Class Clout

School purchasing co-ops forge power through numbers and dollars

By Margaret Sheridan, Senior Editor -- Restaurants & Institutions, 4/1/2003

One-third of all public school districts participate in cooperative purchasing
It’s a cold slap to be judged unattractive.

The Adams 12 School District in suburban Denver spends $2.5 million annually for food, enough, thought Director of Nutrition Services Carol Miller, to make it a desirable customer for distributors. Not so.

In the early 1990s, purchasing for schools was a seller’s market. Only two of seven vendors serving the market would bid. Miller and her associates put up with shoddy service. On average only 50% of any order was filled. When pizzas, a student favorite, failed to arrive one week, she resolved to act on her frustrations. She and equally dissatisfied administrators from other districts decided to start a purchasing cooperative. Two years later, in 1999, CCStar opened for business.

Today, it buys for 10 school districts, totaling 195 schools and 45,000 students. Its business, valued at $7.3 million annually, is sought by 150 vendors.

“We’re like a small business,’’ says Miller. “We make money to spend money.”

COMPLEX SPENDING
Regardless of the organizations they serve, co-ops aim to control costs and quality, dictate length of contracts and safeguard members against unfair practices. There is no one model for operating a successful school co-op; each differs according to members’ needs and size, and must conform to state purchasing codes.

Late in joining the co-op movement, schools are quickly learning the power of economies of scale. Mass brings clout, commanding vendor attention, better prices and savings. The 1996-97 U.S. Department of Agriculture School Food Purchase Study, a survey done every decade, reported that more than one-third of all public school districts participated in cooperative buying compared to 10% in the 1984-85 survey.

Schools can form a purchasing cooperative based on district size, student count or just need. Co-ops can comprise two schools or 20 districts. Salaried professionals manage some while volunteers run others. Dues can be assessed monthly, annually or as one-time upfront payments based on district size or student counts.

Cost savings for CCStar were gradual, Miller explains. “We had many start-up costs, as well as legal and audit fees. Overall, savings the first year were 6% to 7%.’’

A major cost decrease came from reducing warehouse storage, where annual fees dropped to $5,000 from $30,000 to $50,000. Miller insists co-op buying means more than getting the best quality and prices. “You network with other staffers and share knowledge. You don’t get that kind of support in a small district,’’ she adds.

THE SEARCH FOR SAVINGS
Learning the nuts and bolts of cooperative buying can be daunting, but Mary Klatko was interested. “School districts traditionally are financially strapped, so I’m always looking for cost-saving opportunities,’’ says Klatko, administrator of Food and Nutrition Service for the Howard County Public School System in Ellicott City, Md.

The Maryland School Food and Nutrition Purchasing Cooperative she helped form is four years old, and represents 378 schools in 12 counties with combined enrollments of 234,403. Last year, the cooperative purchased $10 million worth of food. “We get bottom-line prices and pay for what we get when we get it,’’ she says. “The first year my spending was down $95,000 over the prior year.’’

The Maryland bid consists of 550 items, including groceries, frozen and dry goods. The co-op conducts annual tests of new products to add to existing bids. (In school purchasing, a bid is a formal request for prices and commonly contains 500 items or more. Bids can be direct to distributor or direct to manufacturer.)

Klatko advises colleagues to become versed in the rudiments of cooperative purchasing and management. “Where funds are limited and expenses have to be monitored to stretch every dollar, cooperative buying is the wave of the future,’’ she says.

VALUE-ADDED APPEAL
After Micheline Piekarski and two colleagues founded Northern Illinois Independent Purchasing Cooperative (NIIPC) six years ago, the director of foodservice for the Oak Park River Forest (Ill.) School District saw costs drop 5% to 7%. The co-op now serves 41 districts and 100,000 students.

“Not everyone was eager to join,” she says. “There was resistance from districts that didn’t want to give up the freedom to buy certain brands.

In a co-op you generally have three brands of pizza to choose from, not a dozen.’’

Elaine Clem, a graduate student at the University of Illinois at Champaign-Urbana, studied NIIPC and the effectiveness of not-for-profit co-ops. What’s central to all education co-ops is members’ passion, says Clem. Organizing and running a cooperative requires attention to detail, follow-through and commitment of time, especially if volunteers run it.

NIIPC’s directors do paperwork, attend meetings, make presentations to school districts and get involved in national organizations. They also compile bids, a process that takes up to six weeks.

In order to expand membership, Clem advised the co-op to offer nutritional analysis with menus, suggesting it would provide major savings for many school districts. The co-op’s dues, based on size of school, are kept low.

“Their goal is to involve more school systems and eventually hire a full-time employee to manage the co-op,’’ says Clem.

As director of Colorado’s CCStar co-op, Carol Miller draws a salary for working 30 hours per month. Members of the co-op’s organizing committee meet once a month for about seven hours to go over bids, housekeeping issues and plans. Sure to make the agenda of most meetings are strategies to grow membership to increase buying power. She estimates that with active marketing, membership will grow 10% to 15% in the next year.

“You’ve got to have the right mindset to join a co-op. You work for the common good and the potential to save money. Some people don’t want to give up their freedom of choice,’’ adds Miller.