E-Procurement

E-Procurement

Online purchasing amplifies the power of group buying.
 

When negotiating multiple vendor contracts and considering an online purchasing system, many small school districts might find it tough to go it alone. But what if there were a few hundred or a few thousand other districts standing as partners in the purchasing?

For multiple small and midsize districts that don't have the buying power to have significant leverage in negotiations, purchasing in larger quantities can often drive prices downward, notes John Kost, managing vice president for government and health care research at research firm Gartner.

"The less obvious advantage-but one that is incredibly important-is that even if the price isn't better, buying consortia basically short circuit the normal competitive bid process and simply let buyers order what they need," he says. "It saves time and lots of bureaucracy."

California's Buying Power

Notable efforts on a state level have cropped up as the benefits of e-procurement and collective purchasing have blended. In California, the CalSAVE buying consortium leverages the collective buying power of more than 8,700 K12 schools for purchasing hardware, software, instructional resources, furniture, equipment and supplies.

Launched in 1999 as a state program focused only on technology purchasing, the program began expanding its reach when it created contracts that other districts could use, according to Ted Witt, head of contract development at Epylon, a technology vendor that administers the electronic purchasing system.

"There has always been a history of cooperation in school district purchasing," says Witt. "But what's different now is that it's becoming more strategic and sophisticated, and they're implementing best practices."

In doing so, he adds, districts can use data more effectively and create better contracts. "The enemy of a good price is ambiguity in the contract language. With proper data collection and evolving e-commerce software, you're constantly reshaping contracts to remove ambiguity."

For example, describing furniture or supplies more accurately, like oak chairs with wheels, prevents the back-and-forth that sometimes develops between a vendor and a district. Witt notes that in the past, a district might have sent solicitations to three or four vendors and evaluated their responses when the mail brought in their bids. But with e-procurement, a request for bids can be sent to 800 vendors, with half of those responding. And a district or consortium can see data on costs with just a click of a mouse.

Larger Purchasing Pools

Districts can also be included in a larger pool of purchasers, thanks to sophisticated software such as that from Epylon or eSchoolMall that can bring together K12 with higher education, nonprofits, and government agencies. That's the strategy of U.S. Communities, a purchasing alliance that has saved counties, cities, schools, and nonprofit organizations about $735 million on $5 billion in purchases over the last 10 years, according to the alliance. To join, a district must fill out an online registration form, in order to confirm that they represent a government agency or a nonprofit agency that provides educational services, and agree to the general terms and conditions of a cooperative purchasing agreement.

Another major initiative is a newly formed partnership between the American Association of School Administrators and the National Joint Powers Alliance, which is also intended to save millions of dollars for districts. The partnership provides public districts with access to national, competitively bid contracts for materials such as classroom sound amplifi cation or administrative software.

Of the over 500 educational service agencies (ESA) in the United States, about 50 have cooperative buying programs, according to Dan Corazzi, president of eSchoolMall, a software provider to ESA. Some of the agencies involve districts from the same state, but many are trying to grow and include districts across state lines as demand increases, he says. "You're seeing consortiums go across state boundaries, which should theoretically drive greater buying power."

Features in the eSchoolMall software allow an ESA to "push" bids out to districts so they can aggregate their requirements before presenting the bids to vendors. An ESA can get quantities quickly with the e-procurement system, Corazzi says. In terms of what can be purchased, furniture is often tricky, since it may need to be specially built, but nearly everything else can go through a consortium, notes Doug Casey, technology director at the Capitol Region Education Council (CREC), an ESA serving 35 districts around Hartford, Conn. "At this point, they can collaborate on the consumption of fuel and utilities, not to mention physical equipment," he says.

As part of its cooperative purchasing, CREC offers art supplies, copiers, roofi ng systems, technology products, custodial supplies, and even cafeteria food. "We have one set of procedures, and the contracts look consistent, so the districts and the vendors all know what to expect," says Casey.

Challenges

As with any multilayered strategy, there can be challenges with consortiums. In terms of technology, the software is evolving, but it doesn't yet have all the functionality that some of the consortium organizations or districts might want.

Epylon is improving its systems so the online published information includes more data, such as all the variables that go into a pricing decision, Witt notes. For example, variables may include whether products such as laptops or printers are new or refurbished. Other variables that go into pricing include how a product is unique in the marketplace, whether a new version of software has just been released, or if shipping costs change the price for each district.

A broader challenge of being part of a consortium is that a district will have to spend time and energy for competitive bidding for products, says Kost. Not all district managers know how to create a much larger scale procurement, which involves learning new systems and possibly assigning diff erent staff members to handle the work, he adds.

Another issue is whether a contract will meet the needs of a specific district, adds Heather Obora, chief purchasing officer for the Chicago Board of Education. "You have to make decisions such as accepting multiple contracting sources and how much you want to participate in the group," she says. "Also, some districts may want to buy locally, or from minority or small businesses, even if they aren't the lowest bidder, and you have to watch for things like that and adjust your buying accordingly."

Given Chicago Public Schools' size, the district doesn't rely on consortiums, but Obora feels that many smaller districts can use consortiums to gain the same type of leverage that Chicago enjoys. Recently the city of Chicago partnered with BMO Financial Group-which has e-procurement services-to customize back office systems, ensuring integration among suppliers, Oracle software, and a MasterCard purchasing program.

Level the Playing Field

With consortiums, smaller districts can have the advantages of e-procurement without having to break their budgets for custom- built systems, Obora notes. "Many vendors have gone to online ordering, which ties in consortium online purchasing," she says. "The bottom line is that it does save money to coordinate your volume spending with someone else, and the technology can ease the ordering process. Consortium contracts work to level the playing field."

Elizabeth Millard is a freelance writer based in Minneapolis.


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