States put buying power to work for local governments

As local governments look for ways to stretch their budgets, many are turning to cooperative purchasing, where they can take advantage of the volume discounts states negotiate for office supplies, laptops and even specialized applications. When states open their commodity purchases to local government buyers, they spread the benefits of the volume pricing, experienced procurement teams and the streamlined contracting process so communities can get the products and services they need faster and at a better price.

In Texas, for example, the Department of Information Resources, or DIR, issued a request for offer June 9 asking respondents to provide Google products and services for not only state agencies, but local ones, too.

“While DIR is specifically charged with overseeing state government, countless local government entities—including K-12 education organizations and public colleges and universities—also depend on DIR’s services to keep their technology reliable, secure, and forward-looking,” the document states.

The main benefit of the approach is volume pricing because more entities can buy off the contract. The idea isn’t new, but it is gaining traction, said Jaime Schorr, chief cooperative procurement officer at the National Association of Chief Procurement Officials.

“In more recent years, especially post-COVID, public procurement professionals realized that there is an incredible benefit in coming together and utilizing that maximum volume discount, and the suppliers in the marketplace really take notice of that,” Schorr said.

She used cooperative purchasing when she was chief procurement officer for Maine. A state statute allowed the procurement office to offer many of its contracts to any political subdivision, municipality, nonprofit, health care-centered agency and the University of Maine. “Nine out of 10 times it was better pricing than what they could get on their own,” she said.

Another benefit is supporting smaller cities and counties that may be short on procurement expertise and time. “Sometimes you could have your wastewater director or your road director trying to perform a procurement,” Schorr said. “However, even the largest state’s largest countries are facing that same challenge—resources and bandwidth and skill set and knowledge —so I think cooperative procurement is an opportunity for any public entity to maximize volume discount pricing and leverage quality partnerships with suppliers.”

In California, about 90% of what the Procurement Division at the Department of General Services, or DGS, calls Leveraged Procurement Agreements are available for local entities to use, said Angela Shell, deputy director of the division. Available through the Cal eProcure portal, LPAs allow for an even greater volume pricing edge.

“We’re using the power of the entire state of California, not maybe a single state department or a group of state departments,” Shell said. “We’re throwing in historical spend that may have happened with local entities to further drive down the pricing in our contracts.” 

For local entities, it streamlines the procurement process, she added. “The hope is that for the locals, they’re able to execute a procurement off of our agreement without having to go through the full procurement process on their own,” Shell said. “They may have to go to their board or some sort of organization to get it approved, but they’re not spending the months of time that it traditionally takes for procurement to get through the process.”

A recent example is a coach bus procurement that the state orchestrated for local transit authorities to use. A large city asked for help, and DGS worked with it and then brought in other localities to determine their needs in building a contract. It also handled a contract for payment acceptance devices and related software for local transit authorities to use on buses.

Another cooperative approach DGS uses is the Software Licensing Program, a contract with about 700 resellers, many of them small and disabled-veteran-owned businesses. Localities can use that contract for any software they might need.

Additionally, there’s the California Multiple Award Schedules that use the federal General Services Administration Schedule for base pricing. “We have more than 2,000 vendors on CMAS,” Shell said. “It’s that same expedited procurement process where the pricing is already there. They can’t go higher than the GSA pricing, but they can go lower, so they can start to drive down the cost if the vendor will accept it.”

Currently, DGS is working with the state Transportation Department to make sure contract vehicles are available that would help local organizations make transit by bus and light rail more effective and efficient. “It’s things like allowing for real-time identification of when your bus is going to show up,” Shell said. “Not something that the state would actually use. It would always be the local transit authorities, but we … want to assist with having a contract vehicle because we know they just don’t have the resources to do what we do at the statewide level.”

Arizona’s Department of Administration Procurement has the Arizona Cooperative Program, a membership organization that allows localities to buy from any contracts designated as statewide and cooperative. 

“We typically do those on something if there’s a commodity that everybody uses,” such as smartphones and laptops, office supplies, janitorial equipment and IT, said John Red Horse, senior procurement manager at the department. “It helps our members from having to reinvent the wheel…. We’ve already done the contract. It helps us get better pricing because we can do economies of scale.”

To join, eligible entities fill out an application in which they agree to comply with the Arizona Procurement Code, among other requirements. Vendors pay a 1% administrative fee under the setup that the department uses to create and manage more contracts.

The cooperative team meets a couple times a month to discuss new needs and what changes need to be made when a contract is due to expire. “We invite them to be part of the focus group and help us because they’re a customer,” Red Horse said of members.

Mariel Reed, CEO and cofounder of Pavilion, which builds technology infrastructure to facilitate public-sector cooperative purchasing, said more collaborative procurement is needed. “I think it’s an underutilized practice,” she said. 

Cooperative procurement should be the default in any policy around purchasing, Reed recommended. “There’s a speed of innovation in government that's possible with the right procurement infrastructure,” she said.