The federal government has long struggled to consolidate its purchasing requirements, using complex mechanisms with limited success. Yet at the state procurement level, which in aggregate approaches federal scale, I’m seeing growth in purchasing cooperatives for everything from fire trucks to information technology.
Rather than each governmental entity endlessly repeating a time-consuming full-and-open competitive process for every buy, cooperatives conduct competitions for multiple award contracts, creating a contractual framework and facilitating faster, lower-cost competitions at the order level. In some cases, cooperatives also are able to aggregate requirements and pool money, lowering costs for both buyers and sellers.
Researchers at Onvia estimate that purchasing co-ops account for only about 2.2 percent of dollars spent at the state, local and educational level. But that is still a big number. Contracts available under the National Association of State Procurement Officers (NASPO) ValuePoint program, described below, drew more than $10 billion in 2014, growing 15 percent. Although counties and cities also participate in interstate purchasing co-ops, state governments tend to use them most.
There are three main purchasing co-ops operating nationally for U.S. nonfederal government and other nonprofit entities in addition to the federal cooperative purchasing program run by GSA. These purchasing co-ops allow for technology manufacturers, distributors, resellers and dealers to participate. And a glance at the products and services they offer shows they quickly adapt to changing IT market conditions by including cloud, cybersecurity and other software services.
NASPO provides the broadest-ranging purchasing co-op in terms of commodities offered. Its ValuePoint site brings together multiple award programs established by a single lead state, but made available to all 50 states and the District of Columbia. It also maintains a list of upcoming procurements and the states creating them. So while there is a lead state for each commodity, ValuePoint provides a single clearinghouse for a variety of commodities and multiple-award contract programs for everything from fire trucks to public cloud hosting services (lead state: Utah) and commercial off-the-shelf software products (lead state: Arizona).
Dating back to 1982 as the Michigan Collegiate Telecommunications Association, MiCTA has branched beyond its original charter — to serve as a forum to share information among universities — into a state and municipal acquisition association for a variety of network products.
These products include hardware such as switches and other data center equipment, and services such as voice over Internet protocol (VoIP), cabling and voice/video conferencing. MiCTA is based in Saginaw, Mich. Buying entities pay a small fee to belong to MiCTA, and its membership spans all 50 states. Some states themselves are members, as are many county and city governments.
A third purchasing co-op arrangement, U.S. Communities Government Purchasing Alliance, dates to 1996. It grew from a partnership between the Association of School Business Officials, the National Association of Counties, the National Institute of Governmental Purchasing, the National League of Cities and the U.S. Conference of Mayors. Customers are public schools and colleges, nonprofits, and state and municipal agencies. Like NASPO ValuePoint, U.S. Communities carries no membership fees. It works similarly to ValuePoint in that a single agency forms the lead for a particular technology or service contract, but the contract is available for all of U.S. Communities members. Technology contracts in place include several cloud providers, document and print services, telecommunications, and systems integration services. It claims 90,000 buying organizations are members.
Then there is the federal buying cooperative operated by the General Services Administration. For decades, Congress barred GSA from offering its multiple-award schedule contracts for use by nonfederal government entities. Why? For many years, coalitions of resellers, led by fire apparatus dealers, said such an arrangement would destroy the local markets they enjoyed for supplying nationally marketed capital equipment. That concern faded, or at least Congress avoided a vocal constituency by enabling GSA to offer Schedules 70 (IT goods and services) and 84 (security, law enforcement and, yes, firefighting and rescue equipment).
GSA has added several more narrowly focused schedule-based blanket purchasing agreements, including those for continuous network diagnostic and mitigation services and wireless voice/data products. From the early days, GSA structured the schedules as centrally managed contracts and catalogs that can also include participation by local dealers.
GSA markets these purchasing cooperatives to state, local and tribal governments and while the program is gradually growing, it only accounts for about $1 billion per year. Clearly it suffers a bit from state-specific cooperative programs where contracts are based on the GSA schedule and managed for the benefit of in-state cities, counties and educational institutions structured to avoid paying fees back to GSA. Thus we see that competition between the various cooperative purchasing programs is quite robust.
It would appear that cooperative purchasing as a public contracting concept is here to stay and will only grow as more buying entities become more comfortable with leveraging framework contracts managed by others.
Steve Charles is a co-founder of immixGroup, which helps technology companies do business with government. He is a frequent speaker and lecturer on technology and the federal procurement process. He can be reached at Steve_Charles@immixGroup.com.