Strategic Cooperatives: How to Select and Make the Most of Cooperative Purchasing Programs

1. Strategic Cooperatives:How to Select and Make the Most of Cooperative Purchasing Programs AESA Conference December, 2011

2. Just What is Cooperative Purchasing? Cooperative purchasing allows school districts to leverage greater buying power by working together. • Aggregating spend results in greater savings. • Schools can avoid replicating the competitive process and the cost of going out to RFP. • With more focus on regionalism and cost saving initiatives, cooperative purchasing has great potential to save money for our schools.

3. The Evolution of Public Procurement

4. What is a Strategic Cooperative? • A group-buying organization that uses methodical, proven, state-of-the-art purchasing techniques to obtain goods and services for its members, at the lowest total cost of ownership. • Distinct from traditional coops that simply share the workload and fail to apply best practices.

5. Leverage of a Cooperative • Cooperatives, as their name declares, require cooperation among participants. • For the most effective results, participation requires members to: • Help set standards • Collect good information • Use the contracts • Understand total cost of ownership • Market the contracts • Leverage the collective size of the group to optimize savings

6. Additional Savings Besides using leverage, cooperatives reduce the total cost of acquisition and ownership by performing tasks once, for many participants. • Vendor/commodity research • Advertising, bidding, evaluating, awarding • Monitoring and control This removes the redundancy being done across school districts.

7. Benefits of Using an Experienced and Knowledgeable Strategic Cooperative • Terms and conditions that protect buyers • Better buyer protection from the involvement of local practicing purchasing professionals • Dedicated educational purchasing agents working to match the right vendors and commodities to the needs of the schools they represent.

8. Deadly Inhibitors to Bidding Efforts to obtain the best price are impeded when districts or ESAs: • Don’t know what was purchased in the past • Foster a fragmented vendor base • Neglect developing the vendor pool • Fail to manage contracts • Don’t benchmark prices • Forego leverage

9. The Model Development Cycle

10. Room for improvement Room for improvement Beyond the Core Competency of Bidding LEAs do a good job of following the law, but best practices in purchasing require that they do more than what the law says. Shape and Negotiate Value Proposition Conduct Quotes and Bids Data Analysis Supplier Analysis Develop Strategy Manage Contracts Model Purchasing Cycle

11. Beyond the Core Competency of Bidding A good cooperative should add the data analysis and development prior to the bid, and contract management after the award.

12. Data Gathering Rarely do district’s have the capacity to capture or analyze the data necessary to get best possible results. • Identifying appropriate data • Comprehensiveness, quality, and timeliness of data • Methods of finding & capturing data What keeps us from this responsibility?

13. Data Gathering What are we looking for when we sift through all our reports, POs and invoices? • Missing spend & maverick buying • Unleveraged spend • Fragmented vendor base • Need for standards • Sub-commodity buying patterns • Most-purchased SKUs • Pricing benchmarks

14. Data Analysis • What contracts are necessary? • What is the demand history? • How can commodities be grouped?

15. Supplier Analysis We get dangerously comfortable with suppliers who do a good job, but best practices require us to constantly analyze the supplier base and marketplace. • What does supplier analysis entail? • What does industry analysis entail? • How can we expand the apparent supply of vendors? • What is commodity analysis?

16. Supplier Analysis Examples of what to look for when we analyze the supplier base: • Cost-drivers to our prices • Corporate goals • How the supply chain works • Environmental factors • Influence of news and politics • Corporate decision points • Financial strengths & weaknesses

17. Develop a Strategy Determining how to get prices should be a strategic decision, not a move based on convenience. • Quoting • RFPs • Formal sealed bids • State or GSA bids • Piggybackable contracts • Cooperatives

18. Bidding for Contract Prices You must be strategic when building terms and conditions that are wins for both the district and the vendor, based on data and supplier analyses. • Checklist of common T’s and C’s • Common legal requirements • Issues often overlooked • Unreasonable expectations of vendors

