Financial concerns continue to spread in higher education. San Francisco State University, Dickinson State University, St. Norbert College, and Christian Brothers University have all announced multi-million-dollar budget cuts amid significant deficits, and these are just a handful of recent cases. Even well-established higher education institutions are seeing significant budget constraints. Concerns over enrollment declines, unpredictable state funding, and the loss of federal funds are creating a challenging environment. At the same time, colleges and universities will continue to face increasing labor costs and inflationary prices at least through the next fiscal year.
If you are in higher education and looking for ways to reduce procurement costs, then joining a Group Purchasing Organization (GPO) could be your solution. GPOs are organizations that leverage the purchasing power of their members to negotiate better deals with suppliers.
While group purchasing organizations have been around for decades, they are becoming increasingly popular in the higher education sector as institutions look for ways to save money and streamline procurement. Higher education institutions participating in GPOs can save 10–15% or more on their purchases. For some institutions, these cost reductions can save millions of dollars on the bottom line over time.
Higher education GPOs aggregate the annual spending on specific products or services for their member colleges and universities. They leverage this collective buying power of millions to negotiate favorable pricing and terms with national vendors, manufacturers, distributors, and service providers. Suppliers offer sizable volume-based discounts on list pricing or educational pricing in exchange for the business.
While members do not receive exclusive pricing, they benefit from pricing they likely could not achieve on their own.
GPOs keep a portion of the contract price to fund their operations, but not all GPOs charge the same amount. Some take 3% to 5% of transaction prices in addition to charging membership fees. Colleges and universities believe the trade-off is worth it to access lower pricing.
By comparison, E&I Cooperative Services has some of the industry’s lowest commission structures and does not charge membership fees. It is free to join. As a non-profit, member-owned cooperative, any profits at the end of the year are returned to members in the form of patronage rebates or equity. E&I Cooperative Services returned $8.7 million to its members in 2022 and $6.32 million in 2023.
Procurement experts at a group purchasing organization conduct a competitive solicitation using RFPs and bidding processes with multiple suppliers for a product or service category on behalf of the member institutions. With scale, GPOs typically get best-in-class pricing and guarantees of locked-in pricing over multiple years.
Contracts detail the discounted pricing and are made available to procurement staff at the member colleges and universities. Institutions can then purchase goods and services directly from the contracted suppliers at the pre-negotiated rates for the duration of the agreements.
Not all GPO contracts work the same way, however. With E&I Cooperative Services, members can opt into contracts when they want to—with no obligation. There are no mandatory spend commitments or minimum spending levels.
E&I Cooperative Services is one of the largest and most widely-used cooperatives among U.S. colleges and universities, leveraging more than $50 billion in member spending to negotiate preferred pricing and terms across 150 product categories.
Education group purchasing provides significant benefits to higher education institutions, including financial advantages, operational streamlining, access to market intelligence, risk mitigation, and greater access to a larger pool of suppliers.
One of the primary financial benefits of working with a group purchasing organization is the ability to secure substantial discounts on products and services through bulk buying. When educational institutions consolidate their procurement efforts, they gain leverage to negotiate cost savings with suppliers.
A compelling example is E&I Cooperative Services, which harnesses the collective purchasing power of its 6,000 educational institution members. This cooperative not only achieves significant savings but also returns substantial amounts to its members.
The efficiency gains from participating in a cooperative purchasing group for education are noteworthy. Instead of investing considerable time and effort in supplier research, bid solicitation, contract negotiation, and supplier relationship management, educational institutions can entrust these tasks to the purchasing group. This strategic delegation allows colleges and universities to redirect their focus toward overarching goals, confident that they are benefiting from optimal pricing structures.
Moreover, the time savings achieved through cooperative agreements extend beyond financial considerations. Educational institutions not only cut costs but also significantly reduce the time required to complete purchases.
Engaging with an education group purchasing organization provides institutions with access to specialized expertise and in-depth category knowledge.
Many group purchasing organizations maintain dedicated teams in areas such as facilities maintenance, IT hardware, and capital equipment sourcing. These teams contribute valuable market intelligence and benchmarking data, leading to more favorable terms and pricing for educational institutions. This reservoir of resources enables schools to navigate complex and specialized categories without needing to develop these capabilities internally.
Contract terms negotiated by group purchasing organizations serve as a shield for institutions, helping meet legal and regulatory compliance.
Through centralized management of competitive solicitations, these groups can secure contractual commitments, including general and professional liability coverages, cyber insurance minimums, and product quality assurances. By consolidating bargaining power, education groups enhance their ability to demand favorable concessions, indemnifications, warranties, and other protective measures from suppliers. This collaborative approach effectively transfers risk away from individual colleges or universities, reducing liability exposure.
