Purchasing Co-ops: Procurement Law Compliance Implications for Pennsylvania Schools

June 9, 2020Alerts

In certain situations, cooperative purchasing programs can provide an efficient, cost-effective procurement option for budget-conscious Pennsylvania school districts, but only if careful consideration is given to applicable state and federal legal requirements. Consider the following example:

A school district’s facilities director has determined that the middle school’s dishwasher needs to be replaced with a new high efficiency model. This will require the demolition of an adjacent wall and the upgrading and re-routing of electrical lines and plumbing. She has just learned that a new cooperative purchasing program operated by an Oklahoma intermediate unit sells dishwashers meeting the district’s requirements. Can the district “piggyback” on the Oklahoma cooperative purchasing contract and procure the dishwasher without conducting a formal bidding process?

The answer is not a simple yes or no.

For specific goods and services, cooperative purchasing contracts offer Pennsylvania school districts a quicker, streamlined alternative to the traditional bidding process, and provide more control over the choice of vendor. Utilizing a cooperative purchasing contract, however, does not relieve a district from following state and federal procurement law. The nature of the goods and/or services sought, the cost of those goods and/or services and the characteristics of the cooperative purchasing program all affect whether a district can use a particular cooperative purchasing contract.

State and Federal Procurement Requirements

The Pennsylvania Public School Code requires school districts to use competitive sealed bidding procedures when procuring certain goods and supplies[1] as well as construction, reconstruction, repair and maintenance services[2] valued at $21,000[3] or more. Further, school districts must utilize multi-prime contracts in which general construction, electrical, plumbing and HVAC contracts are bid out separately if the combined project cost meets or exceeds $21,000.00[4]. Contracts for most goods and construction, reconstruction, repair and maintenance services costing at least $11,300[5] but less than $21,000 require a school district to solicit at least three (3) telephonic or written quotes.

When a district uses federal dollars to fund a project or purchase, it must also abide by federal procurement law. For example, federal law requires the use of  competitive procurement procedures for purchases that exceed the micro-purchase threshold of $10,000[6]. School districts must obtain multiple competitive quotations for purchases above $10,000 but below $250,000[7]. For contracts exceeding the simplified acquisition threshold of $250,000, school districts must evaluate whether competitive sealed bidding, competitive proposals, sole source procurement or some other vehicle is permitted, depending on the type of goods or services sought.

Other Compliance Considerations

When using a cooperative purchasing program contract, school districts must also adhere to other Pennsylvania laws. The Pennsylvania Prevailing Wage Act requires contracts for “construction, reconstruction, demolition, alteration and/or repair work other than maintenance work” that exceed $25,000 to include a provision requiring that each worker be paid prevailing wages set by the Pennsylvania Department of Labor and Industry. Section 752 of the School Code requires that “all contracts … shall contain a clause or stipulation requiring that no person shall be employed to do work under such contract except competent and first-class workmen and mechanics.” This section of the School Code further requires that these workers be paid prevailing wages. Unless an exception applies, the Pennsylvania Steel Products Procurement Act generally requires that school districts include a provision in contracts for certain “construction, reconstruction, alteration, repair, improvement or maintenance” projects that steel products incorporated into the project are made from U.S. steel.

School districts must evaluate whether a specific cooperative purchasing program complies with all of these state and federal statutory requirements, among others. 

In-State vs. Out-of-State Co-ops

Utilizing a cooperative purchasing contract administered by a Pennsylvania public procurement unit, such as an intermediate unit, provides some assurances that the bidding process and final cooperative purchasing contract comply with state laws. However, not all Pennsylvania procurement units have the same bidding requirements, so not all Pennsylvania-based cooperative purchasing contracts are specifically designed to meet school districts’ needs. For example, the state offers numerous contracts through its cooperative purchasing program, COSTARS, and school districts may become COSTARS members to purchase goods and services. However, not all COSTARS members are statutorily required to award multiple prime contracts for projects with a total cost exceeding $21,000. For example, COSTARS-8, a state contract for equipment, supplies and services for maintenance, repair and operation of improvements to real property, states that it may only be used by public procurement units, including school districts, if the project does not require multiple prime contracts or, if multiple prime contracts are required, the project cost does not exceed the $21,000 threshold amount for separate contracts. Further, school districts using federal funding will need to evaluate whether the cooperative purchasing contract was awarded in accordance with federal requirements.

Utilizing cooperative purchasing contracts administered in other states presents even more opportunities for conflict with state and federal law. Cooperative purchasing contract programs must follow the procurement laws of the state where they are based to be considered qualifying programs under Pennsylvania law. In effect, for each such contract, a district or its solicitor must review the procurement laws of the state where the program is located and determine independently whether the cooperative purchasing contract in question was awarded in accord with that state’s laws.

Finally, state and federal bonding requirements still apply for contracts executed pursuant to a cooperative purchasing contract. Pennsylvania law requires school districts to obtain performance and payment bonds for certain projects when the contract amount exceeds a threshold amount. Frequently, these costs are not included in cooperative purchasing program contracts administered in other states, and sometimes are not included in the cost quoted by the vendor in a Pennsylvania-based cooperative purchasing program.

The Matter of the Dishwasher

Returning to our example, if the estimated cost of the dishwasher and associated construction costs exceed $21,000, the dishwasher must be procured either through competitive, sealed bids or through an appropriate cooperative purchasing contract. The removal of an old dishwasher and installation of a new one, with the demolition and relocation of utility services, is considered “construction, reconstruction, demolition, alteration and/or repair work other than maintenance work,” so the Prevailing Wage Act may apply. The dishwasher may be a product covered by the Steel Products Procurement Act; if so, any contract for its purchase would need to require the use of U.S. steel. Because electrical, plumbing and general construction work would be necessary, separate contracts for each trade would be required if the project is expected to exceed $21,000. Lastly, this project would require performance and payment bonds due to the estimated cost.

So the answer to the question posed at the start of this alert is yes, the district may consider using the Oklahoma cooperative purchasing program, pursuant to Chapter 19 of the Pennsylvania Public Procurement Code, but only if:

  1. The Oklahoma cooperative purchasing program contract was awarded through a competitive procurement process that met Oklahoma state law
  2. Oklahoma state law permits its contracts to be used by out of state entities
  3. The vendor’s contract in the program is current
  4. The Oklahoma contract can meet all of the requirements identified above.

Cooperative purchasing program contracts can be cost effective and provide significant value with greater efficiency than the typical bidding procedure. However, they should be evaluated against a school district’s state and federal legal requirements when determining whether they are an appropriate procurement solution for a given project.

[1] 24 P.S. § 8-807.1.

[2] 24 P.S. § 7-751.

[3] Adjusted each year by the Pa. Department of Labor & Industry pursuant to § 120 of the School Code.

[4] Adjusted each year by the Pa. Department of Labor & Industry pursuant to § 120 of the School Code.

[5] Adjusted each year by the Pa. Department of Labor & Industry pursuant to § 120 of the School Code.

[6] Adjusted periodically for inflation.

[7] Adjusted periodically for inflation.