by Lise Patry, BA | Sc | LLB | ICD.D | NECI Instructor| Patry Law
A group purchasing organization, or ‘GPO’, is an entity whose fundamental purpose is to allow its members to combine their purchasing power to benefit from volume pricing for goods and services. In addition to reduced prices, buying through a GPO can shorten the procurement cycle, save staff time and help entities avoid the risks associated with a public procurement process.
In Canada, GPOs have become significant players in the health care and education sectors. Beyond these sectors however there appears to be scarce take-up for GPOs and one has to ask why?
Perhaps it’s because of the historical lack of clarity around whether public procurement rules allow public sector entities to use GPOs. The Agreement on Internal Trade (AIT) only addresses GPOs (which it refers to as “buying groups”) in a cursory fashion in the annexes applicable to Crown corporations and MASH sector entities. Beyond the AIT, it’s rare to find references to GPOs in government procurement frameworks, which creates uncertainty as to their legality or acceptability.
The Canada Free Trade Agreement (CFTA) clarifies the rules around using GPOs, making it easier for public sector entities to add GPOs to their menu of sourcing options. The buying group provisions in the CFTA apply to all covered entities; governments, Crown corporations and MASH sector. When purchasing through buying groups, like the AIT, the CFTA requires that covered entities ensure the procurement process is carried out in accordance with the CFTA but the CFTA introduces an exception to this rule where the entity has little or no control over process. Covered entities using GPOs are required to publish a notice of their participation with a GPO at least annually on their tendering website.
With the CFTA explicitly recognizing the acceptability of using buying groups, procurement officers would be remiss not to explore adding GPOs to their menu of sourcing options. Before doing so, however, it’s important to check with legal counsel to ensure the organization’s procurement framework allows the use of GPOs. If the policy framework allows it, before moving ahead it’s equally important to analyze the pros and cons of using a GPO as there is no ‘one size fits all’ for sourcing options in procurement; GPOs may generate significant benefits for some organizations but not for others.
Watch for future articles on this topic, including the next in this series that examines the pros and cons of using GPs in procurement.
Lise Patry, an instructor with NECI, is a lawyer and former business executive with a strong background in technology and more than 20 years of business and legal experience in the public and private sectors. As principal of Patry Law, in addition to general law, she offers virtual counsel services and specialized expertise in contracts, licensing, government procurement and corporate governance. She can be reached in Ottawa at (613) 833-7488 or email@example.com. This article originally appeared as a series of blog posts in September 2016 at PatryLaw.ca. It has been adapted and is used by permission.Lise Patry
Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.