Clout is something many custom builders believe they lack when it comes to negotiating prices with suppliers. In 1993 a few Northern Virginia builders decided to change that. Under the chairmanship of Jeff Carpenter, the custom builders council of the Northern Virginia Building Industry Association has transformed itself into a buying co-op that gives members the volume pricing enjoyed by large production builders. By combining their annual materials purchases, which total about $100 million, co-op members have created a far stronger bargaining position than any one of them could ever attain. Their hand is so strong, in fact, that Carpenter says the co-op has been able to negotiate prices that save members at least $1,500 a house.
Quick to point out that the success of the co-op was a group effort, Carpenter has, nevertheless, taken a leadership role in enlarging its scope and membership. The number of building products for which the co-op negotiates prices has steadily increased from basic lumber to include many categories of products, from cabinetry to trim. The number of members also has grown from eight to 50, despite $1,300 annual membership dues, which pay for the salary of a recently hired manager who helps with negotiations and keeps track of contracts.
Key to the group’s success has been a legally binding non-disclosure agreement that all members sign, promising they will not reveal prices to other builders. That promise was necessary to gain the trust and cooperation of suppliers. To insure the long-term success of the co-op, members must stay in good standing by paying bills on time and keeping customers satisfied; complaints are subject to peer review. Suppliers also must meet the group’s standards; they are judged on service as well as price and must be members of the Northern Virginia BIA.
