What is cooperative purchasing?
Understanding cooperative purchasing: joint solicitations vs. piggybacking
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 must to purchase from contracts created through a formal competitive bidding process or seek a formal exemption for this process. Although most public agencies 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 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, the Bay Area Chemicals Consortium, and the Southeast Florida Regional Purchasing Cooperative.
The joint solicitation process can help agencies save time and money. Since one agency is conducting a process on behalf of many others that will participate, there are administrative time savings to participating governments. In addition, since joint solicitations aggregate demand from many governments up-front, public agencies are often able to achieve significant cost savings through the joint solicitation process. The drawback of this process - at least for now - is that the burden to coordinate can be high, especially on the lead agency.
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 to generate a contract through formal competitive bidding, 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. (See our basic diligence checklist for public agencies thinking of using a cooperative contract.)
Piggybacking on another agency's contract generates administrative cost savings and expedites the purchasing process. However, depending on the contract, direct price savings may or may not be achieved. Note that for many contracts, additional discounts for larger volume purchases may be achieved with some negotiation.
The information you need to leverage cooperative purchasing opportunities, all in one place
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. But when it comes to piggybacking on national cooperative, GSA, state, or local agency contracts, the main challenge is information. It's not always easy to find cooperative contracts; even if you hear about an available contract, it can be tough to track down source documentation to complete contract diligence. Before using CoProcure, many buyers conducted the search for cooperative contracts primarily by making phone calls or sending emails to their peers in public purchasing. CoProcure makes it easier to quickly identify piggybackable contracts from national and regional cooperatives, states, and local agencies so public procurement professionals 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?”
In the future, CoProcure also aims to make it easier for public entities to identify valuable joint solicitation opportunities. For instance, CoProcure may be able to share information with lead agencies about which other public agencies are piggybacking on a contract, so the next time that solicitation has to be re-bid, those piggybacking entities can be included on the next iteration of the solicitation. We also aim to be able to share data with governments about which goods and services are in high demand in their region(s) and may be good candidates for future joint solicitations.