A Hidden Benefit of Cooperative Purchasing

There has been a lot of discussion about how cooperative purchasing and co-ops help the public sector save time and money. One little known advantage of purchasing through a co-op is vendor and contract management. Well-run cooperative purchasing organizations are active in managing contracts and vendor performance.

“We are seeing our members making contract and vendor analysis a priority,” said Michael Lucas, program manager at Purchasing Solutions Alliance. “There is a growing emphasis on supplier relationship management.”

Agencies and governments spend a great deal of time managing the performance of their vendors throughout the contract lifecycle. Gathering required certification and documentation, analyzing performance vs. spend and conducting pricing reviews take significant expertise and time. When an agency purchases through a co-op, it takes the contract lifecycle management (CLM) off of its plate. “We feel that good contract and vendor management is an integral part of our ability to remain compliant and transparent on behalf of our membership,” Lucas said.

When evaluating which co-ops are the best fit, agencies should look beyond price to other, more strategic considerations. Evaluate how many members a co-op has, how many contracts it carries and also what practices and guidelines are in place for strategic sourcing and vendor management.

Co-ops, like agencies, should be conducting regular analysis of spend, contract reviews, pricing reviews and contract performance audits. Agencies are increasingly aware of this vital aspect of CLM and are evaluating co-ops based on their performance in this area.

When evaluating a co-op, it is important to look at whether the co-op does multiple awards in a category or single awards. If vendor and contract management is an important consideration, then a co-op that does single awards may be the better fit. Multiple award co-ops may dilute the process, leading to less rigorous contract and vendor management.

BidSync, a company that provides e-procurement solutions for agencies and governments nationwide, said that they are seeing more emphasis on strategic sourcing from their clients. “Procurement in the public sector is evolving,” said Fred Tillman, interim CEO of BidSync. “Governments and agencies are getting smarter and more strategic in their management of procurement from solicitation to settle. We are seeing more and more clients put greater emphasis on CLM.”

Strategic sourcing takes into account not only the price of goods and services, but also the total cost of procurement, which includes institutional time, internal processes, policies and procedures and demand drivers. It seeks to put procurement into a collaborative, constantly improving environment that goes beyond supplier source negotiation.

“Organizations that have an emphasis on strategic sourcing are finding that relationships with the right cooperative purchasing organizations are a real asset,” Lucas said. “As procurement best practices and priorities evolve, so must the co-op.”
“Our e-procurement products have evolved as a direct result of the changing procurement industry,” Tillman said. “We have added products and features to our solutions based on the changing priorities of our customers.”

Purchasing via a co-op can have a deep impact on the overall cost of procurement. In addition to beneficially impacting the cost of goods and services, it can also manage the time-consuming process of CLM. Agencies that are implementing strategic sourcing initiatives or are looking to streamline their procurement processes will want to ensure that the co-ops they join have the same priorities.

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