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The Basics of Purchasing Cooperatives

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If you work in the government sector, at an educational institution or for a non-profit organization, you know how long and expensive competitive bidding can be. The administrative and legal costs associated with the process add up, especially for small public entities. Most local governments do not have a dedicated procurement team that can support the time investment needed for competitive bidding.

The high costs associated with competitive solicitation have caused many local government agencies to switch to cooperative procurement. Since 2010, government cooperative purchasing has doubled. With its popularity rising, what are purchasing cooperatives?

This short guide introduces purchasing cooperatives, how they differ from group purchasing organizations, and the benefits of joining a purchasing cooperative.

What Is Cooperative Purchasing?

Cooperative purchasing is when organizations in the same industry or sector work together to buy supplies or services. Banding together allows the members to achieve greater buying power. With this power, the purchasing cooperative can typically negotiate better prices. Since there are many groups in the organization, they get items at a bulk price.

Cooperative purchasing occurs through a purchasing co-op. A purchasing co-op is a voluntary member-based organization. It is owned by the organizations in the cooperative, not by an outside source. Members join by putting equity into the cooperative’s resources in exchange for a share of the group.

While these concepts may seem abstract, you have likely seen a cooperative. Companies such as ACE Hardware and Sourcewell are both purchasing cooperative organizations. These companies act as intermediaries in the procurement process.

While many cooperatives exist, not all of them are made equal. Before you switch to a purchasing cooperative, do your research. When you look at your cooperative purchasing agreements, consider their flexibility, compliance and fees to see if they align with your local needs. A reputable purchasing cooperative helps you save money without making you sacrifice compliance standards or miss your city’s goals. When you decide to join a cooperative, make sure you find a group that matches your needs and values.

Purchasing Cooperatives vs. Group Purchasing Organizations (GPOs)

Now that it is clear what a purchasing cooperative is, how is it different from a group purchasing organization (GPO)? Although purchasing cooperatives and GPOs both leverage buying power to get better prices, their methods and goals are very different.

While purchasing cooperatives are usually made up of members from similar industries, GPOs allow any entity in any industry to join as long as the member wants to buy the services and products the GPO offers. GPOs see to members’ needs individually, often meeting them through the use of many vendors. The members of a GPO have no say in how it is run because the GPO is funded by the fees vendors pay when orders are executed.

Purchasing cooperatives, however, put the power in the hands of members. Because the members of a purchasing cooperative own equity in the group, they have a say in the direction of the group.

Benefits of Purchasing Cooperatives

Switching to a reputable purchasing cooperative alleviates the strain on your purchasing department and brings many other benefits to your organization. To help you see what cooperative purchasing can do for you, here are a few benefits to consider:

1. Increased Efficiency

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Many government-sector agencies look to create more efficient procurement processes. Cooperative purchasing saves agencies time by eliminating many of the manual processes necessary to fulfill competitive solicitation.

When an entity switches to cooperative procurement, they do not need to solicit bids, review proposals or make time-consuming comparisons. Purchasing cooperatives already have established contracts with fair prices. Your organization only needs to decide which agreement works for you. The time you save takes the pressure off your staff and helps you get the products you need sooner.

2. Higher Savings

When agencies come together to create a cooperative contract, they significantly increase their buying power. Rather than one entity buying a hundred units of a good, cooperative buying allows several entities to pool together to purchase thousands of units of that good. Since the group is buying such a large quantity, they have more to leverage during price negations — this allows the group to get a fair price for the good.

3. Ensures Compliance

Purchasing cooperatives work with many organizations in the public sector. Because the cooperative has experience with other agencies, the contracts they offer fulfill all local, state and federal requirements.

When you join a reputable cooperative, you know you are meeting compliance requirements.

4. More flexibility

Joining a purchasing cooperative is often free and requires no commitments. Once you join a cooperative, you can customize the contract to meet your needs, adding conditions and agreements as you see fit.

Opting for a purchasing cooperative also allows your agency to have more flexibility with vendors. If supply chain issues arise, alternative suppliers can deliver products on time and within budget.

5. Higher Quality Contract

The group has already done all the heavy lifting before you join. The bidding process is complete, and you can choose from a list of vendors and products. The cooperative’s large buying power ensures the vendors and products offered are top-of-the-line.

6. Ongoing support

When you join a purchasing cooperative, they support you well after the contract has been signed. The cooperative can assist you if you have any questions about the agreement or issues with a vendor. A reputable cooperative has an entire team dedicated to helping members understand and use their contracts.

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Take Advantage of Purchasing Cooperatives by Becoming a Member of Sourcewell

Sourcewell is a purchasing cooperative that helps members reach their fiscal goals while receiving high-quality products. Before you sign a contract, analysts streamline the procurement process to ensure that your contract exceeds your compliance requirements and offers the highest quality products.

When choosing suppliers, Sourcewell goes through a detailed solicitation process. They choose responsive and responsible vendors, so you know you have a reliable supplier of the products you need. At Liftnow, we’re proud to offer Sourcewell cooperative purchasing contracts.

The process of joining Sourcewell is easy. All you need to do is register online, find a contract that meets your needs, and contact a supplier.

Ready to work with us? We’ve got everything you need just a click away.