Cooperative Purchasing—
An Effective Sourcing
Strategy
Gary D. Link, C.P.M.
E&I Cooperative Purchasing
Ralph Maier
University of Pennsylvania
Cooperative Purchasing:
An Effective Sourcing Strategy
Cooperate: verb
1. To act or work with another or others: act together
2. To associate with another or others for mutual benefit
Collaborate: verb
To work together, especially in a joint intellectual effort
Cooperative: adjective
Marked by a willingness and ability to work with others
Cooperative: noun
An enterprise or organization owned by and operated for the benefit of
those using its services
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Group Purchasing Organizations (GPOs)
Definition and Historical Perspective
“ Two or more independent organizations that join
together, either formally or informally, or through an
independent third party, for the purpose of combining their
individual requirements for purchased materials, services,
and capital goods to leverage more value-added pricing,
service, and technology from their external suppliers than
can be obtained if each organization purchased goods and
services alone”
- Center for Advanced Purchasing Studies
• Group Buying traces to the 1800’s just after the Civil War,
with groups such as farmers, hospitals, schools, food service,
and franchises.
• Today, GPOs exist across all sectors of business, industry,
government, and education in the United States
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GPO Challenges
Agreement on standards/specifications
Member commitment
Public law or policy (internal and external)
Brand preferences
Maverick Buying
Shopping/leveraging GPO contracts
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Collaboration at Penn
Collaborative buying complements Penn specific contracting
and cost containment activities
Key component of our annual Strategic Sourcing & Cost
Containment Plan
Formal collaborative initiatives include:
• Partnership w/University of Pennsylvania Health System
• Philadelphia Area Collegiate Cooperative (PACC)
• E&I Competitively Awarded Contracts
• E&I/SciQuest Science Catalog Contracting Initiative
Collaboration metrics:
• 2000 was 1st year for tracking spend with collaborative contract suppliers
• $39,000 in spend with collaborative contract suppliers in 2000
• $7.5M in spend with collaborative contract suppliers in 2004
• 2005 spend goal is $12M
• 2007 spend goal will be $25M
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University Health System
Limited success due to different purchasing strategies and
sourcing priorities
Significant cost saving realized from successful collaborative
events with the Health System Materials Management
organization
Sole source copier contract awarded to IKON in 2004
• Combined 1st year cost savings of $3M
Sole source office products contract with Staples prior to Penn
re-bidding the contract w/PACC
• Combined 1st years cost savings of $2.3M
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PACC and E&I
Partnership agreement initiated in August 2004
E&I partnership enables PACC members to increase
capacity for competitive bidding events without additional
commitment of resources
E&I will recruit additional buying commitments from other
local institutions for specific commodity events and
handle all RFP activities
PACC retains decision making authority
Gas cylinder contract awarded May 2005
Additional commodities currently in development
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E&I/SciQuest Partnership
Aggregation of science catalog non-contract supplier spend for
possible collaborative contracting & cost savings
35 of 122 Penn Marketplace suppliers are SciQuest science
catalog suppliers
Approximately 3M of the $100M spent with Penn Marketplace
suppliers in 2004
Anticipated cost savings of $300,000 for minimal effort and
resources
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Delivering Lower Costs for Higher Ed
E&I delivers lower life-cycle costs (not just lower prices) for higher
education in three key ways:
We lower the up-front purchase price of goods and services by
aggregating the buying power of over 1,500 member institutions
We optimize the procurement process by leveraging the knowledge
and experience of our member community
Create contracts that meet applicable procurement standards, reducing
need to duplicate efforts among individual institutions
Establish best practices and efficient methods to reduce total cost
We provide additional financial incentives for members, including
return of net income based on individual member purchases
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Competitive Solicitation Process
Relationships
•Deep working relationships with Procurement Professionals
•Utilization of cross-functional experts, i.e. Facilities, IT, Business Officers
in RFP Teams
•Focused relationships with specialized communities of interest, i.e. PACC,
AIRI, NACUBO
Process
•Identify Business Partners
•Conduct solicitation benchmarking
•Develop, issue and manage RFP
 State compliant for many public institutions, eliminating the need for an
institution-issued RFP
 Reviewed and validated by the National Institute of Governmental
Purchasing (NIGP)
•Analyze proposal submissions
•Develop Best of Breed Contracts
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Member Roles & Responsibilities
Collaborate on products/services for solicitation
Commit volume and provide data for spend analysis
Review specifications and RFP document prior to release
Participate in evaluation process and make award
recommendations
Key Issue: Member participation and utilization
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Key Benefits to Members
Direct Cost Reduction via Enhanced Solicitation Process
• Spend Analysis
• “Best Practice” Evaluation Matrices, i.e. Benchmarking
• Standardization of Products/Services
• Reduce Duplication of Process
• Contract Negotiation and Management
• Consensus with Members to Commit to Project
• Significant Savings on Products and Services
Indirect Cost Reduction
• Improved Efficiencies and Increase Productivity
• Reallocation of Internal Resources
• Value Added Services
• Improved Quality and Service
• Joint Learning, Opportunities for Networking, and Information Sharing
• Potential for Reduced Inventory Costs, Shorter Lead Time for
Deliveries, and Increased Availability
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Key Benefits to Members
Local focus and support
• Regional Contracting representative
• Focus on Regional-Based Products and Services
• Small, group-focused RFP teams
 ISM Continuing Education Credits for participation in RFP teams
• Opportunity for localized Supplier Diversity
Ongoing strategic benefits
• Contract management and administration
• Comprehensive marketing support and member communication plan
• Synergy with NAEB
Incentive and Rebate Programs
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Conclusion
Cooperative Purchasing
Works!
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