VOLUME PURCHASING STRATEGIES
- By Michael Fickes
- November 1st, 2004
Jeff Kimball purchases supplies for approximately 160 school districts in Pennsylvania and Maryland. As the cooperative purchasing services manager with the Central Susquehanna Intermediate Unit (CSIU), Kimball will spend $400,000 on behalf of 170 organizations, including the 160 school districts during 2004. Goods include computer and copier supplies, paper, cafeteria and custodial supplies, athletic supplies, cellular phones, art supplies, nonperishable foods and just about any other K-12 school supply you can imagine.
Under a program sponsored by the Pennsylvania Department of Education, CSIU also solicits bids for major lines of computer equipment on behalf of Pennsylvania school districts, other intermediate units, vo-tech schools, approved private schools and state libraries.
Still another CSIU program enables members to purchase new roofs from top national roofing manufacturers, who have re-evaluated their prices to get on the coop’s list.
Overall, CSIU purchasing professionals will spend $20 million this year for school districts and other members of the consortium. In addition to basic goods and services, CSIU’s cooperative purchasing programs provide volume discounts for schools looking for good deals on energy and energy-related services in today’s complex deregulated energy marketplace. If you’re shopping for health care benefits, life insurance coverage, wellness programs or legal services, CSIU has a cooperative program for you to consider.
Today, we do cooperative bidding with organizations in 20 other states that have set up purchasing cooperatives for public entities, Kimball says.
The growing popularity of CSIU offerings illustrates a general trend toward cooperative educational purchasing. For school districts pressed for dollars, time and purchasing expertise, the volume buying capability of cooperatives offers a way to get the best possible prices for quality goods.
How important is cooperative buying to low prices? Kimball estimates that CSIU’s energy purchasing cooperative has saved members more than $30 million since that program’s inception seven years ago.
Chartered 30 years ago to provide educational services to school districts in five central Pennsylvania counties, CSIU turned entrepreneurial five years ago when Pennsylvania altered its laws to allow the commonwealth’s 29 intermediate units to engage in cooperative purchasing with organizations beyond Pennsylvania’s borders. Two years ago, a number of school districts in Maryland joined CSIU when Maryland lawmakers allowed that state’s school districts to participate in cooperative plans outside of Maryland.
I imagine a lot of the school districts we deal with no longer employ purchasing staffs, says Kimball.Orders often come to us directly from principals, facility managers and business managers or their assistants.
Going It Alone
Not all schools need or want to participate in broad-based cooperative purchasing plans. The Cheyenne Mountain School District in Colorado Springs, Colo., relies largely on conventional purchasing tactics to make efficient use of its small budget.
With just 4,300 students, nine schools and four small administrative sites, Cheyenne Mountain’s budget for basic goods and services totals only $3.5 million per year, up from $250,000 last year when state budget cuts stretched the district’s discretionary resources thin. This year, the budget returned to normal thanks to the success of a mill levy increase approved by voters in the district.
According to Walt Cooper, the assistant superintendent for Business, the district has few opportunities to take advantage of high-volume cooperative purchasing strategies.Mostly we respond to building-level requests, he says.
To buy furniture and other educational materials, Cheyenne Mountain’s purchasing agent issues requests for bids to multiple vendors on the bid list assembled by the Colorado Department of Education.
At the beginning of the year, we can usually consolidate furniture orders from several of our schools, Cooper says. Whenever we can consolidate, we do, to get volume pricing. Then again, there is volume pricing and there is volume pricing. Our largest quantity orders really aren’t very large. We’re not buying 3,000 desks. We’re buying 50 desks.
With such small quantities, Cooper doesn’t believe that missing out on volume pricing for furniture costs Cheyenne Mountain very much. While a school that received a $10 discount for each of 3,000 desks would save $30,000, a $10 saving on 50 desks would save only $500.
The real problem is the laborious process of soliciting and evaluating bids for 50 desks. So whenever possible, Cooper looks for strategies to avoid soliciting bids. We never bid carpet, for example, he says. We always piggyback carpet purchases with Jefferson County.
