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POSITIONED TO THRIVE: Higher Ed in the Recession

How colleges and universities are working together to be stronger during tough economic times
University Business, May 2009

SINCE WORLD WAR I, FORT ORD IN SALINAS, CALIF., HAD BEEN AN ARMY training facility and artillery target range. Today, 15 years after the army left, the property’s main feature is a growing regional university—California State University, Monterey Bay.

Using a combination of new buildings and military leave-behinds, the campus is dotted by hundreds of former military facilities that will one day be replaced by new construction. Growth is forecast. With 4,300 students—2,600 of whom live on campus—the school plans to cap its enrollment at 12,500.

Nearly 700 miles to the southeast is a university with a decidedly different history and focus. Arizona State University, founded in 1885, has 67,000 students on four campuses in the Greater Phoenix area. ASU is a top-20 research institution among those without a medical school.

As public institutions, both CSU Monterey Bay and Arizona State have seen state support steadily decline over the years.

“Arizona has been hit fairly hard by the recession,” says Ray Jensen, associate vice president for University Business Services at ASU. “The state’s revenue is heavily dependent on sales tax, and the housing market was hit hard after a period of housing growth and anticipated development.” ASU leaders don’t know what impact the deficit will have on higher education this year, but the university receives 30 percent of its revenue from the state. “We will not receive the funding that’s budgeted, and we are currently planning for significant budget cuts,” Jensen concludes.

“We always are looking at ways to be more efficient,” says James Main, CSU Monterey Bay’s vice president for Administration and Finance. Budget cuts hit CSU Monterey Bay’s academic side as well as administrative operations. Many military buildings are still being used as classrooms, but all capital projects have been canceled, including a proposed 20-classroom academic building.

Other results of belt-tightening include larger classes (an average of 22 students, up from 17 a few years ago). On the administrative side, once-per-day mail delivery has replaced multiple visits, and some offices get no mail delivery, so they now pick up their own.

Reductions in administrative leadership and staff are most visible, Main says. “We’re one-deep in many areas, and when people leave, we’ll go without those positions. Where there were 10 people, we might try to work with eight. I strive to identify the impacts and let people know what we’re not going to do anymore.”

ASU has consolidated several academic programs, as well as reduced or eliminated services. “We’re rethinking major purchases and employment or human resources actions,” says Jensen. “We recently announced a furlough for all employees, and we are actively looking for additional opportunities for significant cost reduction.”

“I routinely hold education sessions and open forums on the campus to explain our budget,” says CSUMB’s Main. “We get a good representation of faculty and staff to participate. I tell them that 80 percent of our budget goes for salary and benefits, half of the rest goes for utilities, and that leaves 10 percent in discretionary money for paper, supplies, travel, and so on. As we’ve looked at how to get more bang for our buck in discretionary spending, we find that cooperative purchasing plays an important role in saving both time and money for our people.

“In addition, we’re developing just-in-time inventories to reduce spoilage. Office and chemical supplies have led the way, because those vendors learned the needs of colleges and universities. A large system such as CSU can consolidate with one vendor to get the best service and the best price. In higher education in general, there are many relationships and partnerships that evolve. Office supplies and scientific items apply well to that,” Main says.

He recommends that purchasing professionals in higher education mount a competitive process to find out who can fulfill the institution’s needs. CSUMB has turned to suppliers such as Office-Max and Staples for recycled paper, and Fisher Scientific for laboratory and other science products. “We buy just the right amounts to accomplish our teaching objectives and not create an environmental hazard on the other end,” Main says.

When it comes to maintenance, CSUMB no longer stocks inventory on campus. The university’s relationships with Grainger, Lowe’s, and The Home Depot bring two major benefits: price discounts and timely delivery within 24 to 48 hours.

“We also had a Heinz 57 Varieties approach to copy machines,” says Main. “We wanted to standardize our fleet of copiers—to pay for clicks instead of leasing or buying, so we went to the major copier manufacturers and asked if they were willing to sign a five-year contract for click-pay. We brought in end-users to explain the program, our user committee evaluated the proposals, and now we’re in fi nal negotiations with two vendors for campuswide document production, for a potential savings of almost $200,000 per year.

“What’s more,” Main says, “the savings are now available at each department’s discretion, and our copier budget is now campuswide instead of by department.” Next year, the university will standardize computer and software purchases. “Right now, we have a smorgasbord of computers. People buy whatever they want,” he says.

At ASU, Ray Jensen cites a long history of cooperative purchasing that helps keep buying efficiency high and costs low. “Attractive contracts and expanding our use of technology helps manage spending,” Jensen says. “Ten to 13 percent of all procurement actions are developed through co-op contracts, so our total amount purchased cooperatively is approximately $30 million. We find great value in combining our spending with other institutions.”

ASU’s cooperative purchasing history goes back at least 50 years, and Jensen says it should be part of higher education’s standard operating procedures. “We regularly use our memberships in E&I Cooperative Purchasing and Tri-University Purchasing—where we jointly buy with the University of Arizona and Northern Arizona University. Cooperative purchasing allows us to structure all our contracts so that we can utilize pricing from other institutions, including county and municipal contracts,” Jensen says.

Cost-savings alone does not characterize cooperative purchasing, Jensen explained. “If we do a $10 million furniture contract through cooperative purchasing, it’s a challenge to come up with meaningful, documented savings, but you can lower administrative costs by using contracts developed by others. You also get the benefit of leveraging the relationship to get better service and support than you might get independently,” he says.

“CSU Monterey Bay has used cooperative purchasing for the whole gamut of office products,” Main explains. “Vendors realized there was a niche to be filled by a one-vendor approach. Groups of universities now come together, and we all sign a multi-year contract. The suppliers that are most successful are the ones that can provide local supply on a national level.”

Main cited California State University’s 23 campuses and $500 million per year in supply purchases. “I’ve seen it become the most comprehensive program over the last 10 years. We order as much as possible through them. Our campus can even hire temporary employees, where the supplier takes care of all of the screening, background checks, training, and pay.”

Main says technology offers tighter control over the size and scope of purchases. “The discretionary 10 percent of higher education’s spending isn’t going to get any bigger, and cooperative purchasing helps us stretch as far as we can,” Main says. “Price, customer service, and ease of ordering are all in the mix, but in the final analysis, we simply have to do more with less.”

Gary Wilson is vice president of educational markets for E&I Cooperative Purchasing.