A recent Input Inc. report shows that state and local purchases under the General Services Administration’s information technology schedules grew to $361.2 million in 2007, a marked increase compared to 2006. Input projects sales under cooperative purchasing to continue to grow at a compound annual rate of 24.6 percent, surpassing $1 billion by 2012.
How are these numbers significant? They certainly are not a large percentage of the market: Input reported that the addressable state and local IT market in 2007 was $54.8 billion, meaning that schedule sales accounted for less than 1 percent of the spending. The numbers are not yet large, but they demonstrate that cooperative purchasing is gaining traction and should be considered part of any technology manufacturer’s public-sector market strategy.
I emphasize commercial technology manufacturers because year-over-year spending was up in hardware, software and wireless but decidedly down for IT services under cooperative purchasing. To me, this makes a lot of sense. The GSA schedule is a unique contract that incorporates product-specific terms and conditions, a characteristic that means a lot to buyers and sellers of manufactured technology but has no relevance to IT service contractors. This means GSA has an opportunity to provide value to the extent that its contracts include license, maintenance and support terms consistent with how manufacturers — and their authorized representatives — actually license and support their products.
So GSA has an advantage over competing state cooperative purchasing programs — such as the Western State Contracts Alliance and U.S. Communities — to the extent that it includes license grants or similar product-specific terms in its schedule contracts.
Another feature of schedule contracts that can lend itself to a company’s market strategy across the public sector is the dealers’ ability to perform sales and transaction processes on behalf of a schedule contractor. This lets manufacturers set up programs under a schedule contract whereby authorized dealers — usually small businesses — can support local customers without GSA having to maintain hundreds of contracts for a manufacturer’s items.
A long-term advantage GSA has is the recent Disaster Recovery Purchasing Authority granted by Congress under Section 833 of the John Warner National Defense Act of 2007 authorizing the GSA administrator to let state and local governments purchase products and services from federal supply schedules to facilitate recovery from a major disaster; terrorism; or nuclear, biological, chemical or radiological attack. According to GSA, more than 60 percent of schedule contractors — 11,000 of 18,000 — across all commodity areas have signed the contract modification that includes purchasing by state, local, tribal and educational entities for this purpose.
We know of no recovery purchases made via schedules so far, but we understand that GSA is developing an outreach and educational effort targeting state and local entities. GSA has been rather quiet about cooperative purchasing and the value it has provided contractors and buyers in the past couple of years. But based on some conversations at GSA, I’m optimistic that the agency is preparing to show buyers and sellers how to use the unique contract type and ordering procedures of schedule contracts at the state and local levels.
Cooperative purchasing is voluntary. It is not a mandate or a requirement. It has to be a good idea, a shared vision for all involved. GSA could do a lot for its contractors — and for buyers at the state and local levels — if it developed a few success stories and case studies illustrating the value of the program to all the stakeholders.
Steve Charles (steve_charles@immixgroup.com) is co-founder of consulting firm immixGroup Inc.
