In December 2014, procurement professionals were vindicated for using a process often attacked by politicians and the public: cooperative purchasing. In plain English, Utah’s auditor general dispelled allegations regarding the state’s relationship with the WSCA-NASPO national cooperative purchasing program:
- That the state’s purchasing director was receiving illicit benefits and/or unduly influencing contract awards;
- That not all state companies were getting the opportunity to bid;
- That local arms of nationally contracted companies weren’t getting in on the action;
- That contracts don’t address administrative fees;
- That taxpayers, not vendors, were paying those fees.
Now called NASPO ValuePoint, WSCA-NASPO is a 501(c) (3) organization formed in 2013 when the National Association of State Procurement Officials (NASPO) merged and then spun off two cooperative purchasing programs: the Western States Contracting Alliance (WSCA) and NASPO Cooperative. The split was made so NASPO ValuePoint could concentrate on contracting and NASPO on professional development without the appearance of impropriety. Ironically, confusion over the legal details caused many people to assume NASPO ValuePoint is a for-profit company.
Suspicion probably would not have been so great if the organizations didn’t have $41 million in administrative fee reserves, a 192% increase over four years, at the time.
Like other cooperatives, business increased dramatically after 2006 as cities, counties, and states grappled with Great Recession budget cuts. With almost $10 billion annually in contract sales in all 50 states, NASPO ValuePoint is the nation’s largest cooperative and has very low administrative fees.
The auditor general concluded that Utah taxpayers benefit twice from the Purchasing Division’s role as lead agency for 22 of NASPO ValuePoint’s 54 contract areas. The agency saves $41,000 to $82,000 annually on labor and receives more than $500,000 in reimbursements for awarding contracts — goods and services the agency would have had to research anyway — for the cooperative as a whole.
“Cooperative purchasing is one of the best tools developed over my career to get departments things they need to get their job done,” says Jay McCleary, recently retired deputy director of finance for the City of Red Wing, Minn. The city has used cooperative purchasing for more than 20 years, first with the State of Minnesota Cooperative Purchasing Venture and later with WSCA.
“It’s saved a lot of money over the years,” McCleary says. “First, combining purchases offers a better pricing structure. Two, I don’t have to spend my time writing specifications for every purchase. In the 1980s, I wrote bid specs for a fire truck that turned out to be 200 pages long. Now we get a committee together, go down a checklist to decide what features we want, and then compare our list to the co-op contracts.”
Next page: Evolution of a spending model