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Buying Groups (or Cooperatives)

Overview

imag eof a collaboration handshake

What is a Buying Group?

 

A Buying Group (or Cooperative) is the coming together of organizations, such as schools, that share a common goal, to leverage their combined purchasing power and spread out administrative burden of managing contracts. School Food Authorities (SFAs) should review the differences of each group to determine which type best benefits the SFA. Determine if the buying group (or cooperative):

  • consists of only schools, or if the group is a mix of government and/or nongovernment organizations.
  • has membership fees. If the fees are negligible, competitive procurement is not required and costs to the nonprofit school food service account are allowable.
  • purchases through the buying group need to be competitive.
List of Known WI School Cooperatives and Buying Groups

Benefits and Drawbacks of Group Purchasing

Benefits

  • Combined purchasing power
  • Lower costs (in most cases)
  • Sharing core competencies
  • Spread out administrative duties
  • Market efficiencies to regional supply chains
  • Networking
  • Procurement Review (school co-ops)

Drawbacks

  • Less room for self-preference
  • Less flexibility
  • No guarantee of lowest price (depends on product mix)

Types of Buying Groups

In general, buying groups (or cooperatives) fall into two categories:

  • School Cooperative and School Buying Group (purchases do not need to be competitively procured)
  • Group Purchasing Organization (GPO) (purchases must be competitively procured)

Cooperative (Co-op)

Schools do not have to competitively procure membership into a buying group (or cooperative) if membership fees are negligible.

This type of buying group is a collection of organizations that cooperate in purchasing goods and services for mutual benefit.

  • A school co-op must comply with Federal and State procurement regulations when awarding a contract for its members.
  • Conducting a competitive procurement is not required if a school elects to participate in a co-op comprised solely of schools.
  • If the co-op contains a third party member that is not a school or government organization, the school may join the co-op, but all purchases through the co-op require the school to create competition.
Contact Ownership Types of Members Fixed Fees Purchases off co-op contract(s):
Co-op Schools Yes, in most cases (e.g. annual/monthly or per case fixed fee) Do not need to be competitively procured.
Co-op Schools and other government organizations Yes, in most cases (e.g. annual/monthly or per case fixed fee) Do not need to be competitively procured.
Co-op Schools and other non-government organizations Yes, in most cases (e.g. annual/monthly or per case fixed fee) Need to be competitively procured. Co-op pricing is one source when using small purchase procedures, sealed bids or competitive proposals, as applicable. A minimum of two sources is required.

Group Purchasing Organization (GPO)

Is a buying group that leverages purchasing power from a variety of members that may include public and/or private organizations and government and/or non-government organizations, including schools. Profits may accrue to the GPO through membership fees or other revenue streams. This type of buying group may elect to comply with Federal and State procurement regulations when awarding a contract for its members.

Contact Ownership Types of Members Fixed Fees Purchases off GPO contract(s):
GPO

Schools and/or non-schools. Both public or private.

Government and/or non-government organizations

 Yes. Annual/monthly membership fees, paid directly to the GPO from its members. Other revenue streams may exist.

Need to be competitively procured.

GPO pricing is one source when using small purchase procedures, sealed bids or competitive proposals, as applicable. A minimum of two sources is required.

School Purchasing Association

While technically not a school cooperative or buying group, this form of collective purchasing may consist of an informal association of schools, government and/or non-government organizations that come together to purchase goods or services. The awarded contract is between each SFA and the vendor. 

Contract Ownership Types of Members Fees Purchasing off contract(s):

Contract held individually be each school

Multiple contracts may be awarded

Schools

Government organization

Non-government organization

No membership fees

Possible clerical fees

Competition takes place during initial procurement

No additional procurement needed after contract award because contract ownership remains with the school

"Piggybacking"

“Piggybacking” can benefit SFAs, but it is only allowable if the state or local government agency included this provision in their contract when that agreement was procured and awarded.  SFAs must carefully review the solicitation issued by the state or local government agency to ensure compliance with applicable Federal and State procurement regulations, while ensuring that the additional scope in services does not create a material change.

A material change to the existing contract may arise as a result of the “piggybacking” because the parties to the existing contract may not have anticipated the increased quantity of goods and services purchased by the SFA. Consequently, a state or local government agency may have to rebid at the next juncture.
 

Resources and Policy Memos