A group purchasing organization also attracts a larger pool of suppliers. Due to the potential volume of business, GPO solicitations are often more attractive to businesses, bringing in more competitive bidding and driving prices lower. This provides colleges and universities access to suppliers that might not otherwise bid on their projects.
This expanded pool of suppliers at GPOs makes it easier to find qualified diverse suppliers and those committing to sustainability goals. With social responsibility being front and center in higher education policies, GPOs can play a significant role in meeting goals.
There are two types of GPOs: National/regional organizations and GPOs that specialize in education.
National GPOs operate on a national level while Regional GPOs focus on a region or state. National GPOs generally have a larger membership base and therefore have greater purchasing power. However, regional GPOs may be better suited for institutions that have specific needs related to their region or have buy-local requirements.
Specialized Education GPOs focus specifically on the needs of higher education. These GPOs understand the unique challenges and requirements of colleges and universities and work to provide tailored solutions to meet those needs. They may offer contracts for everything from office supplies and furniture to laboratory equipment and IT services.
When choosing a Group Purchasing Organization (GPO) for your higher education institution, there are several key considerations to keep in mind. Assessing the strengths of potential GPOs and aligning your goals with their services can help you make an informed decision.
One important consideration when choosing a GPO is assessing its strengths and probing for areas of weakness.
Look for a GPO that has experience working with higher education institutions and understands how you operate. Also, consider the size and reach of the GPO. A larger GPO may have more negotiating power and be able to offer better pricing.
Another important factor to consider is an organization’s supplier network. Look for a GPO that has a diverse range of suppliers and offers a wide variety of products and services. Additionally, consider the quality of the suppliers in the GPO’s network. Look for suppliers that are reputable and offer high-quality products and services. While you want to save money, you cannot afford to sacrifice quality.
You should make sure that the GPO you choose aligns with your goals. For example, if sustainability is a priority for your institution, look for a GPO that works with suppliers that source sustainably.
Also, consider the level of support and service that the GPO offers. Look for a GPO that provides excellent customer service and can offer support throughout the procurement process. This can include assistance with contract negotiations, supplier management, and more.
By carefully assessing potential GPOs and aligning your goals with their services, you can choose a GPO that will help you achieve your procurement goals and save money.
Once your GPO solution is up and running, you will need to measure its impact and performance to ensure that it is delivering the expected results. So, make sure you have an easy way to track purchases and analyze results.
During the selection process, you should identify key performance indicators (KPIs) that match your organization’s goals and objectives. You should look for a purchasing cooperative that allows you to conduct regular reviews to identify areas for improvement. For example, E&I Cooperative Services offers no-cost strategic spend assessments (SSAs) to identify hidden savings, areas where other contracts can offer better pricing, or where consolidation can reduce workloads and trigger volume pricing incentives.
E&I Cooperative Services is the only member-owned, non-profit sourcing cooperative exclusively focused on serving the education community. With education as its sole focus, E&I Cooperative Services is uniquely equipped with the knowledge, experience, and passion to meet the specialized needs of higher educational procurement.
E&I Cooperative Services members receive best-in-class pricing, with competitively sourced contracts and a variety of other services, to reduce costs and implement best practices in higher education procurement.
Contact E&I Cooperative Services today to see the benefits of membership.
What does GPO stand for? What does GPO mean in procurement?
GPO stands for group purchasing organization. A GPO aggregates purchasing volume from multiple schools to negotiate discounted pricing and terms with vendors on members’ behalf.
How many education GPOs are there in the U.S.?
There are about 600 group purchasing organizations in the United States, including several that serve the education sector. However, there is only one member-owned, non-profit cooperative that focuses exclusively on education: E&I Cooperative Services.
What is an example of a group agreement for higher education?
One example is volume pricing discounts negotiated with scientific supplies companies on chemicals, equipment, and instrumentation based on the combined annual spending across colleges and universities in a GPO membership group.
What are the benefits of a group purchasing organization for higher education?
For academic institutions, partnering with a GPO helps schools find lower-priced alternatives for procurement and reduces the time it takes to fulfill procurement needs. By combining collective purchasing across member institutions, GPOs can provide cost-effective solutions that schools and colleges may find difficult to achieve on their own.
What is the difference between an education PBM and GPO?
A Pharmacy Benefits Manager (PBM) negotiates directly with retail pharmacies and drug companies on prescription plan pricing, while a GPO conducts broader contract pricing negotiations with vendors across many product and service categories.