Strategic Cooperatives:

How to Select and Make the Most of

Cooperative Purchasing Programs

AESA ConferenceDecember, 2011

Cooperative purchasing allows school districts to leverage greater buying power by working together.·Aggregating spend results in greater savings.

·Schools can avoid replicating the competitive process and the cost of going out to RFP.

·With more focus on regionalism and cost saving initiatives, cooperative purchasing has great potential to save money for our schools.

Just What is Cooperative Purchasing?

The Evolution of Public Procurement

What is a Strategic Cooperative?

· A group-buying organization that uses methodical, proven, state-of-the-art purchasing techniques to obtain goods and services for its members, at the lowest total cost of ownership.

· Distinct from traditional coops that simply share the workload and fail to apply best practices.

Leverage of a Cooperative

· Cooperatives, as their name declares, require cooperation among participants.

· For the most effective results, participation requires members to:– Help set standards– Collect good information– Use the contracts– Understand total cost of ownership– Market the contracts

· Leverage the collective size of the group to optimize savings

Additional Savings

Besides using leverage, cooperatives reduce the total cost of acquisition and ownership by performing tasks once, for many participants.

·Vendor/commodity research·Advertising, bidding, evaluating, awarding·Monitoring and control

This removes the redundancy being done across school districts.

· Terms and conditions that protect buyers

· Better buyer protection from the involvement of local practicing purchasing professionals

· Dedicated educational purchasing agents working to match the right vendors and commodities to the needs of the schools they represent.

Benefits of Using an Experienced and

Knowledgeable Strategic Cooperative

Deadly Inhibitors to Bidding

Efforts to obtain the best price are impeded when districts or ESAs:

• Don’t know what was purchased in the past

• Foster a fragmented vendor base• Neglect developing the vendor pool• Fail to manage contracts• Don’t benchmark prices• Forego leverage

The Model Development Cycle

Beyond the Core Competency of Bidding

LEAs do a good job of following the law, but best practices in purchasing require that they do more than what the law says.

Room forimprovement

Room forimprovement

Model Purchasing Cycle

ManageContracts

Conduct Quotes and

Bids

Develop Strategy

SupplierAnalysis

DataAnalysis

Shape and Negotiate

Value Proposition

Beyond the Core Competency of Bidding

A good cooperative should add the data analysis and development prior to the bid, and contract management after the award.

Data Gathering

Rarely do district’s have the capacity to capture or analyze the data necessary to get best possible results.

•Identifying appropriate data•Comprehensiveness, quality, and timeliness of data•Methods of finding & capturing data

What keeps us from this responsibility?

Data Gathering

What are we looking for when we sift through all our reports, POs and invoices?

• Missing spend & maverick buying• Unleveraged spend• Fragmented vendor base• Need for standards• Sub-commodity buying patterns• Most-purchased SKUs• Pricing benchmarks

Data Analysis

· What contracts are necessary?

· What is the demand history?

· How can commodities be grouped?

Supplier Analysis

We get dangerously comfortable with suppliers who do a good job, but best practices require us to constantly analyze the supplier base and marketplace.

•What does supplier analysis entail?

•What does industry analysis entail?

•How can we expand the apparent supply of vendors?

•What is commodity analysis?

Supplier Analysis

Examples of what to look for when we analyze the supplier base:

•Cost-drivers to our prices•Corporate goals•How the supply chain works•Environmental factors•Influence of news and politics•Corporate decision points•Financial strengths & weaknesses

Develop a Strategy

Determining how to get prices should be a strategic decision, not a move based on convenience.

·Quoting·RFPs·Formal sealed bids·State or GSA bids·Piggybackable contracts·Cooperatives

Bidding for Contract Prices

You must be strategic when building terms and conditions that are wins for both the district and the vendor, based on data and supplier analyses.

•Checklist of common T’s and C’s

•Common legal requirements

•Issues often overlooked

•Unreasonable expectations of vendors

Benchmark Prices

· Compare to self· Compare to neighbors· Compare to other cooperatives· Compare to retail· Always compare in context· Don’t forget shipping, other terms· Compare in the aggregate· Compare at the line-item level

Prevent Favoritism

Put internal controls in place:

·Read the terms and conditions

·Know the evaluation process

·Audit the evaluation process

·Interview losing vendors

Take Reasonable, Manageable Risks

Effective strategic cooperatives:

·Search, test and implement new vendors

·Creatively combine commodity categories

·Think about spending guarantees to lower prices and eliminate ambiguity

·Remove onerous sections out of terms and conditions

Managing Your Contract

Managing Your Contract

Post contract management can be a major weakness. Don’t let the contract development work be for naught. Contracts must be managed to be effective.

