What Is a GPO Contract? Key Differences of Cooperatives for Higher Education

As colleges and universities look for additional ways to control costs and lower expenses, group purchasing organizations (GPOs) have become an even more popular option. However, there can be significant differences between different GPOs, GPO contracts, and cooperatives.

We will explain the key differences you need to know about and provide some tips on how to choose the right purchasing group for your college or university. Let’s start by explaining what is a GPO contract.

What Is a GPO Contract?

A GPO contract is provided by a group purchasing organization, which negotiates with suppliers for volume discounts and favorable terms on behalf of its members. In higher education, GPOs aggregate the purchasing power of multiple organizations to secure better deals.

Opting into these GPO contracts can provide considerable cost savings while also reducing the administrative time and overhead inherent in the procurement process.

What Is the Difference Between a GPO and a Cooperative?

While providing similar services, such as GPO contracting, there are some fundamental differences in the way these two types of purchasing groups operate.

Governance

Cooperatives are member-owned and governed, ensuring that they work on behalf of members and not GPO owners or shareholders. This is especially important when you are comparing a cooperative with a for-profit GPO, which exists to maximize shareholder and owner value, potentially including optimized profits.

Cooperatives are highly responsive to member needs because they are driven by the collective interests of their members. Because member input is so valued in a cooperative, RFPs reflect their needs. GPOs typically have a more centralized decision-making process, setting policies on behalf of members.

Membership

Cooperatives are typically restricted to certain types of companies or organizations. This might prevent you from joining certain cooperatives, but also provides significant advantages by becoming a member of a cooperative that focuses solely on the education sector, like E&I Cooperative Services. This focus can produce pricing and terms that align with the unique needs of higher education.

Fees

There can also be a significant difference in pricing models and fees. Many GPOs require upfront membership and fees and may have minimum spending requirements. While some cooperatives may have fees, there is no cost to become a member of E&I Cooperative Services and no spending requirements. You can opt into contracts you want, but there is no obligation to do so.

GPO or Cooperative? How Do I Choose?

Both group purchasing organizations and sourcing cooperatives can help you save time and money. If you are trying to decide which is a better approach for your institution, there are some key factors you should consider in your evaluation process.

Best Practices

Before you engage with a GPO or cooperative, there are a few best practices you should follow.

• Conduct a comprehensive needs assessment: Thoroughly evaluate the institution’s procurement needs, spending patterns, and potential areas for cost savings.
• Evaluate procurement goals and priorities: Clearly define the institution’s procurement goals and priorities, such as cost savings, supplier diversity, sustainability, or specific product/service requirements.
• Involve stakeholders in decision-making: Engage relevant stakeholders, including faculty, staff, and departmental representatives, to gather input and foster buy-in.
• Consider contract implications: Assess the long-term implications of joining a GPO or cooperative, including potential changes in pricing, vendor relationships, or membership terms.
• Establish clear evaluation criteria and decision-making framework: Develop a structured evaluation process with well-defined criteria to objectively assess and compare different GPO and cooperative options.

Once you have these processes in place, you are better positioned to make the best decision.

Key Considerations

When evaluating options, keep these considerations in mind.

• Administrative and membership costs: Consider the administrative overhead and membership fees involved in joining and participating in a GPO or cooperative.
• Product and service categories: Assess whether the GPO contracting or cooperative agreements include the specific products and services you need.
• Pricing and potential cost savings: Conduct a thorough cost-benefit analysis, considering not only the negotiated pricing but also any administrative fees or membership costs associated with the GPO or cooperative.
• Supplier selection and contract terms: Evaluate the supplier selection processes and contract terms offered, ensuring they align with your procurement policies.
• Flexibility: Look for the ability to customize a contract to your specific needs. Some contracts will allow you to customize certain terms while others will not.

Choose E&I Cooperative Services

E&I Cooperative Services is the only member-owned and non-profit sourcing cooperative that works exclusively in the education sector. Leveraging the combined purchasing power of more than 6,000 member institutions, E&I offers contracts from more than 200 suppliers, focusing on the unique needs of higher education.

You can save time and money with cooperative contracts through E&I Cooperative Services. View available contracts or contact E&I to learn more.