An Intergovernmental Systems Case Study

By Stephen A. Hamill

Mark Pisano

John Bartle

Richard Callahan

The Market

There are more than 90,000 independent state, local and education governments (SLED Government Agencies) in the United States, that collectively spend over $1.5 Trillion annually on products and services to support operations.

Legal Context

Each of the SLED Government Agencies is subject to state laws requiring open and competitive solicitations to award product and service contracts. Competitive solicitation statutes are intended to avoid conflicts of interest and ensure open competition, transparency, competitive pricing, and favorable contract terms. While necessary to ensure best public procurement practice, state competitive solicitation laws standing alone, require tens of thousands of SLED Government Agencies to issue tens of thousands of multiple and duplicate competitive solicitations for the same products and services.

States have recognized the need for intergovernmental cooperation among SLED Government Agencies through joint exercise of common powers laws that minimize duplication and promote government economy, efficiency, and effectiveness. In the context of cooperative purchasing, the common power of competitively soliciting and awarding a contract for common products and services is exercised by one SLED government agency and is made available for use by other SLED Government Agencies avoiding the time and cost of duplicate solicitations by multiple agencies.

Era of Cooperatives

Over the past 30 years, use of intergovernmental cooperative purchasing grew among SLED Government Agencies with the advent, growth, and proliferation of national, state, regional and local cooperative organizations (Cooperatives) operated by government, nonprofit, and, more recently, private sector entities. The Cooperatives model provides for a lead government agency competitively solicited contract award for a product or service made available through Cooperatives for use by purchasing government agencies. Contract award Suppliers pay an administrative fee to national Cooperatives based on purchase volume, a practice followed by several state, regional and local Cooperatives.

Challenges & Limitations

While the growth of intergovernmental cooperative purchasing has been measurably enhanced by Cooperatives’ growth, an estimated annual volume of $15 Billion in SLED Government Agencies’ Cooperative spend is less than 1% of the $1.5 Trillion annual spend by SLED Government Agencies on products and services. The numbers demonstrate that intergovernmental cooperative purchasing is underperforming: the promise and potential has not been achieved.

Realizing the full potential and promise of intergovernmental cooperative purchasing requires identifying and resolving the current limitations and challenges SLED Government Agencies experience:

• Verification of most competitive contract pricing & terms among Cooperatives & Suppliers.
• Assurance of compliance with state law & best public procurement practices.
• Complex number of Cooperatives & Supplier contracts available through multiple Cooperatives.
• Coordination & collaboration among SLED Government Agencies, Cooperatives & Suppliers.
• Multiple and duplicate Supplier and Cooperative requirements & registrations.

Paradigm Shift-Government Leadership

In any market dynamic there are three (3) essential building blocks: a product, a product distribution channel and, most importantly, a market that provides the customers and revenue source for the products and distribution channels. In the intergovernmental cooperative purchasing market dynamic, SLED Government Agencies provide the product, Cooperatives provide the product distribution channel, and SLED Government Agencies provide the market. SSLED the market.

SLED Government Agencies provide a critical role in providing intergovernmental cooperative purchasing products and the market for Cooperatives. Yet, the Challenges and Limitations enumerated above demonstrate a disconnect or imbalance between SLED Government Agencies’ and Cooperatives’ desired outcomes. This disconnect or imbalance in desired outcomes evolved over time resulting from:

• Emergence of multiple Cooperatives as independent and competing brands.
• Fragmentation of the cooperative market among multiple Cooperatives.
• Lack of consistent SLED Government Agencies’ outcome oversight.
• Suppliers with multiple contracts distributed among numerous Cooperatives.
• Absence of articulated SLED Government Agencies’ desired outcomes.

An initial step, in addressing the current intergovernmental cooperative purchasing limitations and challenges, is recognizing the current market dynamic, the disconnect or imbalance between the desired outcomes of SLED Government Agencies and Cooperatives and the need for SLED Government Agencies to assume a proactive role in addressing the current disconnect.

Leadership Mission and Principles

Determining the North Star or unwavering purpose and mission of intergovernmental cooperative purchasing to inform SLED Government Agencies leadership decisions is the next step in a connected, balanced and more effective intergovernmental cooperative purchasing.

The North Star of intergovernmental cooperative purchasing is to provide clear and measurable public benefit. A review of public procurement best practices and state statutes requiring competitive bidding and authorizing cooperative purchasing provides the foundation for the North Star and guiding principles to inform SLED Government Agencies leadership:

• Establish open, transparent & competitive solicitations and awards.
• I Save time, money & minimize duplication.
• Achieve economy, efficiency, effectiveness, & competitive contract pricing & terms.

Fast-Food, Cars & Cooperative Purchasing

There is a market driven reason why automobile dealers and fast-food restaurants co-locate. A place or single location drives customer traffic, offers choices & comparisons and increase sales growth. The same principle applies to cooperative purchasing-the need to establish a place or single cooperative contract hub where public agencies and Cooperatives co-locate, virtually or in-person, so that purchasing government agencies can share, access, shop, compare and buy cooperative contract product and services.

Establishing a place or hub, supported by available technology, is a critical step in addressing current challenges and limitations and returning intergovernmental cooperative purchasing leadership to SLED Government Agencies.

Intergovernmental Cooperative Purchasing Public-Private Partnership

Advancing the potential and promise of intergovernmental cooperative purchasing will require a multi-sectoral engagement-SLED Government Agencies, Cooperatives and Suppliers-recognizing the essential contribution of each.

Establishing an intergovernmental & multi-sectoral cooperative purchasing public-private partnership including the following general roles and responsibilities would further the common interest of each partner in accelerating the growth, access and use of intergovernmental cooperative purchasing:

• SLED Government Agencies: Leadership, Advocacy & Oversight-Public Benefit Guiding Principles.
• Suppliers: Cooperative contracts, sales, contract administration, technology interconnections.
• Cooperatives: Cooperative contract content, marketing, supplier administration.

Commitment & Execution

Fulfilling the promise and potential of intergovernmental cooperative purchasing requires a commitment to change the current market dynamic and the formation of a public-private task force consisting of Public Purchasing Professionals and private support resources to improve intergovernmental cooperative purchasing by:

• Leading the initiative & building support to address current challenges and limitations.
• Establishing a technology-based place to drive traffic, access, and use.
• Articulating SLED Government Agencies mission & guiding principles.
• Providing Public Procurement Professional oversight to ensure public benefit outcomes.
• Collaborating with Cooperatives and Suppliers as required to achieve results.