Making deals: Cooperative agreements can help governments achieve supplier diversity goals

No question, more state and local governments are relying on cooperative agreements for their purchases of goods and services. GovWin IQ, a market intelligence firm that federal and state, local and education (SLED) contractors use to manage and grow their government business, estimates that the total sales from 13 identified national co-ops has risen from $29 billion in 2015 to $47 billion in 2020 and should reach $61 billion by 2025—and that doesn’t include the many regional co-ops currently operating in the United States.

Diverse and small firms can benefit through cooperative agreements, says Keith Glatz, purchasing and contracts manager for the City of Tamarac, Fla., who also is an active member of the Southeast Florida Governmental Cooperative Purchasing Group. “We awarded a roof tarps contract to a small woman-owned business in Brooklyn, N.Y., recently, and they now have the agreement to supply roof tarps to all of our co-op agencies. Roof tarps can be a very important commodity in areas like South Florida, where we are subject to hurricanes that can cause significant roof damage.”

Local governments, Glatz adds, can leverage their ability to require participation by small and disadvantaged businesses through cooperative agreements. One example is an office supply agreement with Office Depot, where Glatz’s team serves as the lead agency for both the local co-op, as well as for the Omnia Partners national cooperative agreement. “Because of the national volume, we were able to include provisions that require that the primary contractor (Office Depot) to enable agencies across the nation to specify that they want Office Depot to use small, minority, women-owned and other disadvantaged businesses in the fulfillment of their orders.” Glatz says this kind of leverage would not be possible with a single-agency award to a vendor. But because of the sizable volume involved in the Office Depot agreement, the contractor is able to either subsidize those sub-contractors or make them available with a small pass-through cost to the agency.

Glatz says the City of Tamarac has taken advantage of this provision in the cooperative contract. “Office Depot has sub-contracted with a Hispanic minority-owned firm to make deliveries from their warehouse to customers in our city,” he said. “In some instances, this type of program can actually save the contractor money as well, once they get the sub-contractor operating efficiently.” Glatz believes this type of setup will likely become a regular feature of similar cooperative agreements across the nation. “It definitely provides for a successful synergy of the interests of saving money through large-volume purchases, coupled with providing additional opportunities for small, minority- owned, women-owned and other disadvantaged businesses.”

Cooperative agreements can help governments achieve their supplier diversity goals, believes Sarah Hilderbrand, chief operations officer of NASPO ValuePoint, a cooperative purchasing program that works with state chief procurement officers. “Cooperative deals provide opportunities for maximum engagement with small, women-owned and disadvantaged businesses.” She notes several ways for these businesses to participate in cooperatives, including a direct nationwide award, or an award for a single state or region, as well as opportunities as a fulfillment partner or subcontractor.

Yes, small firms may not be able to handle the combined requirements of multiple governments in a nationwide, state or regional cooperative pact. Even so, small, diverse companies can actively participate, Hilderbrand explains. “Even when a large national company wins an award, the solicitation typically includes requirements for engaging with small, women-owned and disadvantaged businesses; and individual participating states will apply their own diversity requirements when determining whether and how to participate in a cooperative agreement.”

Hilderbrand points out that cooperatives also encourage participation through local delivery and service networks that use small business subcontractors. “This allows small businesses to engage in large cooperative contracts by not putting them in a position to over-promise delivery by over-allocating their bandwidth.” She offers two examples:

• NASPO ValuePoint master agreements for office furniture and copiers each have “value-added resellers,” which are a collection of local fulfillment agents within each state, most of which are small businesses; and
• While major manufacturers often win nationwide cooperative tire agreements, each state may have hundreds of small, local tire companies that are able to sell off of the NASPO ValuePoint cooperative agreement.

Small, minority-owned, women-owned and disadvantaged businesses benefit through cooperative procurement agreements with local and state governments, says Chris Robinson, procurement manager at Sourcewell. The company helps government, education and nonprofit agencies operate more efficiently through a variety of solutions. For more than 40 years the firm has managed hundreds of competitively solicited cooperative contracts ready for use.

Robinson says a cooperative procurement agreement can be the platform through which small, diverse and disadvantaged businesses can build on existing relationships. “Your proven track record with a local or state government, combined with access to a cooperative agreement, allows that government customer to move straight to a purchase order with you to fill the next need, while satisfying competitive solicitation requirements and significantly shortening the sales process.”

Robinson urges small businesses to scope out cooperative agreements where they can have an impact. “For the authorized dealer, distributor, re-seller or sub-contractor, take advantage of cooperative contracts that have been secured by your manufacturer-partners. Leverage the existing contract to gain experience with the use of cooperative contracts in general. The experience can translate into a stronger proposal when seeking your own cooperative contract award.”

More governments are using cooperative and piggyback contracts, says Mariel Reed, CEO and cofounder of CoProcure, which helps public agencies make informed purchasing decisions. “At the same time, more agencies are making it a priority to contract with diverse businesses. Ideally, government agencies shouldn’t have to choose between being able to use a cooperative contract and being able to work with a diverse business. We’ve seen that one of the challenges in putting these two pieces together is having the right information about cooperative contract availability and supplier diversity status in one central place.”

CoProcure has added a supplier diversity filter to its web search tool so procurement teams can quickly determine whether a vendor has been certified as a Historically Underutilized Business (HUB) or has been certified as disadvantaged. The company is a resource that can be a first stop in a public agency’s vendor selection process. It offers tools that help find potential suppliers, compare available purchasing methods, or learn from the experiences of an agency’s peers.

Contracting advice for small and disadvantaged businesses

For ambitious small, women-owned and disadvantaged businesses looking to get involved with cooperative contracting, Hilderbrand offers this advice: “Make sure you’re staying up to date on every chance to make yourself known. Also, explore the possibility of partnering with a nationwide supplier.” She also encourages these businesses to take advantage of available supplier education programs and courses in public procurement. “Also, search for opportunities to engage directly with public entities that might become prospective customers through conferences, tradeshows and other networking events.”

Small, minority- and women-owned firms and other disadvantaged businesses should learn more about the cooperative contracting space, suggests Paul Irby, principal research analyst at GovWin IQ from Deltek. “A good resource is GovWin’s Top 3 Strategies for Optimizing State and Local Government Sales report, which profiles cooperative purchasing using our database of actual purchases made from these contract vehicles.”

Irby also urges these firms to consider teaming up with or becoming a subcontractor for prime contractors who hold a lucrative cooperative contract with a public agency. “In addition, they should become acquainted with the most relevant national and/or regional co-ops, depending on their type of good/service, business size and distribution network. We offer access to co-op contracts and have many co-ops tagged in our subscription platform.”

Michael Keating is senior editor for American City & County. You can contact him at [email protected].

Editors Note: This article originally appeared in the Second Quarter 2021 issue of Government Procurement.