Budget Savings through Group Buying

December 10, 2019

By Jeff Barten, Energy & Assets Manager, LAS

The Provincial government has called on Ontario’s municipalities to cut their budgets by 4% and find savings.  With finances stretched so thin, many are not sure where to find that money.  Many have already cut back on things like paper use by going digital, but you still need to buy equipment to run your operations.  Assuming you are already only buying what you need, one idea to cut your budget further is not to look at what you buy for your municipality, but focus on how you buy it.

Group Buying is starting to take hold in Ontario in a big way.  Historically, the municipal sector has purchased this way within small regional groups, seeing time and financial savings from joining forces.  Here’s how it works: a municipality puts together a tender document on behalf of itself and a number of neighbours.  Once the contracts are awarded, everyone within that group of municipalities can purchase the product or service under that tender.

This approach reduces the redundancy of multiple municipalities spending time and effort to procure the same thing.  Typically, it also provides economy of scale because a vendor knows that they will save money on having to respond to multiple tenders and have almost guaranteed sales with multiple organizations. This is the concept that all AMO/LAS programs and services use, where the economy of scale reaches to Ontario’s entire municipal sector and even nationally.

Consider then, a province wide or nation wide buying group – think of the purchasing power!  There are a number of different group buying options available through different government organizations.  Some focus on the education sector, some on the health sector, and others on other BPS organizations. LAS’ new Municipal Group Buying Program focuses on the municipal sector and is part of a larger program involving municipalities from all across Canada.  It includes items that municipalities use on a daily basis to serve their communities. 

So, what about the legality of these groups?  After all, it is the public purse being spent – it must be done wisely and with integrity.  The Canadian Free Trade Agreement (CFTA) that came into effect on July 1, 2017 replaced the Agreement on Internal Trade (AIT) previously used by many in the sector.  Like the AIT, CFTA allows for group buying.  Clause 7 states:

7. A procurement entity shall publish a notice of its participation with the buying group at least annually on one of the tendering websites or systems designated by its Party. That notice shall direct potential suppliers to the buying group tender notices website if it is different from its Party’s tendering website or systems.

To participate in a buying group is simple under CFTA. All you need to do is post a notice to that effect, whether it be on your chosen tender site, municipal website, or both.  For projects with a defined term, include the anticipated start and end dates. For projects with an indefinite term, include the current year only and re-post the notice annually. Posting this notice will allow your municipality to defer to the procurement process that has already been completed on the various offerings.  The idea behind the posting is to let others know your intentions in the interest of transparency.

Group Buying can save municipalities time and money on the things they use every day.  As you prepare this year’s budgets, give some thought as to where you might find savings through group purchases and by simply buying things differently.

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