Cooperative Purchasing

In early 2010, The Aberdeen Group surveyed senior exec’s from 300 companies in North America, asking them for their two biggest challenges in 2010. The responses came back: (1) economic conditions and (2) executing strategies. They then asked “what are the top two strategies?” The answers came back: (1) reducing costs and (2) developing stragegic partnerships. I think these results apply to public sector as well. Revenues are down, budgets are squeezed and resources are scarce. Public sector and higher education markets are somewhat unique in that they purchase so many of the same goods and services, cooperative purchasing groups have become a natural byproduct. Historically most of them have relied on volunteers from on of its members to lead the group sourcing initiative. Once an award is made, the contract is “out there” for all members of the group to use but no one has incentive to drive usage to that contract. Further, in today’s environment of constrained resources it is difficult for any lead agency to devote adequate resources to fully support the entire group. Perhaps, cooperative purchasing groups could create strategic partnerships with private strategic sourcing companies to assist in thoroughly aggregating demand, assisting with proposal drafting and bid evaluation and then, post award, assist in driving usage of the contract to the awarded bidder(s). such a partnership could produce a win-win win. The cooperative group obtains the best value, the supplier(s) benefit from reduction in spend leakage and the third party benefits from a small transaction fee. If the transaction fee is the primary source of reveue to the third party in such an arrangement, then it is truly a success fee and poses no risk to the cooperative. None of us who are working today have seen an economy in such bad shape. Perhaps its time to rethink old ways of doing business and consider these types of partnerships to meet customer demands in an austere environment. George Gordon, CEO, Enporion LLC