Higher ed procurement co-ops branch out

How buying cooperatives decide which new categories to offer, and how institutions can benefit
By: | Issue: May, 2014
April 23, 2014

When it became clear that the scientific equipment in hundreds of labs across the University of Pittsburgh campus was not being maintained effectively, professionals in the university procurement department began looking for a new provider to do the job.

The university had long relied on a purchasing cooperative to secure favorable contracts with vendors for bulk products such as office supplies. When administrators discovered that the cooperative had established an agreement with Specialty Underwriters (SU), a provider of equipment maintenance, their search was over.

The university has relied on SU to maintain scientific and mechanical equipment across campus for the past seven years. The vendor now maintains 300 pieces of equipment at Pitt, says Michael Durica, a procurement specialist at the university. As a result of the contract negotiated by the purchasing co-op, the university has saved more than $400,000, or 23 percent of the original provider’s fee.

“When institutions need a new vendor or their budgets are strapped and they are short on full-time employees, they can always look to buying consortia because they have a lot of helpful contracts in place,” Durica says. “Not only do their contracts save us money, but cooperatives also can provide important information to help us see where we could better utilize our contracts and to help us make connections with other schools.”

Buying cooperatives have long been used in higher education for purchasing consumable commodities, but in recent years, these consortia have begun offering standard contracts for an expanding variety of products and services. Equipment maintenance is one of those nonconventional categories that is now providing savings for universities like Pitt—which is an early adopter of sorts in its choice to look to its purchasing group for a service rather than just a product.

“Co-ops have been around for a long time, but they started with uncomplicated products that didn’t have much differentiation, such as office supplies,” says Doreen Murner, CEO of the National Association of Educational Procurement. “More university procurement offices are now becoming responsible for the bidding, analysis and contract maintenance for other products and services, including financial services, insurance and health benefits, so cooperatives are now offering a wider variety of contracts.”

A number of higher education buying cooperatives offer competitively awarded supplier contracts in increasing numbers of nontraditional categories. E&I Cooperative Services, for example, has energy, electricity, natural gas, equipment maintenance and vehicles as newer supplier categories. And the National Joint Powers Alliance (NJPA) purchasing consortium has recently added contracts in employee benefits, health care, curriculum, construction job order contracting and logistics, says Thomas Morgan, NJPA’s membership communications specialist.

As the procurement departments at colleges and universities become responsible for more varied types of purchases, procurement professionals’ jobs are busier than ever. Purchasing cooperatives can help manage the contracting process and the time involved.

Working with consortia “helps drive costs down, but it also saves time and allows us to work on other initiatives that otherwise wouldn’t get done,” says Andrew Grant, director of business operations at Bowling Green State University in Ohio. His institution has used consortia contracts to purchase software, facilities maintenance and campus cards.

Here’s how buying cooperatives decide which new categories to offer, and how institutions can benefit from the growing number of options.

Making decisions about contracts

After the economic slump of the past several years and tightened budgets at most higher ed institutions, procurement departments have become more highly valued on campus and, as a result, responsible for handling more types of purchases than ever before.

Suddenly, campus leaders wanted procurement professionals to help cut costs through contract negotiations and bulk purchasing. Growing numbers of administrators began turning to that office for help with bidding, contract analysis, awarding and contract maintenance.

“Economic difficulties uniquely positioned procurement to make significant contributions to higher education,” Murner says. “We became more relevant on campus and leaders had more of an aptitude to listen. It was a rare opportunity for procurement to do something and to be heard.”

As purchasing departments have needed to secure contracts with different types of vendors for different types of services, buying cooperatives have vastly expanded their offerings.

Most buying consortiums are member-driven, so they often select new purchasing categories based on member needs. The Inter-University Council of Ohio Purchasing Group (IUC-PG) adds new categories by member vote, says Gene Stephens, the group’s director of strategic procurement. For instance, IUC-PG now offers contracts for web content and shared data services as well as for employee benefits such as pharmacy, vision, dental and life insurance.

“We try to set up agreements that we know will get a lot of participation,” Stephens says. “Some of our agreements are even set up with mandatory participation from all 14 state universities.”

At E&I, decisions about buying categories start with the organization’s strategic sourcing committee and various strategy teams, including Science, Facilities and Technology. Each team is composed of volunteer subject-matter experts from member institutions across the country.

Involving a diverse group of experts results in “a broadening spectrum of goods and services,” says Thomas Fitzgerald, E&I’s CEO. “We now offer many new contracts and services in categories that were once considered outside of our traditional lines. These include energy, science, technology, maintenance, food services, and facility maintenance and repair operations.”

Enjoying collective buying power

At Bowling Green State, Grant says he often hears people across campus saying that “price can’t be negotiated.” But it can. “When you are buying one or two items, it’s hard to influence a deeper price reduction,” Grant says. “Many times, if you take large quantities to the same supplier, maybe with multiple institutions, they are willing to reach in their pockets to get the sale.”

Emory University in Atlanta has realized “significant cost savings” by utilizing Vantage Point Logistics (VPL), an E&I vendor, for inbound freight management, says Loette King, senior director of procurement and contract administration at Emory. The contract covers small packages from suppliers, which includes the majority of incoming freight packages. King says the university may review adding larger shipments in the future. In addition to cost savings, the contract with VPL has provided the university with the ability to provide better reporting to its business units.

While Emory works with VPL through a consortium contract, the university actually began working with the vendor before the purchasing cooperative agreement was in place. After Emory purchasing professionals shared their success with other co-op members, the group “was prompted to explore putting together an agreement that could be made available to their entire national

membership,” King says. Such opportunities to share success and best practices with counterparts at other institutions make purchasing cooperatives more beneficial, King adds.

Involving cross-campus professionals

The expansion of cooperative supplier categories also means more campus professionals can lend their expertise to purchasing decisions. Because consortia already have contractual agreements in place with specific vendors, the process of requesting proposals, vetting potential vendors and making a deal is greatly shortened and can be more easily handed off to the departments that will use the products or services.

“Cooperative agreements allow administrators to utilize the expertise of their department heads to help select products to buy,” says Morgan from NJPA.

The procurement office doesn’t need to have an expert in every field or industry and start from scratch in negotiating. Its team just needs to explore the existing co-op partners’ contracts before starting a formal bid process, he adds.

Building campuswide support

As purchasing consortia have branched out, the onus can be on the procurement department to prove their value to others across campus. At Tarrant County College District in Fort Worth, Texas, the procurement office this spring is rolling out a new SciQuest eProcurement program that notifies campus end users about new contracts.

At Bowling Green State, procurement officials keep campus personnel informed about vendors and contracts through an electronic catalog and robust website, Grant says.

A growing number of procurement offices view the institutions they serve as their customers—and marketing to those customers has become a priority, says Murner of NAEP.

“Marketing is a natural avenue to make sure customers are educated on what you can provide,” she explains. “A lot of procurement departments have well-developed websites and educated staff that visit various departments regularly. They also offer lunch-and-learn events and opportunities for vendors to come in for vendor shows so departments can see what’s out there.”

Nancy Mann Jackson is a writer based in Alabama.