What is a Cooperative Purchase?
This article will first define a cooperative purchase, then demonstrate how it effects the economy via graphs. Lastly, the article gives, a cutting-edge intelligence list on the top co-op government buyers and private sellers in Washington State.
Additionally, at the end of this article you'll be able to take what you've learned and apply it to your knowledge of cooperative purchases. More importantly, increasing your probability of winning a government cooperative purchasing contract.
First, a cooperative purchase, often referred to as a group purchase or bulk purchase, is a buying arrangement in which a group of individuals or organizations comes together to leverage their collective purchasing power. The purpose is to obtain goods or services at a lower cost than they might individually. Cooperative purchases are common in various contexts, including:
1. Consumer Cooperatives: A group of consumers may form a cooperative to buy goods or services directly from producers. This model is often seen in the agriculture industry, where consumers might collectively purchase shares in a local farm, and in return, receive a portion of the farm's produce. (pcaamerica.org, 2023)
2. Business Purchasing: Companies might engage in cooperative purchasing to buy supplies, equipment, or services in bulk. This can lead to cost savings and better negotiation terms. (Consumerfed.org 2020)
3. Government or Institutional Purchases: Government entities, schools, or other institutions may engage in cooperative purchasing to obtain better prices on goods or services. This can be particularly useful for smaller entities with limited budgets. (Fema.gov, 2019)
4. Group Buying Platforms: Online platforms facilitate group buying where individuals can join together to make a bulk purchase of a product or service, often at a discounted rate.
5. Real Estate Cooperatives: In real estate, a housing cooperative is a type of joint ownership where residents collectively own shares in the property, and the cooperative manages the building. (Investopedia, 2018)
Cooperative purchasing is driven by the idea that there is strength in numbers, and by combining resources, participants can achieve economies of scale and negotiate better deals. It's a strategy that can benefit both consumers and businesses by lowering costs and increasing efficiency.
Take the following graphs paired with testament from The Theory of Farm Purchasing Cooperatives published by Oregon State University in 1967.
Look at the below graph, starting at the intersect of 0/0. Notice the graph has a price on the ‘X’ axis and ‘Q’ for Quantity on the ‘y’ axis. Supply in this case, represents an upward sloping line. This upward sloping line is the line of best fit when it comes to matching the residual outputs give them the market swings of price and quantity. In this case we will use the example of representing desktop computers from Hewitt Packard.
The below graph represents the downward trend of demand which goes inversely to supply. The demand line is the line of best fit that represents the market residuals over time given the fluctuation of consumer demand against quantity. Notice that demand is a downward sloping trend-line.
The below graph indicates that when supply and demand meet it creates an ‘X’.
This ‘X’ is known as equilibrium, regardless of market fluctuations the market will go back to equilibrium based from the supply chain and the demand from the consumer market.
The Effects of Cooperative Purchasing
According RCW 39.26.060
(1) On behalf of the state, the department may participate in, sponsor, conduct, or administer a cooperative purchasing agreement for the procurement of any goods or services with one or more states, state agencies, local governments, local government agencies, federal agencies, or tribes located in the state, in accordance with an agreement entered between the participants. The cooperative purchasing may include, but is not limited to, joint or multiparty contracts between the entities, and master contracts or convenience contracts that are made available to other public agencies.
(2) All cooperative purchasing conducted under this chapter must be through contracts awarded through a competitive solicitation process. (Washington State Legislator, 2021)
The below graph showcases what happens when the government conducts cooperative purchases on behalf of the taxpayer to get a cheaper price point ‘P2’ and a higher quantity ‘Q2’.
Notice the bulk ordering of demand for Hewlett-Packard desktops is driving the supply line down the demand curve forcing it at a lower price point from P1 to P2. Note that the demand line never changes, and this cooperative purchase is temporary stimulus to the economy; however the supply line will eventually creep back to equilibrium with time.
Now exploring the binary distribution of Cooperative Purchase. Notice that the Cooperative Purchases consist of less than half of the total contracts.
The below graph shows the frequency of Cooperative Purchase is significantly greater for 5-year contracts. Indicating that Cooperative Purchases have a higher average of ‘Total Contract Amount’ compared to Non-CoOp. While Non-CoOps have significantly more 10-year contracts. The inverse is true for 5-year contracts.
For a deeper analysis of where the data was sourced, check out this article here: What are the Odds of Winning a Government Contract?
1. Which Washington State agencies issue the largest contracts by 'Total Contract Amount'?
2. Which state agencies have the longest contracts?
3. Which state agencies issue the most 10-year contracts?
4. Which state agencies issue the most 5-year contracts?
5. Who are the top hired tech contractors?
6. Which contractors have the longest contracts?
7. Which contractors have the most 10-year contracts?
8. Which contractors have the most 5-year contracts?
According to the outputs, Community Colleges and State Universities. It also appears the University of Washington is common issuer of contracts; At the same time, a contract winner for 10-year contracts.
In final analysis, we defined what a cooperative purchase is, how it affects the economy through supply and demand to get an optimal price point. The reader has now been exposed to eight points of industry intelligence as well as a visual understanding of the binary nature of cooperative purchases. Lastly, this article increases consumer and taxpayer awareness.
Work Cited
Business Cooperative Purchasing . PCA. (n.d.). https://www.pcamerica.org/
Consumer Cooperatives · Consumer Federation of America. Consumer Federation of America. (2022, March 24). https://consumerfed.org/consumer-cooperatives/
Cooperative purchasing programs. FEMA.gov. (n.d.). https://www.fema.gov/assistance/public/tools-resources/cooperative-purchasing-program
Housing Cooperatives - University of Wisconsin–Madison. (n.d.-b). https://resources.uwcc.wisc.edu/housing/HousingCoops_HomeOwnership.pdf
Smith, L. (n.d.). Housing cooperatives: A unique type of home ownership. Investopedia. https://www.investopedia.com/articles/pf/08/housingco-op.asp#:~:text=To%20purchase%20shares%20in%20a,running%20and%20maintaining%20the%20building.
A theory of farm purchasing cooperatives - JSTOR. (n.d.-a). https://www.jstor.org/stable/pdf/44013755.pdf
Washington State Laws . RCW 39.26.060: Cooperative purchasing. (n.d.). https://app.leg.wa.gov/rcw/default.aspx?cite=39.26.060
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