19. Benchmark Prices • Compare to self • Compare to neighbors • Compare to other cooperatives • Compare to retail • Always compare in context • Don’t forget shipping, other terms • Compare in the aggregate • Compare at the line-item level

20. Prevent Favoritism Put internal controls in place: • Read the terms and conditions • Know the evaluation process • Audit the evaluation process • Interview losing vendors

21. Take Reasonable, Manageable Risks Effective strategic cooperatives: • Search, test and implement new vendors • Creatively combine commodity categories • Think about spending guarantees to lower prices and eliminate ambiguity • Remove onerous sections out of terms and conditions

22. Managing Your Contract

23. Managing Your Contract Post contract management can be a major weakness. Don’t let the contract development work be for naught. Contracts must be managed to be effective. • Publishing prices to schools • Preventing maverick spend • Audit vendors for contract compliance • Evaluating supplier performance • Capturing data

24. Marketing Contracts must me marketed, therefore cooperatives: • Have a responsibility to help members understand contracts • Must provide resources to assist districts to reach outside of the district office down to the school level, the end-users • Need to ensure that local vendor reps understand and are leading with your bids

25. Talk to Buying Constituents Communicate: • Anticipate issues • Create user groups • Listen to the ultimate end-user • Try surveys • Get information from the back-office employees

26. Tips to Get Started Tomorrow Don’t wait for a “big event” to begin your work on contract development. Start immediately with small steps, such as: • Better management of existing contracts • Asking a vendor for a spend report • Asking accounting for an AP report • Setting a date for vendor interviews • Using the trade show to find new tools • Looking for price benchmarks • Comparing cooperatives that meet your needs and can supplement your current bidding practices

27. How to Find an Experienced and Knowledgeable Cooperative There are a lot of options out there . . . AEPA is only one tool in your toolkit • A local ESA in 24 states has vetted AEPA against the others. • Your representative ESA serves as the voice of school districts in those states.

28. The Association of Educational Purchasing Agencies (AEPA) is a nationwide group of non-profit educational organizations working collaboratively to save school districts time and money. We provide a single contract that is available statewide with one cooperative agency identified to function as the statewide contract facilitator and representative.

29. AEPA has more than $330 million in annual protected purchases.  We are currently 24 members strong, representing schools serving more than 25 million students.  Together we have hundreds of years of public sector purchasing experience.

30. AEPA is unique in that each purchasing contract is awarded separately in each member state, in accordance with local bidding laws. The benefit is state-specific bid protection and lower cost of ownership for school districts.

31. Of the many advantages to this unique purchasing group are the combined human resources representing purchasing/ bidding expertise, current and past vendor relationships, past experience and overall vision with regard to the needs of the qualified customers within each represented state.

32. We know schools and their needs. • There is no cost to schools to use AEPA contracts, and no red tape to sign up. • Competitively bid contracts are can be accessed immediately.

33. AEPA Membership and Sales AEPA currently has 24 member states (shown in Blue). In addition, several member states offer contiguous states the option to piggyback off of their contracts to save time and money (shown in dark GREY).

34. Member States

35. Bid Process • The member states form the Board of the AEPA.  The Board meets each spring for the purpose of, among others, selecting product categories to seek bid responses from national vendors. • Tasks groups, or sub-committees, are assigned to develop product specifications, market and educate potential vendors, and refine terms and conditions specific to product categories. • In the fall, each member posts the bid announcement in their state.  The sub-committee reviews the submissions and makes a recommendation to the Board for approval at the winter meeting.  It is then up to each member state to enter into a contractual agreement with each recommended vendor.

36. Current Bid Categories New bids are added annually. Coming soon – scoreboards, asphalt paving, mobile learning, kitchen supplies, musical instruments and security systems.

37. Vendor Sampling

38. Other Benefits 24 ESA members with expertise to share: • Independent bids to piggyback off of • Experts to bounce ideas and questions off of • Network to share other educational and entrepreneurial ventures with

39. Thank you! Visit us on the web at www.aepa.org and contact a neighboring AEPA representative to learn more.