Onvia interviewed Voight Shealy, who is currently the Director of Marketing, Education and Outreach for WSCA-NASPO. Voight had been a member of parent group NASPO for 20 years while being Chief Procurement Officer for the State of South Carolina. Over that period he served as board member and president. NASPO merged its Western States Contracting Alliance (WSCA) with its NASPO Cooperative in January 2013 to create WSCA-NASPO, a unified national cooperative purchasing organization.
Who Are They?
WSCA-NASPO, a leading cooperative purchasing association, is made up of representatives of all 50 states and the District of Columbia. The chief procurement officers of each state serve as “members,” and function as “gatekeepers” for local agency buyers within their state.
State chiefs collaborate on ideas for new products and services and a lead state is chosen to select the vendor in a competitive process. Buyers sign agreements with these vendors that impose the same terms and conditions as the original contract. Transactions are facilitated and approved by WSCA-NASPO according to member guidelines.
Voight indicated that around $10.5 billion in total purchasing takes place through his association, counting all purchases made by states as well as local agencies using the cooperative contracts made available by the lead states. Once awarded, the contracts are re-solicited typically every five years.
How Do They Help Vendors?
Traditionally, contractors seeking to win bids on a regional or national basis have to spend the effort required to reach out to state procurement staff in each state they are targeting and respond to numerous requests for bids and RFPs. With a national co-op organization like WSCA-NASPO, a contractor can potentially submit one winning bid and then sell into all 50 states without having to bid separately in each. As Voight explained, without a national co-op buying process, “You have the cost of the bid submissions each time such as the risk review, the sales review, the executive management review, the legal review, etc. that have to be done for each state, versus preparing only one bid. The administrative cost savings for the bidder is tremendous.”
Contracts can be re-used hundreds or thousands of times – even multiple times with the same buyer – without the vendor having to re-apply and compete with other firms.
How Do They Help Agencies?
One of the major benefits of working with WSCA-NASPO for states is what Voight calls “in-depth collaboration” – a healthy process of ongoing interaction where the “best and the brightest solutions” are identified that will “meet the needs of the member states.” For the local agencies, the benefits include saving time by not having to go out for competitive bids and saving money from the negotiated discount group pricing. Furthermore, agencies have confidence knowing that the items offered on the list of solutions have been studied based on current needs and are agreed to by top state procurement officials.
What Do They Sell?
While some may assume all cooperative purchasing revolves around high volume commodity items, a review of the selection offered by WSCA-NASPO shows a balance of both products and services, including niche products and a wider range of business services than would normally befound in other co-ops.
A total of 242 contractors are providing 51 categories of product and services. In total, 41% of WSCA-NASPO’s categories are in services.
Among the product categories are a wide variety of standard items, like computers, as well as niche categories such as natural gas vehicles for fleets, ankle bracelets for corrections and newborn-related hospital products, like formula and child safety seats. Services categories include cloud and wireless services, online auctions, E-pay, contract compliance, travel, HR services and small package delivery.
How Fast Are They Growing?
Over a five year period ending in 2014, Voight reported the association has been growing in total procurement dollar values by an average annual rate of 15% (including local and state agency buying).
He mentioned, “Growth has ebbed and flowed over these years, but overall it has remained fairly consistent.”
To provide a sense of how fast 15% is, we applied this rate to the current reported sales of $10.5 billion and roughly estimated that five years earlier sales would have had to start at around $5 billion – suggesting a gain of around $1 billion per year on average in incremental sales increases. While 2014 numbers are not final, Voight expects an increase of $800 million, which would place it reasonably close to the longer-term $1 billion average. A similar level is expected for 2015.
What Is Their Future Outlook?
Looking ahead, Voight does not anticipate any material leveling off in the trend:
“For the foreseeable years, we anticipate growth.” He expects continued steady growth for WSCA-NASPO, although perhaps not quite at the frantic pace of recent years. Voight suggested that much of their success has to do with their R&D work to develop the right solutions for their state agency members. As Voight explained, “If we do our job, the perfect contract to meet a given need of government agencies that comes along has already been awarded. Historically, the time invested by public agencies to create specifications, to build procurements, has been tremendous and has elongated. One of the things we’ve been working on, particularly in IT, is to anticipate the needs of states and work with them to put contracts in place ahead of time. So when the head of an agency says, ‘I want this and I want it now,’ you don’t have to wait six months to a year for it.”
Vendors should evaluate if their business model makes sense for participating in cooperative purchasing. At the very least, they should make themselves aware of this large and growing trend in procurement. Onvia expects it to have continued impacts on the purchasing process, including limiting the volume of competitive bids and RFPs for the broader base of vendors.
This is a re-post from Onvia's State, Local and Education (SLED) Procurement Snapshot for Q4-2014