Group Purchasing Organizations in Education: Why Cooperative Contracts Outperform Sole Source

As demands increase and budgets tighten, many education procurement teams are feeling the pressure. There’s often not enough time in the day to handle all the purchasing needs while ensuring compliance with every regulation and guideline. Some turn to sole-source procurement as a way to accelerate the labor-intensive process of sourcing, proposals, and bidding.

However, before you make this decision, consider how national purchasing cooperatives can relieve that pressure and generally deliver better results.

What Are Group Purchasing Organizations for Education?

When you work with a group purchasing organization (GPO), you can leverage the collective buying power of other educational institutions. National purchasing cooperatives, for example, might aggregate spending across thousands of members to achieve volume discounts and more favorable terms than you might be able to negotiate on your own.

Key benefits of working with an education purchasing cooperative include:

• Cost savings: By combining spend across institutions, suppliers offer better pricing.
• Negotiating power: Larger order volumes allow cooperatives to get better terms and conditions.
• Efficiency: The cooperative handles most of the RFP, bidding and evaluation, and negotiating, streamlining the procurement process and saving time and resources.
• Compliance: While you should always check with your legal counsel, cooperatives or GPOs ensure contracts meet legal frameworks for compliance.

Why Cooperative Contracts Outperform Sole Source

While most projects go out to bid or require competitive proposals, some schools opt for sole-source suppliers. In some cases, there may only be one supplier that can provide a product, such as a specific type of software, or in case of an emergency. However, in many cases, cooperative contracts will produce a better deal than a sole-source provider.

Choosing a cooperative contract is not the same as a sole-source supplier. The bid process is advertised nationally and may uncover solutions you did not know existed. National purchasing cooperatives can assist in enhancing supplier diversity intitiatives.

Here are a few head-to-head comparisons.

Cost Savings

Cooperative contracts typically result in lower prices due to economies of scale and negotiation power.

• Cooperative contracts: Leverage aggregated demand to secure better pricing.
• Sole source: May lead to higher costs due to a lack of competitive pressure.

Competitive Bidding

The bidding process plays a crucial role in determining the value of contracts.

• Cooperative contracts: Involves competitive sourcing and bidding, ensuring the best value for money.
• Sole source: Lacks competition by definition, potentially missing out on better offers.

Transparency

The level of transparency in pricing and terms can vary significantly between contract types.

• Cooperative contracts: Often provide more transparent pricing and terms.
• Sole source: May have less visibility into pricing structures and negotiation details.

Flexibility

Contract flexibility refers to the range of options available to educational institutions.

• Cooperative contracts: Often offer products and services from a range of suppliers.
• Sole source: Limits options to a single vendor’s offerings.

Time and Resource Efficiency

The procurement process can consume varying amounts of time and resources.

• Cooperative contracts: Reduces the need for individual institutions to conduct separate RFPs.
• Sole source: May require more time and resources for negotiation and justification.

Risk Mitigation

With the ongoing disruptions to supply chains, mitigating risk is crucial for procurement teams.

• Cooperative contracts: Spread risk across multiple institutions and vendors.
• Sole source: Concentrates risk with a single vendor relationship.

Compliance

Whether you use national purchasing cooperatives or negotiate contracts on your own, there are a variety of legal regulations and institutional guidance you have to meet.

• Cooperative contracts: Often meet stringent regulatory requirements by default.
• Sole source: Typically requires additional justification (and paperwork) to meet procurement regulations.

Innovation

Contract types can influence vendor innovation and service improvement.

• Cooperative contracts: Can encourage vendors to innovate to win large, multi-institution contracts and provide better service over time.
• Sole Source: May lead to complacency due to lack of competition or missing out on new and better products or solutions.

Keep in mind that even when it appears there is only one source for certain items, that may not be the case. We mentioned software earlier. Although there may be a single producer, such as Microsoft, there may be multiple organizations that act as resellers or distributors for that particular type of software. So, even if you have a particular product in mind, there are often several options available. A cooperative contract may provide greater purchasing power, enabling you to get the exact product you want at a lower price or under more favorable terms.

Leverage Volume Discounts

What are group purchasing organizations for education in comparison to sole source procurement? GPOs offer a way to leverage volume discounts and remain compliant while producing more competitive deals for education purchasing.

If you would like to learn more about the benefits of cooperative contracts and explore options to streamline your procurement and save money, contact E&I Cooperative Services. E&I is the only non-profit member-owned sourcing cooperative that focuses solely on the education sector.