How does cooperative purchasing work?
By: Brian Alexander
Tags: Innovation, Local Government, Govtech, Procurement, Public Procurement

How does cooperative purchasing work?

Photo by Mari Helin on Unsplash

There are nearly 90,000 local government agencies across the U.S. Since governments spend public dollars, the way they spend these dollars is highly regulated. Above a certain dollar threshold, as low as $5K or $6K in some jurisdictions, governments are required to purchase off of contracts created through a formal competitive bidding process (or seek exemption to this process). Although most governments default to creating their own contracts by running their own competitive bidding process, they don’t have to.

Cooperative purchasing is an established legal best practice that helps governments significantly shorten purchasing timelines and achieve cost savings.

Generally, there are two (not mutually-exclusive) ways that governments can collaborate with each other on purchasing:

Joint solicitation: Coordinating a shared process up-front

In this case, multiple agencies will pool their demand up-front and run one single competitive process that includes all of their individual requirements. Usually, one entity usually takes the lead and handles the administrative burden of managing the competitive bidding process. In many cases, coordination across multiple governments can be quite challenging, particularly if specifications differ, or if there are a number of different terms and conditions specific to each government that have to be included in the solicitation and contract. That being said, there are examples of groups that are comprised of multiple entities running joint solicitations, including the Kansas City Regional Purchasing Cooperative and the Southeast Florida Regional Purchasing Cooperative.

Piggybacking: Sharing work that’s already been done across public agencies

More often, instead of coordinating needs up-front, governments will share contracts via “piggybacking.” Piggybacking is when one government uses the contract that another public agency has created purchase from the same supplier on the same terms. In this situation, the piggybacking agency is able to satisfy the competitive bidding requirement and complete a purchase above its purchasing threshold by utilizing the work that another public agency has done, instead of generating a new contract via a new competitive bidding process on its own.

Typically, in order for a contract to be shareable or “piggybackable,” the original bid solicitation and contract must include language that permits other public agencies to use the contract on the same negotiated terms. States and local governments also have different rules that govern the use of cooperative contracts; in most cases, the buyer has to make sure the contract meets basic requirements to be able to issue a purchase order.

Making it easier to find and use cooperative contracts

Already, about 20% of local government purchasing spend flows through cooperative contracts. Most public purchasers know of cooperative purchasing and would like to be able to purchasing using cooperative contracts more often. The challenge is that it’s not always easy to find cooperative contracts.

Most of the time, public buyers must search across national and regional cooperatives, state agencies, and even reach out to local government agencies to see if a cooperative contract exists for a specific type of purchase. Buyers will oftentimes email and call peers in other public agencies to try and track down a contract; even if they identify a relevant contract, they must still acquire the source documents necessary to do proper diligence.

CoProcure is making it easier for governments to quickly find and use cooperative contracts. Our free tool aggregates contracts from national and regional cooperatives, states, and local agencies across the country so public buyers can quickly know: “Are there contracts I can use to make this purchase already, or do I have to run a new competitive bidding process from scratch?”