Cooperative Purchasing: Its Forms and Potential for Public Procurement in Mississippi
Executive Summary
This review examines the types of cooperative purchasing, the legal authority for such in Mississippi, and the processes that control agencies such as the Department of Finance and Administration should implement to ensure that decisions to use cooperative purchasing are beneficial to the state and its citizens.
According to the American Bar Association’s Model Procurement Code, “cooperative purchasing” is the sharing of procurement contracts between governments or, more precisely, the procurement conducted by or on behalf of one or more units. Cooperative purchasing generally occurs when two or more governmental units have a common need for the same type of commodity. Common items for cooperative purchasing include office supplies, furniture, copiers, laboratory supplies, and fleet vehicles.
NASPO recognizes three types of cooperative purchasing: true cooperatives, piggyback contracts, and third-party aggregators. In a true cooperative, two or more governmental units pool their resources and work together to develop specifications for commodity items that meet their needs. Under piggybacking arrangements, a governmental unit may make use of a commodities contract negotiated by another governmental unit. In using third-party aggregators, several governmental units join together to procure commodities using their buying power to obtain the best prices. Often the process is managed by an independent for-profit or not-for profit manager that enters into contracts for the benefit of the members.
Through a combination of recent legislative enactments and interpretations of existing law regarding purchasing, the public purchasing environment in Mississippi has become ripe for true cooperative purchasing and piggybacking. In 2003, the Legislature enacted a provision that opened the door for individual agencies to seek out cooperative purchasing arrangements for their own use. In 2006, the Attorney General opined that the purpose and public policy behind the state’s purchasing laws is to ensure that state agencies receive the lowest and best prices on their purchases and in instances wherein the Department of Finance and Administration finds that this end is served by the use of cooperative purchasing agreements, it may adopt these agreements and make available their benefits to state agencies and local governments.
Benefits of cooperative purchasing do not inure to the state automatically. The state should have a systematic process for evaluating the benefits of cooperative purchase agreements and should perform certain analytic functions to determine what is in the state’s best economic interest before entering into a cooperative purchasing agreement:
Recommendations
The Department of Finance and Administration should proceed with its e-purchasing program to obtain more detailed information regarding purchases made by state agencies. Such information should be used to analyze the benefits of any cooperative contract prior to entering into such a contract.
The department should implement a formal evaluation system that would include:
Additionally, because of the considerable expenditure of state dollars on local vendors, the department should make all reasonable efforts to ensure that local vendors will be able to participate in cooperative purchasing contracts. As an example, when purchasing office supplies such as paper, it would be beneficial if efforts could be made to insure that the cooperative provider includes local firms so that they could continue to receive some benefit from state business.
The department should also consider adopting any necessary restriction on agencies’ use of cooperative purchase agreements authorized under the authority of MISS. CODE ANN. Section 31-7-13 (m) (xxix) (1972) if they impair the economy and efficiency of the department’s procurement efforts. In the event that the department believes that legislation should be adopted to address this matter, it should recommend such. The department should also consider the possibility of establishing incentives to encourage local governments to participate in the state’s group purchasing agreements.