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Cooperation is gaining momentum

0 31 Government

The idea of cooperative procurement arrangements for government buyers with respect to standard stock type items is becoming more popular as time goes on.
Stephen Bauld
Stephen Bauld

Procurement Perspectives | Stephen Bauld

The idea of cooperative procurement arrangements for government buyers with respect to standard stock type items is becoming more popular as time goes on.

Small and mid-sized municipalities sometimes find it advantageous to band together into joint purchasing networks in order to place larger orders and thereby secure more favourable purchasing conditions.

However, like e-procurement, cooperative purchasing seems to be an idea that is just around the corner, but which somehow never arrives for most municipalities. In order for such an approach to be adopted, the participating municipalities must either release their purchasing departments to form a network or formally empower a consortium to negotiate purchasing conditions on their behalf.

Most municipalities contemplate such a process in their bylaws, but in practice purchases of this kind are relatively rare across Canada. As with most commercial options, there are both benefits and costs in adopting the joint purchasing approach. For instance, the right reserved by most cities has a clause to back out of this contract where it concludes that “the award is not in the best interests of the city” would likely be considered to be too risky both for many suppliers and for consortium partners.

Joint purchasing will invariably restrict the scope of available products to an approved standard. There is also a loss of local control over the purchasing process, and in the view of at least some, a reduction in the extent of oversight to which the purchasing function is subject.

In an ideal situation, the purchasing authority coordinating the consortia purchase would adopt a procedure that allows the selection of competent suppliers while respecting local policies. Purchasing would also be carried out in a way that is open and competitive, in order to minimize the potential for abuse.

Since a handful of municipalities in each province control the lion’s share of municipal procurement, one might naturally assume that consortium purchasing would be the rule rather than the exception. By using this strategy, municipalities might obtain a significant degree of collective purchasing power in at least certain markets (e.g., the purchase of fire trucks and buses). Yet, as noted above, the surprising reality is that the strategy is not widely employed. Indeed, in the United States, some states are subject to a statutory prohibition against entering into cooperative purchasing arrangements with other states.

Cooperative purchasing arrangements require strong leadership, which can serve as the basis for trust among the participants. Securing that trust involves not only integrity and mutual confidence in the corporate control mechanisms employed to ensure integrity, but also confidence that all participants will remain in the procurement process. Objectives must be seen to be compatible. Intended outcomes must be clearly defined and agreed to by the participants. Similarly, the operating principles and procedures to be followed must also be agreed to. A lengthy delay in working out a cooperative purchase agreement adds to the transaction costs of procurement, and this may be sufficient to cancel out any perceived benefit of such an approach.

Economic constraints make the sharing of resources (equipment, manpower, special services) among agencies at all levels of government more desirable than ever before. Cooperation can reduce the demands on staff through better utilization of their existing capacity for work, and thus afford a level of service not always possible by one agency alone.

Although it may be time consuming and sometimes costly to get started, cooperative purchasing has compelling advantages for small local governments, including more buying power, more accurate and comprehensive specifications and better vendor service.

I have been involved in many cooperative procurement programs and when all the stars line up, they work very well.

Stephen Bauld is Canada's leading expert on government procurement. He can be reached at stephenbauld@bell.blackberry.net.

by Journal Of Commerce

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