other words, it’s increasing your bargaining power.

So, but first I’d like to hear you tell us, you describe that in your own words. Why is cooperative purchasing?

Bob:

Well, cooperative purchasing is a program where a group of agencies share and utilize common completed contracts, such as for vehicles, office equipment, information, technology, professional services, and much more.

These programs have the collective buying power that allows all members to enjoy the benefit of economies of scale, direct resources, and greater efficiency in obtaining goods and services.

So, in essence, it’s really one contract that serves many jurisdictions. So that’s the whole spirit of cooperatives.

How does Cooperative procurement works?

Hélène:

So how does it run in practice? Can you provide an example, maybe?

Bob :

Sure. It works amazingly well. There are many cooperative organizations in the marketplace for agencies to join.

Some cooperatives are specific to certain areas of business, such as for government, for information technology, healthcare, telecommunications, and law enforcement. Agencies can pick and choose which cooperatives have contracts for goods and services that meet their core business needs.

Many agencies are short staffed, so having cooperatives to help augment procurement is very valuable to these agencies.

Benefits of Cooperative Procurement

Hélène:

So we were talking about the benefits indeed. So we’re saying when you are short on staff and when you want better terms and conditions, but on a practical standpoint, what would you say are the main benefits of working with cooperative purchasing?

Bob:

Well there are many benefits to cooperative purchasing. You know, the two that stand out for me are time and money. So those are the two biggest benefits. So you’re gonna save time, you’re gonna save money. However, there are other benefits too such as solid terms and conditions in these contracts.

These contracts are put together with large cities or counties, usually that have a very extensive legal department that makes sure to include very solid terms of conditions for warranties, for liabilities and such.

The other is flexibility to utilize different cooperatives that meet your core business needs. Also indefinite delivery, indefinite quantities.

So you’re not tied into any specific quantity or dollar amount. And also what’s kind of cool is some of these cooperatives even offer rebates back to agencies for contract use.

So the more you use the contract, the larger the rebate you get. So those are some of the key benefits that kind of come to mind for me.

Hélène:

That’s very interesting. So let’s now see on the downside, what would be in your opinion, the limitations of such methodology?

Bob:

So there are limitations. So the biggest hurdle is making sure your entity can procure from cooperative organizations. In other words, there needs to be enabling laws for this type of purchasing.

So for example, here in Idaho we had very restrictive laws around cooperative purchasing. And so we weren’t able to use a lot of cooperative purchasing organizations.

Well in 2019, a group of stakeholders, including myself, lobbied the Idaho legislature and said: “Hey, you know, cooperative purchasing is a good way for cities and counties to procure in our state.”

Legislators, they agreed and also saw the value of cooperative purchasing and unanimously passed our bill in both the House and the Senate (Editor’s note: legislative chambers at state level).

So today we have the opportunity to procure from many cooperative purchasing organizations. And so that’s where lies the limitations to make sure you have that enabling legislation that allows you to procure.

Hélène:

That’s interesting. So you said that you convinced the state leadership to authorize cooperative procurement. You mentioned that you did that with some other stakeholders. How did you get to that point? Say, oh, we need to do that. This is the right path for us.

Bob:

Well, we saw the value in cooperative purchasing you know, a lot of cities and counties just don’t have the resources, so they don’t have the staff or the procurement professionals within their staff to go out and do competitive purchasing.

So that’s where these cooperative contracts fill in those gaps. And so it was a number of us who said: “Hey, this makes sense to do.” So. We got together with our local association of counties, association of cities, those professional organizations.

They also saw the value in helping their constituents in their organizations. And so they, we all banded together, went and lobbied the legislature. The legislature thought it was a good idea. And in 2019, July of 2019 we were able to pass that legislation.

Hélène:

Wonderful. So we’ve seen, you know, cooperative procurement in other industries like the automotive industry, for instance, for decades. I have in mind the Renault Nissan Alliance for instance, but why do you think it’s so hard to penetrate other industries?

Bob:

You know, I think it’s education about what the cooperative purchasing does. You know, we haven’t convinced everybody here in Idaho that cooperative purchasing is a good idea.

There’s some organizations that want to learn more about it before they dive head first into cooperative purchasing. Some of the] concerns I think lie around you know [business] taken away from local businesses.

For example that we’re only gonna be buying from big box stores, big companies. And actually the opportunity for smaller businesses is expanded because not only is it expanded for the local jurisdictions, but now that they have a cooperative contract, it really can go nationwide for them and actually expand their business. So the challenge is really education.

Hélène:

So let’s imagine we have listener today that would like to explore cooperative procurement, where should they start? And what would be the main resistance to overcome?

Bob:

Well first they should start by researching their laws and to make sure that they have authority to utilize cooperative purchasing programs.

And if so, then the next step is to discuss with the agency leadership and articulate the benefits of utilizing cooperative purchasing where it makes sense. You really need to get the agency buy-in before going any further.

If your agency leadership green lights the use of cooperatives, then this really opens the doors for exploring different cooperatives that can help your agency and filling in those procurement gaps.

Hélène:

From what I hear we talked a lot about public procurement because that’s what you do, but I feel like those opportunities are, you know, true, the benefits and the limitation are the same for any company, also private company out there.

But let’s wrap up now that we know that it is interesting. We know that companies could have an interest, we know where to start, but, you know, I like to wrap up with just one word. I’m not asking you to do one word, but very short sentence.

Like if there was one takeaway from this discussion, one thing that you want all listeners to remember, what would that be?

Bob:

That cooperative purchasing is a great tool to have in your procurement toolbox. It’s not the end all be all for all procurements. It can help in ways where competitive solicitation may not fit.

Cooperative procurements can assist where there are procurement staff and resource shortages and where perhaps there may not be the expertise within the agency to conduct competitive solicitations, such as smaller cities and counties. So it’s really just another tool in the toolbox.

Hélène:

Wonderful. I think that’s a very good takeaway. Thank you so much for your time and for your knowledge Bob for sharing that with us today.

Bob:

Well, thanks, Hélène. Appreciate it. And thanks for having me.

Hélène:

So now it’s your turn to tell us about your experience and your challenges with cooperative procurement in the comment section. Don’t forget to subscribe if you want to be notified when a new episode is out.

Thank you for listening. And I hope you enjoyed this episode. And if that’s the case.

Don’t forget to give us a thumbs up!

So happy sourcing to you all; bye, au revoir.

PS:- To hear our previous PGC podcast episode, CLICK HERE!

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Helene Laffitte

Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting. To find out more, visit the blog or contact her directly.

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