By Paul Irby
Onvia Market Analyst
Recently I was invited to address partners and advisors of the Smart Cities Council. The topic I covered was the current city agency trend toward "efficient" government. Efficient government increasingly involves making more purchases of innovative technologies. In addition, efficient government can be furthered by being smarter about how things are purchased.
One of the more common tools that cities have been using to increase procurement efficiency is cooperative purchasing. Cooperative purchasing helps agencies:
- Spend less time and money buying goods and services
- Reduce project and budget risk
- Leverage best practices from outside the agency
Defined simply, cooperative purchasing allows two or more agencies to execute multiple/many purchases off of a single contract. Used properly, cooperative purchasing can reduce the number of times a new and formal bidding process is needed. This saves significant time and cost for the agency. Cooperative purchasing commonly takes the form of either purchasing through a co-op association or "piggyback buying" – when one agency buys from another agency’s existing contract.
Limitations of traditional procurement
City agencies typically suffer from budget and staffing constraints plus, traditional procurement is a rigorous, time-consuming process that doesn’t always work well for innovation-focused projects. According to Voight Shealy at the leading co-op association NASPO ValuePoint, "The time invested by public agencies to create specifications, to build procurements, has been tremendous … when the head of an agency says, ‘I want this and I want it now,’ [with cooperative purchasing] you don’t have to wait six months to a year for it." Cities increasingly will want tech-related solutions provided much faster than standard methods allow or agencies will lack the necessary experience with staff who may have never faced a given IT situation before in a bid process.
Onvia’s recent analysis of cooperative purchasing activity in the SLED (state, local and education) government market revealed IT/telecom to be the second highest ranked industry. In our "buying index" shown below, the higher the score, the more likely that type of item is purchased cooperatively. The other top categories in the index were generally viewed more as "commodity" items that benefit from the pricing leverage available in cooperative purchasing contracts.
Procuring technology faster
Cooperative purchasing is often a tool to gain pricing power but as the high IT scores indicate, it is also becoming a tool to help agencies procure more complex solutions quickly -- by leveraging the requirements, specifications and best practices of other government buyers.
Paul Irby is a Market Analyst at Onvia, responsible for in-depth analysis of government procurement trends. Formerly he was a market researcher with 17 years of experience serving clients in both the public and private sectors.