Cooperative contracts can be an entryway for small and diverse companies to successfully compete for government sales

Written by Michael Keating

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Cooperative purchasing agreements are just what the doctor ordered for stretched-thin government procurement departments.

“One thing all procurement offices seem to have in common (even before the pandemic) is too much work and too little time,” says Christina Nielsen, director, government accounts for Lawson Products. The firm is a distributor of maintenance, repair and operations (MRO) products and supplies. The company is also a supplier on many cooperative procurement agreements that governments use.

Nielsen says compliance is a priority for procurement teams, and that managing supplier and end-user compliance to contract terms is a time-consuming and ongoing task throughout the life of a contract for those teams. She adds that it’s also a heavy lift when it’s time to re-solicit an agency’s home-grown competitive solicitations.

The pandemic has made life more difficult for lean-staffed procurement departments, Nielsen adds. “COVID-19 only magnified the problems associated with limited human resources by adding a layer of sourcing complexity (everyone needs personal protective equipment/PPE) to a challenged supply chain (can’t make enough PPE).”

Yet in 2021, small, disadvantaged and women-owned firms are suffering due to the pandemic. As noted in National Geographic Magazine, more than half of Black-owned businesses may not be functioning when the pandemic is finally over. Analysts at the University of California, Santa Cruz, and a publication by the National Bureau of Economic Research found that 41 percent of Black-owned businesses—roughly 440,000 entities—have been eliminated through the impact of COVID-19, compared to just 17 percent of white-owned businesses.

A report from the Federal Reserve Bank of Cleveland shows small businesses run by Hispanic, Latinx and Asian proprietors have seen bigger drops in business activity, outsized closures and declines in cash balances during the pandemic compared to small firms run by white operators.

Local governments should think about helping diverse and local businesses grow by helping equip those businesses with cooperative contracts that help them sell to many government clients rather than just one, says Mariel Reed, CEO and cofounder of CoProcure. Her firm helps public agencies make informed purchasing decisions. CoProcure is a resource that can be a first stop for a public agency’s buying decisions. The company offers tools that help find relevant suppliers, compare available purchasing methods, or learn from the experiences of an agency’s peers.

“This can make working with local and diverse businesses easier and less expensive for other government agencies as well,” Reed tells Government Procurement. She adds that cooperative agreements can also be used to work with diverse businesses that have not been directly awarded a contract when those businesses are included as subcontractors, distributors, or when products or services from those businesses are resold through cooperative contracts.

Reed offers an example in the IT category, where cooperative contracts can be used to purchase software and IT services from small-, women-owned-, minority-owned-, and disadvantaged businesses. “The Unified Government of Wyandotte County (Kan.) and Kansas City, Kan., purchased GovInvest software through SHI International Corp.’s contract with OMNIA Partners, a cooperative purchasing organization. GovInvest is a women-owned, minority-owned business that provides software for pension, other post-employment benefits (OPEB) and workforce cost analysis.”

SHI is a 100-percent minority-owned company and a Corporate Plus member of the National Minority Supplier Development Council (NMSDC). The firm offers its entire product catalog of IT services to public sector customers through the OMNIA Partners contract.

Reed says cooperative and piggyback agreements can be extremely meaningful for small-, women-owned and disadvantaged businesses because they lower the cost of selling into government for those businesses. “Unfortunately, many businesses still don’t know about cooperative contracting.” She offers this suggestion on how governments can help level the playing field for diverse business types: “Public agencies should include cooperative purchasing language in their contracts with these types of firms, and businesses can learn to ask for this language to be included if it is not included as a default.”

There is another avenue small and disadvantaged businesses can follow to land government contracts, says Chris Mellis, senior vice president-strategic accounts at OMNIA Partners, Public Sector. The competitively solicited and publicly awarded cooperative contracts with manufacturers offered through OMNIA Partners often also name their authorized dealers or distributors. Some of these manufacturer distribution partners are certified minority and/or women-owned businesses (MWBE).

“Using these cooperative contracts not only saves the public agency time and money, but may also help to meet their particular MWBE requirements. In some special instances, a supplier who has been awarded a cooperative contract will work with MWBE businesses to provide other services,” Mellis says. One example is when a supplier may partner with an MWBE company to deliver their products or services to the public agency. He adds that his firm continually looks for opportunities to include MWBE channels in its cooperative contract portfolio.

In order for a supplier to be awarded a cooperative contract through OMNIA Partners, they must first respond to an open solicitation, which is accessible to anyone and everyone on the website. To be part of the consideration process, suppliers can take the first steps listed here. At this last site, vendors can check off which of eight diversity designations where their firm holds certifications. The designations include minority- and women-business enterprise (MBE, WBE and MWBE), LGBTQ-owned, historically underutilized business (HUB), veteran-owned, and small/disadvantaged business enterprise (SBE).

“The opportunities for women- and minority-owned small business are unlimited in the cooperative purchasing sector our company operates in—selling to governmental and not-for-profit entities,” says Jeff Drury, senior director at Choice Partners, a national purchasing cooperative. “These types of companies can literally go as far as they want if they are willing to put in the hard work and be a little patient.” Drury cautions, however, that there are times when the wheels of government grind a bit slower than other industries. “We absolutely encourage any qualified companies to get involved with our cooperative, or any cooperative, as a way to grow their business.”

Drury points to Facilities Sources as a cooperative purchasing success story. Facilities Sources, a multi-faceted construction firm with MWBE status, has been awarded pre-bid contracts through several cooperative purchasing groups. The firm repaired and restored damaged facilities in the Humble Independent School District (Texas) after Hurricane Harvey hit the district’s buildings in 2017. The firm did repairs in district facilities valued at tens of millions of dollars. “The company was able to completely restore and get the largest ‘victim’ of Hurricane Harvey, a large high school, up and running on time and on budget so that the seniors could finish the year in their own high school instead of sharing a high school with split shifts with another group of students,” Drury explains.

For any company to gain a cooperative contract, it starts with research, says Tammy Rimes, executive director of National Cooperative Procurement Partners. The organization is the professional association of cooperative procurement. Rimes says some of the steps in that research “include identifying those cooperative organizations who bid/award contracts for your company’s particular services; ensure your company is registered in their system to obtain the solicitation notice; contact the contract manager for more in-depth information; and obtain a copy of the existing awarded contract for that product line/services to gain more insights.” Rimes adds that there may be sub-contracting opportunities with larger manufacturers through cooperative contracts.

Things are looking up for disadvantaged businesses hoping to sell to government, say Stephen Goldsmith and Scott Becker in their report, “Cooperative Procurement: Today’s Contracting Tool, Tomorrow’s Contracting Strategy.” They note that public officials have been concerned that cooperatives would achieve efficiency at the expense of local suppliers. Those officials also have concerns about fairness in the marketplace for smaller players as well as women- and minority-owned businesses. Goldsmith and Becker offer some assurances: “Leading national and regional cooperatives are working to address these challenges through educational materials, expanded outreach to increase participation by enterprises that are owned by the underrepresented, and improvements to the bidding and selection processes.”

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

This article originally appeared in the Q1 issue of Government Procurement.