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Procurement: Local Government Collaboration

September 27, 2022

By Stephen B. Gordon, lead coordinator of the Continuity of Supply Initiative (CoSI)

The idea of collaboration among local governments isn’t a new one. They’ve worked together in ways both formal and informal in a wide variety of functional areas including public safety, corrections, and public education.

Generally speaking, the reasons for interlocal collaboration have been straightforward: to avoid costs, to increase efficiency, and to gain access to workload capacity, expertise, experiences, knowledge, skills, technology, and other cumulative benefits that the individual entities participating in the joint effort might not be able to afford on their own.

But what about procurement? A strong business case can be made that interlocal collaboration can be an effective tool to optimize procurment capacity among the participating entities. Currently, there is some use of collaboration among local governments in the procurement world. But most haven’t made the leaps necessary to take full advantage of the tool and have settled for lower levels of collaboration. Typically, those localities that collaborate have limited the extent to which they do so to activities like sharing their publications, solicitations, bidders’ lists, lessons learned, and counsel with their peers and piggybacking on contracts created by other local governments.

On average, approximately twenty percent of a local government’s total spend and up to one hundred percent of its total controllable expenditures comprise dollars spent on direct goods and services. Yet despite the huge amount of money involved, procurement, because it is a back-of-the-house function invisible to the public, historically has not received the financial, staff, or other resources necessary to help this happen. By denying departments and agencies in highly visible, front-line roles the procurement support they need to achieve their strategic goals, governing bodies and senior administrators have forfeited opportunities to optimize organizational results.

Fortunately, the enabling authority given to local government procurement officials in state and provincial law and local charters and ordinances provides many ways through which they can collaborate to secure individual and mutual benefits. This can help leverage the dollars localities get for procurement in a way that can optimize the effectiveness of the procurement function for all involved. Such options range from sharing information, materials, and experiences to creating joint-administrative procurement units.

Prior to the mid-1990s, local government officials searching for other entities’ contracts to use would reach out to others in their professional networks. A more common practice in today’s more digitized, information services environment is to search for usable contracts in the portfolios of vertical brokers colloquially referred to as “purchasing cooperatives,” or “purchasing co-ops.”

Using other entities’ contracts can be a viable sourcing option, but it is not an especially rich form of interlocal collaboration and reasons for its use are not always strategic. Common reasons include timely fulfilling requirements that were requisitioned late, placating department heads who have brand preferences in competitive market categories or avoiding having to undertake a formal competitive procurement process. When local government officials use other entities’ contracts, they are complying with the letter of their legal requirements to seek competition. However, knowingly, or unknowingly, they may be denying their entities of the numerous potential benefits, in addition to best pricing, of “full and open” competition.

During the 1960s and 1970s, many local governments engaged in true cooperative procurement, also known as joint-solicitation cooperative procurement, through formal programs that had charters, bylaws, and regular meetings. The form of joint-solicitation cooperative procurement they used was the “true lead agency” model, in which one local government took responsibility on behalf of all the entities that had committed to use the results of its invitation for bid (IFB) to form their own individual contracts. This agency would draft a solicitation using input and feedback provided by all participating entities, incorporate the contractual terms and conditions and the specified estimated requirements of each entity into the solicitation, invite and receive the bids of suppliers, and in consultation with the other participating entities, award the solicitation.

This rich form of collaboration began to give way in the late 1970s to entities including “rider clauses” in their solicitations, which other entities could use to piggyback. One very likely reason for the decline in the use of true cooperative procurement at the time was the absence of the technology and information resources that exist today. Simply stated, it took a lot of time of effort.

A contemporary, successful example of the true lead agency model of joint-solicitation procurement is the program administered by the Southeast Florida Chapter of NIGP – The Institute for Public Procurement. The contracts entered into by this program for personal protective equipment (PPE) during the early days of the COVID-19 pandemic held firm, while many of the third-party brokered agreements that so many local entities had used to source their PPE failed.

A second form of joint-solicitation cooperative procurement involves a professional procurement staff member of a regional organization executing the responsibilities of the true lead agency in the model I’ve just described. A current, successful example of this model is Kansas City Regional Purchasing Cooperative (KCRPC) administered by the Mid-America Regional Council (MARC). The KCRPC’s contracts for personal protective equipment also did not fail during the first few months of COVID-19.

Examples in which larger local governments have created a consolidated or shared procurement agency are relatively rare. In a few rural areas, shared services organizations created through joint powers agreements handle procurement and other back-of-the-house functions. I would argue that many other governments – especially smaller ones -- can make use of this option in a way that benefits the governments and the taxpayers that support them.

Convenience and timeliness should not be optimized at the expense of supporting best possible organizational results through strategically designed and executed procurement.  Assuring the availability of critical goods and services when supply chains are disrupted must be high on the list of those best possible results.