Trashy Purchasing

Jack Bernard, a retired SVP with a large national healthcare firm, has worked extensively with hospitals across the nation regarding cost containment and insurance. He was also the first Director of Health Planning for Georgia.

I was a County Commission Chairman in another Georgia county. After a bidding process with exact criteria listed in an RFP going out to many firms, we did a “sole source” contract for garbage pick-up. The price went down and service improved because we were a larger client. It should here as well if the cities and county went this same direction, combining their volume in a group purchase to get a better price (for example, companies prefer 100,000+ customers county wide to just 35,000 in Peachtree City).
PTC is facing this issue right now, so I will use them as an example. I’m aware that some PTC citizens want the ability to choose their own garbage service company, despite the expensive, negative effect that trucks from multiple provider have on our streets. However, they may not be fully aware of how group purchasing works.
As someone who spent decades in the field, I feel compelled to give PTC and county taxpayers a very short course in group purchasing.
• Sole-source contracts are not necessarily good. Neither are they always bad.
• Multi-source contracts are not necessarily good. Neither are they always bad.
There, now you know the basics. Seriously, it just depends on your goals: Price, service, and quality.
For example, the Pediatric Association of Kentucky asked me to set up group purchasing vaccine contracts for their 700 MDs, a buy of $50 million. Via a sole source contract, we cut prices 10 to 20 percent versus what they could get on their own. Use of the contract was voluntary, but why not use it?
The answer to why not use it may be complex depending on the service/product. Service and quality must be factored in for vendors. For a commodity like vaccine, there really is not a difference (although if a vendor is taking the Doc to the Super Bowl every year… the Doc may think otherwise).
For garbage pickup, there certainly is a service component that must be considered. However, my assumption is that all three of the current providers in PTC are roughly equal or at least acceptable or their services would have already been terminated.
So, we have price. By using a sole source contract, PTC can definitely get a less expensive price than individuals doing it on their own. PTC can also definitely get a lower price with a sole source contract versus having three vendors simply due to increased volume.
To sum up, in the case of PTC’s garbage pick-up, there’s savings to be made via a sole-source contract. It would also save our roads. The City Council’s course of action should be obvious.
Furthermore, if Peachtree City, Fayetteville, and the County did a sole-source group contract, those savings would be enhanced. Isn’t it time we all work together?

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