Why you should include cooperative language in your government contracts
Is your local agency including cooperative language as a default in your bids and contracts? Here are 3 reasons why you should.
While many public purchasers associate cooperative contracts with national purchasing cooperatives like Sourcewell or OMNIA Partners or state-led programs like Texas DIR or MMCAP, all public agencies including local governments can create cooperative contracts.
Note that including cooperative language in bid solicitations and contracts merely provides an option for other peer agencies and the supplier to work together. It does not obligate other public agencies to purchase, nor does it commit the suppliers to provide the contracted products or services to all public agencies that wish to use the contract.
Here are a few reasons to add cooperative language to your solicitations and contracts:
1) Support your peer public agencies
By including cooperative purchasing language in your bid solicitation and contract templates, you can help your peer public agencies save time and money. Since agencies that are geographically close tend to share a similar supplier pool and have similar compliance needs, collaborating with agencies in your region on procurement can deliver outsized value. For instance, a recent San Mateo County Civil Grand Jury Report predicts that San Mateo County and the 20 cities within the county could save up to 15% — as much as $108M each year — by collaborating better on purchasing at a local level.
2) Lower the costs of selling into government for suppliers
Governments spend trillions of dollars a year (~$1.6T at the local level in the United States), so the way they award contracts can have a massive impact on which types of businesses ultimately succeed and grow. When a supplier is awarded a contract that includes cooperative purchasing language, that supplier can now turn that successful contract award into multiple contracts, especially with other governments in the region. Consider that this language may be especially meaningful for small-, women-owned- and disadvantaged businesses because they lower the cost of selling into government for those businesses. Unfortunately, many businesses still don’t know about cooperative contracting. Still, governments can help level the playing field for diverse business types by including cooperative purchasing language in their contracts with these types of firms, and businesses can learn to ask for this language to be included if it is not included as a default.
Keith Glatz, Purchasing and Contracts Manager at the City of Tamarac, FL and active member of the Southeast Florida Governmental Cooperative Purchasing Group, reflects on how cooperative contract language can be especially helpful for diverse businesses:
"As an example, we awarded a contract for Roof Tarps to a small woman-owned business in Brooklyn, NY recently, and they now have the agreement to supply roof tarps to all of our Co-op agencies. Roof tarps can be a very important commodity in areas like South Florida, where we are subject to hurricanes, which can cause significant roof damage in a region."
3) Generate revenue for your government agency
Some, but not all, cooperative contracts have administrative fees. These fees are written into the contract and obligate the awarded supplier to pay a fee when the supplier generates a new sale using the cooperative contract. The fee is usually a percentage of gross sales between 0.25% and 0.3%. The fee is usually paid to the lead public agency that created the contract or the purchasing cooperative that is administering and marketing the contracts. Most suppliers are very willing to pay these fees, since paying an administrative fee is less expensive than participating in a new competitive bidding process for the supplier.
In 2015, for instance, the City of New York utilized the City of Tucson's cooperative contract for IT Solutions with CDW-G. The single purchase with the City of New York generated $25,000 to $60,000 in administrative fees to the City of Tucson; the City of Tucson's cooperative contracts generated $500,000 overall in that same year.
Some public entities have even found that the revenue generated through administrative fees on successful contracts can effectively "pay" for the procurement department. The City of Mesa, AZ for instance now generates more revenue each year for its General Fund from cooperative contract fees than it spends on its procurement department.