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What is a major advantage of coop purchasing for higher ed institutions? You can start with savings from leveraging aggregated buying power to achieve volume discounts, but the benefits of education purchasing cooperatives go well beyond that. You can significantly streamline your procurement while tapping into industry expertise, complying with your competitive bidding requirements, and so much more.
Procurement has become complex due to a significant number of legal requirements, institutional initiatives, and budgetary constraints, which has led to several misconceptions about how purchasing organizations in education work. So, let’s start by explaining these misconceptions and the reality behind them.
The TV show MythBusters spent nearly 15 years testing the validity of rumors and myths using scientific methods. While we will not be using explosions or building complex machinery, we can bust a few myths about how cooperative purchasing works.
One myth we hear from some schools is that cooperative purchasing organizations do not meet the legal requirements for competitive solicitation and bidding. While you should always check with your legal counsel, the reality is that not only is the practice legal, it is encouraged.
Education purchasing cooperatives have a competitive solicitation process and lean on member institutions to help craft RFPs to ensure compliance.
Most states have laws and regulations that allow schools to engage in cooperative purchasing. On a federal level, the Education Department General Administrative Regulations (EDGAR) encourages academic institutions to leverage cooperative purchasing agreements as a way to control costs.
In most cases, education purchasing cooperatives meet or even exceed legal requirements.
Let’s bust this myth as well. Cooperative contracts are the culmination of competitive solicitation and rigorous process, following documented steps for transparency:
Nearly every college and university today weighs diversity and localism in making purchase decisions. Some have formal policies that require certain percentages to go to certified diverse suppliers that are more than 50% owned by minority groups and under-represented populations. Others have informal policies but still make an effort to be more inclusive and stimulate the local economy.
While a noble goal, it does increase the workload for higher ed procurement teams to source and encourage these suppliers to bid on projects. Thinking that education purchasing cooperatives only work with national companies or limit participation from diverse suppliers is wrong. In fact, purchasing coops provides access to a larger pool of diverse suppliers that meet these goals.
Even Tier-1 suppliers that are not diverse or local can help you meet your goals by subcontracting a portion of the work to diverse suppliers.
Look at this from the supplier’s viewpoint for a moment and see which you would prefer.
Suppliers can spend time searching every school’s website to find RFPs and look for solicitations they can fulfill. This is a big job in itself since there are more than 5,000 colleges and universities in the U.S. When a fit is discovered, suppliers then have to craft a custom proposal, track submissions, and follow up to answer questions. Multiple that times hundreds of bids and you can see how labor-intensive this is.
Conversely, suppliers can work with an education purchasing cooperative, responding to fewer—but larger—RFPs to streamline the bid process. Cooperative agreements typically result in higher-volume sales, uncover new opportunities, reduce overhead, and lead to longer relationships. This process lowers customer acquisition costs for suppliers, one of their biggest marketing and sales expenses.
Working with a purchasing coop saves time and expense for suppliers. That is one of the big reasons they are willing to provide greater volume discounts for cooperative contracts.
While some group purchasing organizations (GPOs) restrict purchasing to certain vendors, an education purchasing cooperative like E&I Cooperative Services does not have restrictions. You are free to contract with whomever you want, whether it’s a cooperative contract through E&I or something you negotiate separately.
At any time, there are several hundred available cooperative contracts on the E&I website, enabling you to compare with your existing contracts. In most cases, you actually broaden your options by getting access to a wider range of potential suppliers to make your purchasing even more competitive.
To accommodate multiple institutions, cooperative contracts need to negotiate standard terms, so some components may not quite fit the way you want to do business. However, you can generally customize the contracts by working with the suppliers.
For example, you might require a supplier to work with local or diverse subcontractors as part of order fulfillment. This is common in food services where there is a standard pricing structure but many items are sourced locally.
By working with the supplier, institutions can often find ways to adapt cooperative contracts to meet their unique needs without compromising the benefits of the volume discounts.
Before we talk about the benefits, think about the answers to this question: what is the purpose of a cooperative agreement in higher education? The primary purpose is to leverage collective buying power to achieve cost savings you likely could not realize on your own. This collaborative effort also streamlines procurement, saving you time as well as money.
Working with an education purchasing cooperative provides you with volume discounts and greater access to suppliers who may not bid on your individual RFPs.
To maximize your benefits, look for a purchasing coop that emphasizes:
The best education purchasing cooperative will have active members. For example, E&I Cooperative Services has a strategic advisory board made up of members who provide input on goods and services, contract terms, and conditions. This helps ensure member needs are met.
By actively participating in the cooperative purchasing process, institutions can maintain control over their procurement practices while leveraging the benefits of collective buying power.
Look for coops that provide clear, detailed information about their procurement processes, contract terms, and pricing structures. This transparency should extend to how savings are calculated and how administrative fees are used.
E&I Cooperative Services is a non-profit and member-owned organization. Unlike for-profit cooperatives that exist to generate profits for owners, E&I is focused on serving its members. In fact, any profits at the end of the year are returned to members in the form of patronage rebates based on spending volume. This typically results in several million dollars that go back to members in the form of cash or Certificates of Equity every year.
One of the key benefits of working with a purchasing cooperative is access to specialized expertise that may not be available within your institution. Sector and industry specialists can provide insight into market trends, emerging products or technology, and pricing benchmarks. They help negotiate better contracts but can also act as consultants to help you make your procurement more efficient.
Due to the volume of transactions they facilitate, purchasing coops are uniquely positioned to negotiate better terms and conditions—especially if they are focused on your industry. E&I Cooperative Services serves the education sector exclusively, enabling contracts that have terms more favorable to colleges and university needs.
Colleges and universities generally spend about a third of their operating budgets on products and services. By undergoing a strategic spend assessment (SSA) with your purchasing coop, you can often uncover ways to lower costs and bring more spending under contract.
E&I Cooperative Services offers SSAs at no cost to members, typically analyzing 12 months of spend data, looking for cost-saving opportunities, and ensuring contract portfolio alignment. Another key is finding areas where you consolidate spending to drive greater volume discounts.
Comparing your current spend to available cooperative contracts can give you a way to estimate the potential savings from switching suppliers.
Let’s take a look at five examples of a cooperative and how they provide value in higher ed, looking at it through the lens of specific purchasing needs:
What is cooperative purchasing in higher education?
Cooperative purchasing in higher education is a collaborative approach where institutions pool their buying power to negotiate better prices and terms with suppliers. The buyer cooperative definition includes groups of institutions that work together to reduce costs and improve efficiency in procurement. Another term for coop purchasing is “group purchasing” or “collective buying.”
How does a purchasing coop work?
Members join the cooperative, which then aggregates the demand from member institutions. Using this combined volume, the purchasing cooperative puts out RFPs and negotiates contracts with suppliers on behalf of its members. These pre-negotiated contracts are then made available to all member institutions, allowing them to purchase goods and services at more favorable terms than they could achieve individually.
What are 3 examples of a cooperative?
There are three main types of purchasing cooperatives. There are general cooperatives that work with a broad range of industries, coops that only work with a particular sector like utilities or finance, and those that work solely on a particular sector. E&I Cooperative Services only works with educational institutions to meet their specific needs.
Busting Myths: what are five reasons coops are bad?
Ready to bust a few more myths? Here are five statements people sometimes make about purchasing cooperatives, along with the reality:
E&I Cooperative Services is the only non-profit, member-owned sourcing cooperative that focuses exclusively on education. View available contracts and learn more about the benefits of becoming a member.