•Publishing prices to schools•Preventing maverick spend•Audit vendors for contract compliance•Evaluating supplier performance•Capturing data

Marketing

Contracts must me marketed, therefore cooperatives:

·Have a responsibility to help members understand contracts

·Must provide resources to assist districts to reach outside of the district office down to the school level, the end-users

·Need to ensure that local vendor reps understand and are leading with your bids

Talk to Buying Constituents

Communicate:

·Anticipate issues

·Create user groups

·Listen to the ultimate end-user

·Try surveys

·Get information from the back-office employees

Tips to Get Started Tomorrow

Don’t wait for a “big event” to begin your work on contract development. Start immediately with small steps, such as:•Better management of existing contracts

•Asking a vendor for a spend report

•Asking accounting for an AP report

•Setting a date for vendor interviews

•Using the trade show to find new tools

•Looking for price benchmarks

•Comparing cooperatives that meet your needs and can supplement your current bidding practices

How to Find an Experienced and Knowledgeable

Cooperative

There are a lot of options out there . . . AEPA is only one tool in your toolkit

·A local ESA in 24 states has vetted AEPA against the others.

·Your representative ESA serves as the voice of school districts in those states.

The Association of Educational Purchasing Agencies (AEPA) is a nationwide group of non-profit educational organizations working collaboratively to save school districts time and money.

We provide a single contract that is available statewide with one cooperative agency identified to function as the statewide contract facilitator and representative.

AEPA has more than $330 million in annual protected purchases.  We are currently 24 members strong, representing schools serving more than 25 million students.  Together we have hundreds of years of public sector purchasing experience.

AEPA is unique in that each purchasing contract is awarded separately in each member state, in accordance with local bidding laws. The benefit is state-specific bid protection and lower cost of ownership for school districts.

Of the many advantages to this unique purchasing group are the combined human resources representing purchasing/ bidding expertise, current and past vendor relationships, past experience and overall vision with regard to the needs of the qualified customers within each represented state.

· We know schools and their needs.

· There is no cost to schools to use AEPA contracts, and no red tape to sign up.

· Competitively bid contracts are can be accessed immediately.

AEPA Membership and Sales

AEPA currently has 24 member states (shown in Blue). In addition, several

member states offer contiguous states the option to piggyback off of their contracts to

save time and money (shown in dark GREY).

Member States

 

California Massachusetts

Ohio

Colorado Michigan Oregon

Connecticut Minnesota Pennsylvania

Florida Missouri Texas

Iowa Montana Virginia

Indiana Nebraska Washington

Kansas New Mexico Wisconsin

Kentucky North Dakota Wyoming

Bid Process

·The member states form the Board of the AEPA.  The Board meets each spring for the purpose of, among others, selecting product categories to seek bid responses from national vendors.

·Tasks groups, or sub-committees, are assigned to develop product specifications, market and educate potential vendors, and refine terms and conditions specific to product categories.

·In the fall, each member posts the bid announcement in their state.  The sub-committee reviews the submissions and makes a recommendation to the Board for approval at the winter meeting.  It is then up to each member state to enter into a contractual agreement with each recommended vendor.

Current Bid Categories

New bids are added annually.Coming soon – scoreboards, asphalt

paving, mobile learning, kitchen supplies, musical instruments and

security systems.

Athletic Surfaces Industrial Supplies School Furniture

Carpeting Interactive Classroom Sports Equipment & Supplies

Classroom & Office Supplies

Medicaid Billing Technology Products

Copiers Parent Notification Systems

Tech & Facility Software

Custodial Supplies Portable/Modular Buildings

Vehicles/Utility Vehicles

Document Management Roofing Weight Training Equipment

Vendor Sampling

Other Benefits

24 ESA members with expertise to share:

·Independent bids to piggyback off of

·Experts to bounce ideas and questions off of

·Network to share other educational and entrepreneurial ventures with

Thank you!

Visit us on the web at www.aepa.org and contact a neighboring AEPA

representative to learn more.