All For One and One For All: Competitive Bidding Group Purchasing Programs

 Have you heard of U.S. Communities?  What about National IPA?  Or HGAC?  WSCA?  TCPN?  NJPA? This alphabet soup of organizations (and others like them) can provide North Carolina local governments with purchasing flexibility and efficiency through an exception to the bidding statutes for “competitive bidding group purchasing programs.”  This exception, found in G.S. 143-129(e)(3), was added to the formal bidding statute almost 10 years ago, but many local governments are still unaware of it.  So how does it work?

What is a competitive bidding group purchasing program? G.S. 143-129(e)(3) defines a competitive bidding group purchasing program as “a formally organized program that offers competitively obtained purchasing services at discount prices to two or more public agencies.”  What exactly does that mean?  Let’s break it down:

• “Formally organized program”—the statute doesn’t explain what “formally organized” means.  But the word “formally” suggests that the program must be more than an ad hoc group of public entities deciding to join in on a couple of contracts together.  At the very least, you’d want to see some kind of written document (or series of documents) setting out the purposes of the program, the membership of the program, and the procurement process used by the program.
• “Competitively obtained purchasing services”—the emphasis here is on “competitively obtained.”  That is, some type of competitive process must be used by the program.  The process does not have to meet all of the statutory requirements for a formal bid under G.S. 143-129, but it must be competitive.  Most of these programs use a “lead agency” approach, where one public entity—the lead agency—uses its standard procurement process to award a contract to a vendor who agrees to supply products to all of the public entities participating in the program.
• “Discount prices”—The prices offered through the program have to be discounted from list prices, at least, and are hopefully comparable to the pricing you’d get through a formal or informal bidding process.  The idea behind these programs is that vendors will be able to offer deeper discounts to the group of entities participating in the program than to an individual public entity because of the larger sales volume offered through the program.
• “Two or more public agencies”—This part is easy.  As long as you can verify that there’s one other public entity participating in the program, you’ve met this requirement.  Again, the idea is that the entities participating in the program will get a better deal buying as a group than they would if they entered into contracts individually (because of the increased sales volume).  But it can't be a group of private entities.

How do you know if a program is a “competitive bidding group purchasing program”? You have to do some research to decide (1) if the program is “formally organized,” (2) if the process used by the program is competitive, (3) if the program benefits from “discount prices,” and (4) if there is at least one other public entity participating in the program.  I suggest starting your research on the internet (each of the programs listed at the beginning of this post have their own websites), and then following up by calling the program directly to clarify any questions you have.  Be sure to save the documentation you use to determine that the program meets the definition of a “competitive bidding group purchasing program”—including pages from the program’s website, or separate documentation you receive from the program—and keep the documents in your bid file. When should you use this exception? Once you’ve done your research and verified that a program meets the definition of a “competitive bidding group purchasing program,” you’ll also need to verify that the item(s) you want to buy are actually offered through the program, and—if you heard about the program from a vendor trying to get your business—you’ll need to verify that the vendor is authorized to sell those products through the program.  If you can’t find that information on the program’s website, call or email the program directly. Then it’s up to you to determine—considering the prices offered, the process used, the money and time that could be saved by avoiding the bidding process, the politics involved with the procurement (e.g., what will your local vendors or your board members say?), and any other relevant facts and circumstances—whether using this exception makes sense.  (Or cents.) Note that if you’re using state or federal funds (including ARRA funds), you should ask the agency providing those funds if you can purchase through a competitive bidding group purchasing program. What do I have to do to use the exception? The statute doesn’t give any procedures that must be followed to use the competitive bidding group purchasing exception; it simply says that purchases made through these programs are exempt from bidding.  So, unless required by your local policies, governing board approval is not required and you don’t have to publish notice of your intent to use the exception.  All you have to do is contact the program to find out what you have to do to purchase through one of their contracts. If you’ve had a good experience with a competitive bidding group purchasing program that I didn’t mention above, you are welcome to share that information by commenting on this post.