Cooperative Purchasing: What Is It, and What Does It Have To Do With My Building?December 2010 – Newsletters In the Zone
Are you building, renovating, equipping or maintaining a building? Is your organization a local governmental entity; a nonprofit educational or public health institution; a nonprofit fire, rescue or ambulance company; or other similar type organization? If so, your organization may be eligible to purchase supplies, equipment, maintenance services and even construction services through a cooperative purchasing program. What is the benefit of utilizing a cooperative? It can save you money and time, and it can help you identify quality vendors and contractors with proven track records.
In Pennsylvania, there are various cooperative purchasing statutes. The most inclusive statute is Chapter 19, Intergovernmental Relations, of the Pennsylvania Commonwealth Procurement Code, 62 Pa.C.S. §§ 1901 et. seq., (the Pennsylvania Procurement Code). The Pennsylvania Procurement Code permits political subdivisions; public authorities; tax-exempt, nonprofit, educational or public health institutions or organizations; nonprofit fire companies; nonprofit rescue companies; nonprofit ambulance companies; and other entities that expend public funds to join together to purchase supplies, services and construction.
Most states have some form of cooperative purchasing statute. Not all states are as broad as Pennsylvania’s Procurement Code with respect to the types of eligible organizations. Further, many states, including Pennsylvania, have cooperative purchasing statutes that allow eligible organizations from multiple states to join together, resulting in many cooperatives that operate on a national basis.
Many Pennsylvania school districts have been using cooperative purchasing in connection with their purchase of routine custodial, office and classroom supplies for decades. For more than 25 years, school districts and libraries have used cooperative purchasing to buy computers and other technology equipment through the PEPPM Technology Bidding and Procurement Program (PEPPM). More recently, school districts have been using cooperative purchasing in connection with their building, renovation and ongoing maintenance projects. For example, the Pennsylvania Education Purchasing Council (PEJPC), in conjunction with the national Association of Educational Purchasing Agencies (AEPA), has cooperative purchasing contracts available for installation of flooring materials, roofing services and HVAC services.
With the enactment of the Pennsylvania Procurement Code, a broader number of organizations – including select nonprofit organizations – are eligible to participate. Accordingly, cooperative purchasing is not just for school districts, municipalities and other local governmental entities any more.
As mentioned, the primary benefits of using a cooperative are to save time and money and obtain a quality vendor/contractor. Money is saved primarily in three ways: (1) volume, volume, volume discount, (2) decreased administrative expenses and (3) decreased advertising expenses (for those eligible organizations required to advertise for competitive bids). As more and more eligible organizations combine their purchasing power, they can demand a volume discount. Some cooperative purchasing programs, such as PEPPM, include “most favored customer” provisions in their bid solicitations, which assures your eligible organization that the same vendor is not selling the same product with similar quantity and terms to another eligible organization for a lower price. Most cooperatives either charge a nominal fee or no fee to join. To cover the cooperative’s expenses, the cooperative generally receives a fee from the vendor when an eligible organization makes a purchase under the contract.
Time is saved as the cooperative handles the administrative burden and expense of preparing competitive bid solicitations and specifications, advertising for bids and evaluating the bids. This can be an invaluable resource for participants – especially when dealing with an experienced cooperative – as the cooperative will have greater expertise and resources to prepare bid specifications and evaluate bids.
Some cooperatives award only to the lowest responsible bidder – such as AEPA, PEJPC and the Keystone Purchasing Network. Other cooperatives, such as COSTARS, operated by the Pennsylvania Department of General Services, award to all qualified bidders regardless of price – thereby pushing the burden of evaluating pricing back on the eligible organization. In either case, the eligible organization benefits because the cooperative is evaluating the bid responses and vetting the vendor’s qualifications. Some cooperatives, such as AEPA and PEJPC, also require the vendors to post bonds to demonstrate their financial capabilities and commitment to the contract.
A word to the wise: Although cooperative purchasing is an important and valuable tool for eligible organizations to maximize their spending dollars, not all cooperatives are created equal. As with most services, some cooperatives provide richer and greater services, documentation, expertise and customer support than others.