Adams, Aerials, Apparatus, Rescues, Tankers

Apparatus Purchasing: National Sales Cooperative Contracts

Issue 12 and Volume 21.

By Bill Adams

Buyers and sellers should be aware of a subtle transformation occurring in the competitive bidding arena for fire apparatus.

Selling and purchasing fire trucks may never be the same. Apparatus manufacturers, their dealers, and end users are embracing the concept of purchasing apparatus through one of the many national sales cooperative contracts (co-ops). In this article, co-ops include national, state, and regional contracts.

Random samplings of apparatus manufacturers’ Web sites found more than a dozen co-ops listed. In no order of preference or recommendation, they are Defense Logistics Agency (DLA); United States General Services Administration (GSA); Houston-Galveston Purchasing (HGACBuy); BuyBoard National Purchasing Cooperative (BuyBoard); Fire Chiefs Association of Massachusetts (FCAM-MAPC); Florida Sheriffs Association (Florida Sheriffs); Louisiana Multiple Award Schedules (LaMAS); New Jersey State Contract; Ohio State Term Schedule (OSTS); Pennsylvania State Contract (COSTARS); and FireRescueGPO and NPP.GOV Contract. Other states that also have or are soon to implement a form of cooperative purchasing co-op are too numerous to list. There appears to be no rhyme or reason for why some apparatus manufacturers list co-ops on their Web sites and others do not. Soon they all will.

Each co-op has its own online explanation of what it does, how it does it, and the benefits of using it. Read them very carefully; they’re not all the same. Pundits and commentators have their own descriptions. Mine is simplified: Co-ops solicit the bids and everyone can buy at the same price.

Regardless of a co-op or vendor’s claim of meeting all legal bidding protocols, the ultimate consent or authorization rests with each purchaser’s political subdivision whether it be at a state or local level. Be aware that there may be written contractual covenants between the authority having jurisdiction (AHJ) and purchasers-including independent volunteer entities-when taxpayer monies are expended. Additionally, there’s the possibility that a city council, a board of fire commissioners, or a fire department’s hierarchy may nix a cooperative purchase and mandate a local and formal public bid opening-regardless of whether or not other local entities have used co-ops. It’s legal to do so. Apparatus purchasing committees should verify at every level whether a co-op purchase is both legal and permissible. Doing so in writing may save grief and aggravation later.

Two Sides

It is unfortunate, but essential, that any discourse concerning apparatus purchasing be explained in detail to reflect the multitude of viewpoints and attitudes in the marketplace. Occasionally political correctness is a victim. I believe there is a preferred vendor for the vast majority of apparatus purchased today regardless of whether or not the preference is subtle or obvious. Manufacturers and dealers (aka vendors) look at selling apparatus from opposing viewpoints-one where they are the preferred vendor and one where they’re not. These perspectives are readily obvious in the cooperative purchasing field. Overwhelmingly, dealers would not speak on the record when discussing cooperative purchasing. Off the record, they spoke plenty. If they are the preferred dealer in a co-op purchase, life could not be any better. If they are not the preferred dealer, they decline comment or say the process is flawed.

Purchasers using co-op purchasing wholeheartedly embrace the concept. Surprisingly, some fire departments are unaware of it. Industry experts, pundits, and commentators normally expound on the positives for everything being discussed because readers seldom want to hear the downside of any topic including cooperative purchasing. It is not prudent to alienate readers, advertisers, and sources of information. Being politically correct does not mean different points of view do not exist or are not valid. Sometimes the truth hurts.

The Players

No manufacturers want others to get a sale without putting up a good fight for the business. They encourage their dealers to pursue every fire truck. To most, the end result counts-whether it be profitability, prestige, or the claim of who sells the most rigs. How they influence, mandate, or coerce dealers to bid every truck is immaterial. It is important to note that some manufacturers will sell direct either by choice or by necessity in areas with inadequate dealer representation. Selling direct is a sales tool at their disposal. So is cooperative purchasing.

Dealers have a pragmatic approach to sales. Face-to-face interaction and local familiarity with end users on a daily basis may give a better feel for the landscape than some manufacturers have. There are two types of apparatus dealers: sellers and bidders. Sellers are professionals who can market their products to prospective purchasers and can influence the specification writing process. Astute sellers realize when a fire department wants another’s rig. They will acknowledge the fact they’ve lost before specifications are written and may decline to bid. Sellers are in the upper echelon of dealers. Like good card players, they know “when to hold them and know when to fold them.” Smart sellers embrace co-op purchasing; it’s another tool in the crib. They’re getting another chance to deal the cards.

