USDA m

United States Department of Agriculture

Rural Business - Cooperative Service

Shared-Services

Cooperatives
shared-services cooperative is an organization whose members are businesses or

public entities that jointly acquire goods

and/or services at a specified quality for the best

available price.

The goal of shared-services cooperatives

is to buy or provide products and/or services for their

members at a total cost less than the combined

costs of individual members buying or providing for

themselves. Savings are captured through lower

administrative costs, quantity purchasing discounts,

and assured levels of business with vendors and

suppliers. By purchasing cooperatively, individual

businesses or governmental entities can increase

the efficiency of their buying activities.

How Does a Shared-Services Cooperative

Operate?

Because of the way a shared-services cooperative

is organized, several structural and operational

characteristics make it different from other types of

businesses.

1. A shared-services cooperative is owned by the

private businesses or public entities that use it.

For example, an off ice supply cooperative is owned

by the businesses that purchase office products

through it.

As owners of the cooperative, members are responsible for the payment of fees and assessments,

participation in the governance and operation of the

cooperative, and use of the cooperative’s services.

Membership support is important. A shared-services

cooperative cannot succeed without the patronage

of the membership.

2. A shared-services cooperative is controlled by

the private businesses or public entities that

own and use the business. The cooperative is

controlled by its member-owners through a board of

directors (elected democratically from among the

member-owners) and through participation in membership meetings and committee work.
The board sets the overall operating policy for the

cooperative, approves the annual budget, and oversees the cooperative’s operation. The board also

hires professional management to handle the day-today operations of the cooperative. The manager

hires needed staff and implements the policies of

the board.

3. A shared-services cooperative operates to

provide benefits to its members as users, not as

investors. While the goal is not to generate a return

on investment, operating budgets are developed so

expected income exceeds operating costs. A

shared-services cooperative, like any other business, needs to cover costs and generate an excess

to cover expansion and unforeseen emergencies.

In general, a shared-services cooperative earns income through its fee structure. Part of the earnings

generated when income exceeds costs of operation

can be retained by the cooperative as ownership

capital. The rest is refunded to members based on

their use of the cooperative, not their investment in

the cooperative.

Examples of Shared-Services Cooperative

Organizations

Health care purchasing.

Groups of employers have

formed alliances to buy health

care insurance for their employees at the lowest prices.

Hospitals and clinics have

formed cooperatives to purchase supplies, share medical

personnel, and provide other

services.

Pharmacy purchasing.

Small independent pharmacies have organized cooperatives to save costs through

volume purchasing and to

benefit from coordinated sales

and marketing efforts.
Educational services

agencies. Regional and state

agencies have been established by school districts to

purchase supplies, health

surance, legal assistance, and

administrative services.

These agencies also provide

special education programs

and teacher training.

Restaurant supply

purchasing. Many of the

nation’s fast-food restaurants

have formed cooperatives to

purchase restaurant supplies

and equipment, advertising,

insurance, and even financing.

Dealer-owned hardware.

Independent hardware

retailers have established

cooperatives to purchase

hardware items in large

volumes and to assist members with market analysis

strategic planning.

Cooperative day-care

centers. Some companies

that cannot afford to establish

day-care centers for their

ployees have joined with other

companies to form cooperative day-care centers.

cooperative centers

offer safe, creative, and

educational day-care at

affordable prices.
Resources

National Cooperative Business Association

(NCBA) 1401 New York Ave. NW; Washington, D.C.

20005; (202) 638-6222

NCBA is the national membership and trade

association representing America’s cooperative

business community. NCBA’s work includes

supporting the development and expansion of

cooperative businesses, representing cooperative

business interests before Congress, promoting

international commerce, and representing American

cooperatives to the world’s cooperative business

community.

National Cooperative Bank (NCB) 1401 I St. NW,

Suite 700; Washington, DC 20005; (202) 336-7700

NCB has become the most important financial

institution for America’s housing, business, and

consumer cooperatives. NCB is owned by its

member-borrowers and, through its subsidiary NCB

Development Corp. and affiliates NCB Savings Bank

FSB, NCB Investment Advisers, and Cooperative

Funding Corp., provides financial services and

technical assistance to cooperative businesses.

USDA Rural Development has co-op development

specialists in some States who can provide

assistance and information. Rural Business -

Cooperative Service (FIBS), in Washington, D.C.,

can help organize a cooperative and assist existing

cooperatives. Publications on shared-services

cooperatives and other cooperatives are currently

available from RBS-Cooperative Services.

The rural business programs of RBS include

many loan and grant programs. These programs

help provide financing to rural business owners,

cooperatives, public bodies, and Indian tribes for

business ventures which create quality jobs and

stimulate the economy of rural areas.
For further information or assistance contact:

USDA/FIBS-Cooperative Services

Ag Box 3250

Washington, D.C. 20250-3250

(202) 720-7558

The U.S. Department of Agriculture (USDA) prohibits discrimination

in all its programs and activities on the basis of race, color, national

origin, gender, religion, age, disability, political beliefs, sexual

orientation, and marital or family status. (Not all prohibited bases

apply to all programs.) Persons with disabilities who require alternative

means for communication of program information (Braille, large

print, audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director, Office of

Civil Rights, Room 326-W, Whitten Building, 14th and Independence

Avenue, SW, Washington, DC 20250-9410 or call (202) 7205964

(voice or TDD). USDA is an equal opportunity provider and employer.

Cooperative Information Report 49

September 1998