INSPIRED BY ITS SUCCESS IN pooling purchasing power, a group of Northern Virginia custom builders is helping others start their own purchasing cooperatives.
In 1996, seven members of the Northern Virginia Custom Builders Council formed a cooperative to negotiate better pricing with vendors and suppliers. It proved an immediate success when lumber prices increased as much as 50 percent during one quarter. Co-op members had better pricing locked in for 90 days, recalls Jeff Carpenter, president of Fairfax, Va.–based Monticello Homes and one of the co-op's founding members.
The group has since expanded to 50 members and has negotiated preferred pricing across a range of commodities and products. What's more, the co-op is profitable, thanks to rebates the vendors pay based upon how much the builders buy.
Last year, co-op members created a separate company, CB/ USA, to take the model to other cities. So far, it is working with builders in Houston, Wilmington, N.C., and Albuquerque, N.M. CB/USA helps organize the builder group, negotiates the vendor pricing, and manages the coop once it's started, receiving a percentage of rebates in return. Bill Smithers, principal of CB/ USA, says the business model makes the most sense for builder groups with at least $20 million in annual material purchases, noting that it's easier to receive competitive vendor bids in larger markets.