Onvia’s recent report, Leverage Cooperative Purchasing to Grow Your Government Sales, confirms the common perception by contractors that cooperative purchases do not impact all industries equally, but tend to skew towards “off-the-shelf” products (with some basic services offered). The reasoning for this expectation is sound: Agencies are attracted to cooperative contracts for volume buying advantages and common product purchases lend themselves to significant “price per unit” discounts that suppliers can offer based on high total volume over the life of the contract. When buying “off-the-shelf products”, the focus tends to be solely on price -- as opposed to buying services that require special expertise or buying products that have custom features.
The National Institute for Public Procurement (NIGP) defines cooperative purchasing as “the combining of requirements of two or more public procurement entities to leverage the benefits of volume purchases, delivery and supply chain advantages, best practices and the reduction of administrative time and expenses.” Cooperative purchasing includes both buying from co-op associations (either regional or national) as well as buying from another agency’s existing contract not tied to a co-op group (commonly known as “piggybacking”).
Measuring Types of Products Purchased - The Cooperative Purchasing Buying Index
As part of our research for the report, we examined nearly 800,000 total awards since 2012 and identified over 15,000 cooperative purchases. In order to shed light on what types of products and services tend to be purchased more often, we created a “cooperative purchasing buying index” to compare cooperative buying with competitive government contracts (bids & RFPs). Whenever the index climbed above 1.0, that particular area or industry is “above average” in terms of having more sales than would be expected. The top categories for cooperative purchasing are:
- Office equipment
- IT/Telecom products
- Transportation equipment
- Industrial supplies
When taken as a group, these four categories are commonly viewed as more product oriented, with a focus on volume, highly competitive pricing per unit and less need for specialized consulting.
Office equipment was purchased at 4.2 times its expected level for co-op associations and was 2.5 times above normal for piggyback purchases. IT/Telecom products was also stronger for co-op groups, with a score of 3.2 versus 1.7 among the piggyback segment.
Conversely, the categories of transportation equipment and industrial supplies showed stronger index scores for piggyback purchases (2.6 and 1.8, respectively) compared to lower co-op association indexes of 1.7 and 1.3. These industries tend to feature large, high value equipment purchases or equipment that may require a special delivery component. An agency may decide to buy from a local/regional vendor using piggyback contracts rather than from a national vendor offered through a co-op association that does not have a convenient dealer location.
Takeaway for Contractors
Opportunity to pursue cooperative purchases exists for businesses operating in all industries, but government contractors selling ready to use IT or telecom products, office supplies, industrial supplies and transportation equipment should take particular note of the areas of higher concentration. In general the cooperative contracting model skews strongly toward purchases in these industries, but there were also differences between co-op associations and piggyback purchases in the four top categories. Office equipment and IT products are more likely to be bought through a co-op while transportation equipment and industrial supplies are more likely to be purchased with piggyback contracts. To learn more about industry trends in cooperative purchasing, download the free “Leverage Cooperative Purchasing to Grow Your Government Sales” report today.