Power in numbers

Sometimes the most innovative contracting begins with a simple premise.

In the case of the Western States Contracting Alliance (WSCA), the proposition

was: Volume purchasing of computers for education, state and local governments

should lead to discounted prices.

The alliance's first computer contracts went into effect in October

1999 with New Mexico, the lead state for the contracts, managing procurement

and administration. A year later, the WSCA computer buying program had purchased

a total of $295 million in computers and peripherals, enabling contract

participants to reap the benefit of six permanent price reductions from

involved vendors, which include Gateway Inc., Dell Computer Corp., IBM Corp.,

Compaq Computer Corp. and CompUSA Inc.

As additional state and local purchasing authorities begin using the

contracts, the volume is expected to pass $500 million this year and top

the $1 billion mark in 2002, according to Terry Davenport, WSCA national

computer contracts administrator.

Twenty states participate in the program on a statewide basis, and the

agreements are also used by cities, counties, public schools and universities

in an additional 10 states, he said. The program's users currently include

the states in the alliance, Vermont and Rhode Island, and local governments

in Connecticut and Maryland.

Underlying the obvious advantage of earning price discounts for large

scale cooperative purchases, the program is structured to make it easy for

additional state and local entities — large and small — to participate,

and to ensure that the benefits of big volume buying are realized by buyers

and sellers alike.

"One of the things that makes this program work is the way that the

contract is structured — in two pieces. In addition to the basic contract,

there's a participating addendum that allows an individual jurisdiction

to tweak the terms and conditions for its unique requirements," Davenport

said.

Barriers to participating in the agreement generally lie not in the

contract model but in the regulatory climate of the government's own statehouse.

In North Dakota, for instance, an opinion from the state's attorney general

forbids the use of cooperative purchasing contracts, while Nebraska is currently

seeking clarification from its legislature to ensure that it can participate,

Davenport said. California's participation in the WSCA contracts also required

the passage of special legislation, he said.

"To some extent, we've accomplished two things in that some states have

found that they need to make a special provision in their statutes to allow

them to use these kinds of contracts. By doing so, we're encouraging participation,

but we're also breaking down the barriers to large scale cooperative purchasing,

because we think that's really the future of government buying," Davenport

said.

For vendors, the agreement adds volume while streamlining the selling

process. Eliminating the need to compete for and administer contracts with

hundreds of individual state and local government customers, the WSCA program

enables PC makers to cut their administrative costs and pass along their

per-transaction savings to a larger pool of buyers, without the loss of

margin they would incur with groups of smaller sales.

"The big state agencies and big cities have always received good prices,

and they still do under the terms of the contract. The difference is, those

purchases are now counted in the cumulative volume discount pool, and when

we hit a preset volume level, the baseline price drops for everybody," Davenport

said.

The streamlined buying process also works on the buyers' side, as purchasing

officials avoid the time- consuming tasks of formulating and issuing a request

for proposals, evaluating vendors, negotiating contracts and responding

to protests.

For all its intricacy, however, the program's bottom line still fulfills

its original mandate of making volume discounts available to smaller buyers,

with real world results for its constituents.

"Most of the states in the West and the Midwest suffer from digital

divide issues. There's a lot more technology and a lot more money on both

coasts than there is in the middle of the country. By combining our purchasing

power with state and local governments and with universities and other users,

we've been able to drive down prices and put more and better equipment in

our public schools," Davenport said.

"In one of our school districts locally, for the same exact amount of

money they spent on their previous contract, their new WSCA contract put

computers in 17 additional classrooms. Smaller users are seeing prices like

they've never seen before."

Walsh is a freelance writer based in Peekskill, N.Y.