With 85,000 students, Jefferson County Public Schools ranks as the largest school district in Colorado. They buy a lot of carpet every year and can negotiate very good prices because of their volume, Cooper says. And on every contract they bid, they require the winning vendor to make products available to every other school district in the state at the same price.Nor does Cheyenne Mountain solicit bids for computers. Because we use Apple’s Mac platform, we buy directly from Apple, Cooper says. We do bid out components such as routers and hubs. But Apple computers and components are only available through Apple.
Some large districts go it alone as well. In the Kansas City, Mo., School District, an eight-person purchasing department administers an annual budget of about $23 million for supplies, equipment and computers largely on its own. The district serves 30,000 students and operates 75 buildings with a total budget of $360 million, according to Bonnie McKelvy, chief finance officer.
Purchasing operations involve the processing of approximately 12,000 individual purchase orders annually, a number McKelvy hopes to reduce by half this year. We’re eliminating purchase orders for items less than $1,000 this year by raising the limit for our procurement credit card purchases, she says. Probably half of our current POs are under $1,000.
McKelvy also says that the purchasing department has experimented with piggyback purchasing in cooperation with city, county and state contracts. But for the time being, McKelvy’s primary strategies for stretching dollars involve raising the procurement credit card limit, developing an electronic requisitioning system and working with grant funding. We’ve received more than $40 million in E-Rate funding for computer infrastructure during the last four years, she says.
We would be interested in cooperative purchasing opportunities, says McKelvy. But while the Missouri School Board Association has been exploring that option, they have done nothing definitive with it.
Aggressive Purchasing Efficiency
Judson Crane, director of Purchasing for the 25,000-student Santa Rosa School District in the Florida panhandle, purchases about $30 million of goods and services annually with an aggressive strategy of searching out cooperative and piggybacking opportunities with other governmental entities in Florida — an approach authorized by Florida law some years ago. At the same time, Crane limits the department’s use of labor-intensive bid and proposal solicitations.
As a result, Crane’s group conserves district resources with volume pricing discounts and holds down labor costs with a streamlined purchasing department composed of just three purchasing professionals.
The strategy has altered the job description for purchasing officers in Santa Rosa. Part of our job is staying informed about the best manner of purchase for all kinds of products, Crane says. Our function is not just to get the cheapest price either, but to get the best value, while complying with all local, state and federal regulations. Of course, we can’t control the bids that we want to piggyback with, and there are times when we need to solicit bids or proposals for specific needs.
Nevertheless, Crane estimates that the focus on coop and piggyback purchasing has slashed the number of bid and proposal solicitations developed by his department by 75 percent during the past 10 years.
For example, it’s been years since we put out a copier bid, he says. When we need a copier, we look around to see what government contracts are being bid. A lot of government entities and coops put their bids and tabulations online, so the Internet has become an important resource for finding whatever it is we might be looking for. We also learn about who has bids out by networking with colleagues in different purchasing associations that we belong to.
Crane finds networking contacts particularly useful in the case of products that require expertise. When we need technical products, it’s important to be able to call someone with a knowledge of technology, he says.
Crane himself is considered an expert in contract administration.
How does piggybacking work in practice? In the wake of Hurricane Ivan last summer, Santa Rosa’s regular fencing vendor couldn’t meet the district’s needs for replacement fencing.
A quick Internet search yielded information about an awarded fencing bid in a neighboring school district. And one of Crane’s purchasing officers hopped right on the piggyback deal. When we find a bid or proposal that meets our needs, we can go ahead and cut POs, Crane says. All we have to do is inform the school board. We don’t need to go to the board in advance for an approval.
Florida’s piggybacking rules allow vendors to refuse to sell to a would-be piggybacker. If Crane wanted to piggyback with a contract issued by Miami-Dade County at the other end of the state, the local vendor there might find shipping products from Miami to Santa Rosa unprofitable. In such a case, the vendor would be free to refuse a piggyback purchase.
Crane also works through a local cooperative called the Central Gulf Coast Purchasing Coop, a group of public entities operating in the panhandle. Coop bid solicitations are developed by one or another coop member who acts as the lead agency for the contract. Coop members that want to participate submit orders. The lead agency consolidates the orders into the solicitation.
Piggybacking and cooping are much more efficient than starting a purchase from scratch with a request for bid or proposal, says Crane. We’ll not only get a good volume price, but in many cases, we can cut the time it takes to make a purchase from months to days and sometimes to hours.