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The economic benefits of cooperative purchasing

Cooperative purchasing allows government agencies to speed up a slow procurement process. As purchasers are experts at the process, it can also help organizations save money. With cooperative purchasing, one agency (the cooperative purchaser) goes through the bidding process and awards a contract to a vendor. Other government organizations and non-profits can then piggyback off of this contract.

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For government agencies, procuring the goods and services needed for operations can be time-consuming and costly. In some scenarios, companies must push back deadlines, unable to negotiate with vendors. Plus, the bidding process can result in supplies that don’t match the original proposal.

Cooperative purchasing is a way for government agencies to speed up the typically slow procurement process. As purchasers are experts at the process, it can also help organizations save money. For many government agencies and non-profits, working with a cooperative purchaser can provide a wealth of benefits.

What is cooperative purchasing?

Traditionally, when an employee at a government agency needs to purchase something — like essential supplies, equipment or services — they’ll file a Request for Proposal (RFP). The agency will then need to approve the proposal and open a bid for vendors. 

The procurement process can be long and expensive. If anything goes wrong, it can delay the acquisition of essential supplies and equipment. The agency will need to review all bids the contract receives carefully. If not reviewed, they might end up with supplies or equipment that differ from the RFP.

Cooperative purchasing is an alternative to traditional procurement that streamlines the process for smaller agencies.

With cooperative purchasing, one agency — sometimes referred to as the cooperative purchaser — goes through the bidding process and awards a contract to a vendor. Other government organizations — and in some instances, non-profits— can then piggyback off of this contract. 

When a contract includes a piggybacking clause, other agencies can go through the cooperative purchaser to procure needed goods and services. In this case, the cooperative purchaser will complete the bidding process on behalf of the other agency, or arrange for the purchase of products under already existing terms.

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Some specific agencies, like Sourcewell — formerly the National Joint Powers Alliance, or NJPA — exist solely to act as cooperative purchasers and assist other agencies with securing equipment and services. In this case, goods include fleet management technology and school equipment.

Cooperative purchasers go through a bidding process to award a contract to a vendor. (Photo by DepositPhotos)

The benefits of cooperative purchasing

The most significant advantage of cooperative purchasing over traditional procurement methods is the time and money saved. When agencies don’t run the bidding process, it allows them to spend more time building relationships with top suppliers and cooperative purchasers.

By running the public procurement process through one purchaser, cooperative purchasing can streamline the process for all parties involved. Smaller agencies with less bidding and procurement experience can depend on cooperative purchasers with more robust standards and procedures. This arrangement can speed up the total process time, including for the vendor. Many organizations have found cooperative purchasing to be a better solution than standard procurement methods.

In one example, city officials in Linden, New Jersey, used cooperative purchasing to replace the generator at City Hall and the town’s 911 center. The same generator used when the power was knocked offline in the wake of Hurricane Sandy. 

For years, budget constraints prevented the replacement of the generator, which was more than 40 years old. The town contracted with Sourcewell, who performed the bidding for town officials. The city was able to secure a new generator without carefully reviewing each bid. They could step away from the lengthy bidding process without concerns over low-quality alternatives. 

Cooperative purchasing can save government agencies money on supplies and equipment. Purchasers often have a closer relationship with — and more leverage over — vendors. This relationship can help purchasers secure contracts that are less costly to government agencies than those negotiated themselves.

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Agencies can benefit from cooperative purchasing even if only to procure supplies for themselves. By including a piggybacking clause in their contract, organizations can open up their relationship with a vendor to other agencies.

What organizations gain from cooperative purchasing

Cooperative purchasing is a way for government agencies to speed up the typically slow procurement process. In addition to speed, it can provide organizations with several other benefits.

Cooperative purchasers typically have vast experience navigating the proposal bidding process. Rely on them to get the best deal possible and avoid potential setbacks. You don’t want to waste months waiting for your supplies to arrive. Plus, they can often secure a better contract than the one you negotiate on your own. 

(Featured image by DepositPhotos)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Holly Welles is a writer with her finger on the pulse of industry changes, covering advancements in agriculture, construction, and commercial real estate. She’s a regular contributor to sites like Homes.com and BOSS Magazine, and runs her own real estate blog, The Estate Update.

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