05/18/2016 | By Nicole Katz
There are currently about 250 purchasing cooperatives in the U.S. offering group buying and shared services. Many of these cooperatives offer contracts specifically geared toward the technology arena, with products and services ranging from laptops, desktops, and projectors, to software, hardware, servers, and even cloud based solutions. According to the Center for Digital Education, educational IT spending was estimated to increase to nearly $21 billion in 2015. That’s an astounding number, and it means there’s incredible opportunity for these purchasing cooperatives to deliver significant savings.
The Cooperative Purchasing Model
A cooperative purchasing model allows a group of buyers with a common interest to pool their buying power in order to negotiate more favorable pricing on goods and services. Cooperatives — also known as group purchasing organizations or purchasing consortia — aggregate purchasing volume from many different institutions and increase the purchasing power from each individual.
A cooperative contract can improve the overall effectiveness of the purchasing process by providing volume discounts, administrative savings and other benefits. There are a number of national as well as local purchasing cooperatives focused on education, including The Cooperative Purchasing Network (TCPN), the Association of Education Purchasing Agencies (AEPA), the Massachusetts Higher Education Consortium (MHEC) and E&I Cooperative Services, to name a few.
So How Can Cooperative Purchasing Help You?
The sheer volume of purchasing power aggregated by the size of the cooperative provides each individual member with economies of scale that they would not have been able to achieve on their own. This can be especially advantageous for smaller schools that do not necessarily have the purchasing power of their larger counter-parts, and therefore do not have the leverage to negotiate the same price on a product or service.
Make no mistake, larger schools benefit from a cooperative purchasing as well. Consider the administrative resources typically associated with preparing a bid, including research, resources and time. By allowing the contract management and administrative functions to be handled by the cooperative, the costs associated with these time consuming tasks can be significantly reduced, if not completely avoided.
Many cooperatives utilize a competitive bidding process that meets the procurement standards or requirements for most states. This too, can be extremely advantageous from a time saving perspective.
The following are a few of the many benefits you can expect to take advantage of when utilizing a cooperative — regardless of the size of your institution:
- Superior pricing: a purchasing cooperative is generally able to negotiate lower prices for goods and services than any of the single members in the collective. Leveraging this aggregate purchasing power allows members to take advantage of superior pricing. Imagine the difference between negotiating pricing on 250 laptops for your district individually, as opposed to negotiating pricing on 25,000 laptops for the cooperative as a whole. No doubt about it — there is strength in numbers.
- Best practices: a cooperative provides access to the combined knowledge of all of its members, which it can tap to identify best practices and efficient methods to reduce total cost and extend efficiencies. This combined knowledge and expertise is invaluable to the cooperative in terms of ensuring that it is always employing best practices, processes and technology. This broader base of experience also lends itself to the development RFPs for the products and services that are most relevant and essential to the membership. A cooperative with a membership that includes a community of technology professionals could potentially share input, ideas and past experiences to ensure the development of contracts that include the technology equipment and supplies to meet the specific needs of educational institutions.
This feeling of “connectedness” also offers many intangible benefits. With so many procurement professionals stretched so thin, it can be helpful to pool resources and share experiences with colleagues that are in the same situation. This willingness of individuals to come together and discuss their shared experiences can often provide others with new perspective, and perhaps, new ideas they had not previously considered.
- Time savings: many procurement professionals simply don’t have the time or the resources to research new product categories, source competitive quotes and negotiate pricing. These individuals realize a tremendous time savings when a contract development process has already been conducted by a cooperative. By eliminating time spent on more labor intensive tasks, resources can be reallocated to focus on more strategic projects. Additionally, procurement professionals are provided with more time to establish and develop the important collaborative relationships that are so imperative to a successful organization.
- Spend analysis: many cooperative purchasing organizations will conduct a spend analysis across the membership to identify goods and services, as well as suppliers, that are the most meaningful in particular contracting areas. This will result in a supplier portfolio that includes many of the suppliers most committed to meeting the specialized needs and delivery requirements of members.
- Rebates/refunds: a true member-owned cooperative shares its profits with members. These “patronage” refunds are based on a member’s annual purchases, and set cooperatives apart from other group purchasing organizations. In addition to patronage refunds, many cooperatives work with suppliers who offer rebates and/or incentives to members based upon annual purchases. These incentives can be extremely beneficial to an institution’s bottom-line, and actually help generate revenue.
Cooperative purchasing is a time-tested model that can make a significant contribution to its members’ bottom line by lowering costs, reducing redundancy and freeing up valuable resources for reallocation to other strategic initiatives. There are, of course, challenges associated with this kind of procurement method. Procurement professionals would be wise to do the research before determining if a cooperative is the right fit. Here are several questions to ask when considering going with a cooperative for your technology purchases:
- Is it legal for my institution to use cooperative contracts?
- Is there a fee to join the cooperative?
- Is there a minimum spend requirement?
- Does the cooperative’s bidding process meet the procurement standards in my institution/state?
- Does the cooperative have experience with educational procurement? Do they understand my specific requirements?
- Does it make more sense for me to use a cooperative contract versus issuing an RFP?
- Does the cooperative offer the technology products/service we are looking for?
- Will I be able to quantify the time and/or cost savings realized through participation in the cooperative. What’s the ROI?
- Does the cooperative offer any value-added services or member support?
While the most tangible benefit of the cooperative purchasing model is superior pricing, the truth is, cooperative contracts are most useful if they deliver more than cost savings. By performing your due diligence to ensure you’re accessing the most competitive agreements available, the time and process efficiencies, knowledge and expertise can be priceless. More than anything, a cooperative should serve as a reliable business partner, helping to support your institution’s mission and ultimately achieve your goals.