Winning Public Sector Business by Establishing a Piggybackable GPO Agreement
Over the past several weeks, we have focused our efforts on understanding two of the three compliant sales options you have as a supplier when pursuing public sector business. The bid-by-bid approach, and establishing and leveraging state term contracts. This week, we will begin to discuss our third and final sales option, establishing a piggybackable agreement with a public sector group purchasing organization (GPO).
As with the bid-by-bid approach, we’ll need to define a few terms before we dive in:
- Group Purchasing Organization (GPO)/Cooperative – a membership organization that legally and appropriately establishes contracts with suppliers that enable the GPO members to purchase from the suppliers without having to conduct their own stand-alone bid/RFP process. In this respect, a GPO contract is very similar to a state term contract as an alternative to a formal public sector procurement process. Note: some GPOs are themselves a public sector entity and some are operated by management companies and utilize a “Lead Agency” model.
- Lead Agency – cooperative contracts made available to public sector entities through a GPO must be originally procured by a public sector entity to remain in compliance with public sector procurement guidelines. If the GPO itself is a public sector entity, it is legally empowered to issue a bid/RFP and make the contract award. If the GPO is not a public sector entity, and instead utilizes a “Lead agency” (a public sector entity), then that lead agency would conduct the bid/RFP and make the contract award available to the GPO and the GPO’s members.
- Piggyback/Piggybackable – pursuant to laws in each state, most public sector entities have the ability to purchase through cooperative agreements without having to conduct their own procurement process. Purchasing through these already-procured contracts without conducting a stand-alone procurement process is called “Piggybacking”, and such contracts are considered “Piggybackable” contracts, also referred to as cooperative contracts, already-procured contracts, master agreements.
The pricing and contract terms available to GPO members are memorialized in a “master agreement” between the supplier and the GPO. The GPO’s members are then eligible to purchase from you the supplier directly under the master agreement pricing and contract terms.
The GPO will typically serve in a legal and facilitation role, and does not actually take or place orders; receive, store, or deliver products and services; invoice members, collect payments from members, or make payments to you the supplier.
Keeping these things in mind, we will discuss the advantages and disadvantages of this sales option in our next digest.