Dealers that are derogatorily called just bidders or bottom feeders by their peers don’t sell fire trucks to prospective customers. They bid on whatever purchasing specification happens to hit the street. Bottom feeders are usually aggressively honest or nefarious. Aggressively honest dealers will do everything legal to sell their rig regardless of ethics or moral correctness. Nefarious dealers might not. Cooperative purchasing will detrimentally affect the livelihoods of both.

Purchasers include the AHJ that signs the check and the fire department that usually writes the specs and influences and steers the purchasing process. Co-op purchasing may appeal to both because of the advantages described below. A potential downside and possible bombshell is when a co-op purchase is made from a manufacturer of choice for questionable reasons while circumventing the local bidding process-a harsh but plausible statement and one worth exploring.

Commentators must tread carefully when conveying the observations of those who wish to remain anonymous. Apparatus dealers interviewed declined speaking on the record. It is understandable because they’re not always the preferred vendor. However, they were willing to discuss both sides of the story off the record. The comments made by the apparatus dealers interviewed are more enlightening rather than disingenuous. Some remarks appear debatable because not every dealer is well informed on the particulars of each purchasing co-op. Because some purchasers’ comments may inadvertently reflect what could be construed as a hidden agenda, they too shall remain anonymous. The following are synopses of my interviews.

1 This 1,500-gpm pumper with a 1,000-gallon booster tank was delivered to Crosslake, Minnesota, in 2015. The all bolted stainless steel body features a forward transverse compartment and speedlays with side pump panels protected by roll-up doors. According to Chief Chip Lohmiller, the apparatus purchasing process through the HGAC was easy with no issues. This complex unit demonstrates that cooperative purchasing is not limited to “plain Jane” production line apparatus. (Photo courtesy of CustomFIRE
1 This 1,500-gpm pumper with a 1,000-gallon booster tank was delivered to Crosslake, Minnesota, in 2015. The all bolted stainless steel body features a forward transverse compartment and speedlays with side pump panels protected by roll-up doors. According to Chief Chip Lohmiller, the apparatus purchasing process through the HGAC was easy with no issues. This complex unit demonstrates that cooperative purchasing is not limited to “plain Jane” production line apparatus. (Photo courtesy of CustomFIRE.)

Advantages for End Users

Purchasers using cooperative purchasing unanimously praised the concept. All state they will use it in the future, claiming there is little to no hassle and that it is the best value for taxpayers. There is no haggling on price and no negotiations. Several mentioned they could standardize their fleets without having to contend with low-balled bids. Some were pleased with the past performance and low maintenance costs associated with particular manufacturers and used a co-op to purchase additional apparatus from their preferred manufacturer. Others said the co-op chosen allowed for flexibility in making changes. Changes are typically frowned on with public bids. However one co-op allows for changes to the product as well as an allowable financial overage of 10 percent of the cost. It is essential that purchasers understand how each co-op works.

Purchasers claimed there are few drawbacks. They could purchase the exact apparatus they wanted designed for their specific application without having to deal with vendors who are just trying to “get their foot in the door” but have pages and pages of exceptions to bid specs. It saved time in legally justifying why a purchase was not made from a vendor who took multiple bid exceptions and threatened legal action because his bid was the “cheapest.” There is no need to review bids. You can buy discreetly from the vendor of choice while avoiding public bidding-sometimes before other vendors are even aware you are looking. Purchasers say vendors who were not considered for a co-op purchase have never formally complained. They might be the favored one the next time.

Most emphasized having a vendor who knows the process and guides you through it from start to finish makes it a stress-free and smooth experience. Some vendors who try to dissuade you from going this route may not understand how it works or have concerns over their own remuneration.

Advantages for Dealers and OEMs

The biggest advantage is to the preferred dealer who guides the co-op purchasing process. One successful dealer claims he hasn’t formally bid a rig this year and probably will not because of the advantages of cooperative purchasing. Pricing isn’t revealed in front of other vendors like at a formal bid opening. Co-op purchasing removes price from the decision matrix, as the customer already knows whose rig it wants and knows the formal bidding process has been performed by the co-op. It eliminates the pressure of meeting a bid deadline and the expenses of formal bidding. There is no writing and rewriting verbiage to create an “open” purchasing specification for a potential customer. It keeps the customer’s focus on the preferred manufacturer. The vendor can be a hero to the end user because it saves money by not formally bidding. There are no attorney fees; posting of legal notices; advertising costs; specification preparation; public bid opening expense; reviewing of proposals; or arguing with bidders over exceptions, clarifications, options, pricing, and bid award.

