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As part of our reflection on 2013 at Onvia, we reviewed some of the industries and sectors in public procurement that exhibited the greatest degree of change in the Onvia dataset over the last year.  Education Materials & Services was one of the areas we identified that had exceptional volatility both in 2012 and 2013 – so much so that we wanted to investigate more deeply with our content analysts into the catalysts that are shaping the Education Materials and Services market.  The Educational Materials category typically covers project-based bids & RFPs for items like classroom supplies, sports equipment and library books.  Education Services are generally procured through term contracts and cover services like special program teaching services, food services for schools, education programs and testing services.   Across the Onvia data set of procurement documents, the education market saw a 33% decline in bids and RFP volume for project-based opportunities in 2012 and we expect final numbers for 2013 to finish with another 30% decline on top of that.  Onvia term contracts for education are also expected to decline 30% year over year as 2013 procurement finalizes.  On the surface, opportunity volume declines are concerning for this sector of contracting, but shifts in government purchasing strategies could present larger opportunities for vendors in the education market in 2014 and beyond.

Shift To ESAs & Cooperative Purchasing Gaining Support From Officials

One key driver of the decline in project and term contract volume in the education sector is the continued shift toward cooperative purchasing efforts in U.S. schools.  Programs like The Cooperative Purchasing Network (TCPN) and Educational Service Agencies (often identified as ESAs, ESCs, ESUs or ESDs) are growing in popularity as sources for procurement due to the projected savings in administration costs and cost savings of purchasing in higher quantities.  Indiana’s Department of Education surveyed 371 school corporations and charter schools about cooperative purchasing participation in 2013.  In the survey, 85% of respondents reported participating in Educational Service Agency cooperative purchasing (specifically, ESCs) in 2012.  While many ESAs have existed for decades, their role in recent years has shifted from providing basic training and services to their member schools to being a consolidated purchasing and negotiation engine for our nation’s education materials and services sectors.  The data in the Indiana DOE survey clearly illustrates that the majority of schools are utilizing ESA programs for at least a portion of their procurement needs and, with ongoing pressure on reducing and controlling education spending, the trend toward consolidated purchasing will likely only continue.   The Indiana DOE survey asked an open-ended question to school officials on top ways to reduce costs in their agencies going forward and their responses such as “Negotiated pricing through ESC”, “Negotiated pricing through state contracts” and “Consolidated purchasing for all property, liability and workman’s compensation insurance” pointed to the overall theme of consolidation in procurement initiatives among the responding schools and the acceptance and buy-in of those programs by school officials. 

Education Vendors Must Adapt To Target New Government Buyers

For vendors selling materials and services into the government education market in 2014 and beyond, the Indiana study offers some clear insights on the need to adapt to the changing education procurement market.  The study revealed that 34% of all respondents did not use independent bidding at all in 2013, a number that should be startling to those vendors still focusing solely on marketing to specific agencies without executing direct marketing and sales campaigns directed at the cooperative purchasing entities themselves.   Jennifer Schaus of Jennifer Schaus & Associates leads a boutique government contracting consulting firm based in Washington, DC and commented on the consolidated purchasing trend in education and its effect on pricing and competition for vendors in the sector adding, “Additional vendor participation and shrinking budgets also tend to lead to lower prices, thus leaving little room for profits.  Fewer companies will win contracts, but they may see larger orders than previous years”.

Expect More Price Competition But Larger Average Contract Values

Vendors selling education materials and services to the government market should expect a continued trend toward consolidation in 2014 and beyond as schools continue to experience funding shortfalls and must find ways to provide high quality services to students at reduced costs.  The Southern Oregon Education Service District (SOESD) makes a clear case for the ESD benefit to members, citing as much as “60% off list prices” when schools purchase through the agency and additional significant savings when the ESD is “able to develop a consortium for products and services involving several school districts”.  In the case of vendors selling services into the Oregon education market, the SOESD will put pricing pressure on product and parts vendors, but simultaneously offer up much larger contracts to those same vendors by creating consortiums of buyers that may have never been able to purchase direct from that vendor on an individual basis.

Education Vendor Playbook For 2014

To prosper in the ESA and cooperative purchasing environment, education vendors must focus on three key actions to discover who the influential cooperative purchasing entities are in their districts.  First, vendors must leverage their existing direct relationships within schools to understand internal purchasing and procurement practices in their market.  Vendors must utilize agency relationships to ask these questions because the purchasing patterns and practices of past years aren’t necessarily indicative of how those districts and agencies will purchase in the future.  Second, proactive vendors should be researching term contract activity to discover who is opening up long term service contracts in their market going forward for education services.  Lastly, successful education vendors will be constantly monitoring and reviewing contract award notices in their markets to see which purchasing entities are actively buying education materials and services.   Once the influential buyers have been identified, successful vendors must work to build strong relationships and create a proven track record of success with those entities to increase their chances of winning future contracting opportunities.  “Past performance, competitive pricing and quality offerings are essential in government contracting, but building a relationship based on those factors is essential in selling to any risk-adverse government entity”, added Schaus.