Disadvantages

The co-op process can create barriers to competition because it enables purchasers to become insular and complacent. When a manufacturer has been prechosen, product comparisons are not considered. With a formal bid opening, even when nonpreferred vendors are not invited to make sales presentations and product demonstrations, vendors will have-at the least-an opportunity to present their product with comparative pricing to the AHJ.

As I understand it, when a co-op solicits bids, it is on a generic specification. In turn, each manufacturer submits a price for its own product. There is not a low bid per se for each rig priced. All prices and options are listed in the co-op’s schedule. Purchasers can pick and choose a favorite manufacturer regardless of its price standing in the co-op schedule. In essence, a purchaser can pick a rig that is not necessarily low bid for that category. There’s the possibility that even if a purchaser meets with various vendors beforehand, the vendors really do not know if they are making an apples-to-apples comparison. That is an unequal product comparison.

Carefully evaluate the co-op’s technical specifications. I believe proposals through co-ops do not make the nitty-gritty product comparisons between the various “listings” as would be made known in a formal bid because each manufacturer is proposing its own product. And, there may not be a low bid per se for each rig priced.

One vendor predicted that as more and more end users embrace cooperative purchasing, vendors that do not will have a hard time securing contracts, as opportunities will become scarce. The uneducated vendors and ones that do not have a good handle on what’s happening in their territories may follow the same path to irrelevance as the bottom feeders.

The Bombshell

Notwithstanding the accolades of end users and dealers promoting co-op purchasing, there can be downsides to the process. What is to prevent end users from using co-op purchasing to circumvent normal bidding protocol to purchase a rig because of a hidden and perhaps unethical agenda? The mayor’s brother-in-law sells Brand A, so we’ll use a co-op program to purchase a Brand A. We dislike Brands X, Y, and Z and don’t want them getting our business, so we’ll use a co-op purchase to buy Brand B. It might not be proper to purchase a particular rig through a co-op for no apparent reason except to satisfy a fire chief who says this is the rig he wants-period.

All prices and options are listed in the co-op’s schedule. Purchasers can pick and choose a favorite manufacturer regardless of its price standing in the co-op schedule. So, in essence, a purchaser can pick a rig that is not necessarily low bid for that category. Is that kosher? If there are a dozen co-ops available, what prevents an end user from shopping the various co-ops to find the exact rig it wants-whether it be for quality, price, or personal preference such as favoritism for a given manufacturer?

Words of Wisdom

There’s more to co-op purchasing than picking a rig off a contract schedule and ordering it. One end user stated that fire departments still need to “build a specification” to their individual department’s needs regardless of whether or not it is a stock or customized rig. There is a fair amount of paperwork involved that is unique to each co-op, so it is essential to work with an OEM or its vendor that is knowledgeable of the process.

It’s mindboggling to some purchasers that vendors are actually compensated when selling fire apparatus! Regardless of the amount, many think it is probably too much. A reassuring fact is that commissions for co-op sales are set by the manufacturer rather than the local dealer. Some purchasers and end users believe that better pricing can be secured by negotiating and bidding locally. To my knowledge, that has not been substantiated.

Some co-ops note that OEMs must sign an agreement that the OEM cannot bid or sell a like piece of apparatus for less than what has been bid through the co-op. Individual unit pricing and pricing for myriad options are available on some co-op Web sites; hence, costing is available to all parties. Some require potential users to “sign up” to access pricing-with no obligation to purchase.

A misconception is that purchasers are limited to only co-op published options. There is no prohibition for purchasers to separately negotiate and price unpublished options with a local dealer for items that may be advantageous to be completed locally. Customized tool mounting and specialized graphics are prime examples.

Many of today’s apparatus purchasing committees are well versed and educated in fire apparatus construction and in specifying a new rig. A possible disadvantage to co-op purchasing when buying a fire truck is that the process may be downgraded to merely looking at a catalog, picking a rig with the color you like, and sending in the purchase order. Users may become complacent. Over time, they may become uneducated about their primary tool: the fire truck. That would be a disservice to the fire department.

BILL ADAMS is a member of the Fire Apparatus & Emergency Equipment editorial advisory board, a former fire apparatus salesman, and a past chief of the East Rochester (NY) Fire Department. He has 50 years of experience in the volunteer fire service.