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Shared Pain & Payoffs

Managing relationships within a buying consortium
University Business, Jun 2006

From buying paper and furniture to defibrillators and health insurance, consortia of higher ed institutions are saving up to millions of dollars annually on items bought in bulk-while at the same time breeding greater, long-term relationships built on trust. That adds up to saved time, fewer headaches.

Consortia processes can vary, but a constant for many of these groups is procurement-finding and buying much needed products for a super (or at least good) price, avoiding aggravation, and offering a healthy and strong communication link among the various administrators, particularly purchasing agents, at institutions of higher ed. And where there is networking and camaraderie, there is power.

"I've always worked in private industry where people don't share their knowledge," says Jeff DiCiaccio, director of Purchasing at the University of Massachusetts Medical School. "Here, we're all feeling the same pain and we're sharing ways to do things better. And when you get together with these people, it feels like family."

Sure, disagreements could pop up about the type of products that need to be purchased or the timing, but the next day's e-mail usually has a note from a consortium member asking, "Still friends?" Of course we are, DiCiaccio assures.

As in virtually any type of consortia, purchasing directors and other administrators at member IHEs decide what they want and the consortia does it.

Case in point: The Board of Directors at Wisconsin Association of Independent Colleges and Universities, a 45-year-old nonprofit, is composed of member college presidents from Catholic and secular, large and small schools statewide. Members express their needs to WAICU staff, who then find a way to take action.

The focus for WAICU is on reducing purchasing costs. For example, its board members decided several years ago to purchase an enterprise resource planning (ERP) system, which would integrate everything from course registration to human resources in a single piece of software.

It involved 54,000 requirements, which WAICU staff took out for bid to various vendors. The first phase is being implemented in July.

"Far too many people resist collaborative buying because they see it as a sign of weakness" in management.

-Ralph Maier, University of Pennsylvania

WAICU also helps Wisconsin members save money. "We say to vendors, you have to beat the price of our largest member, Marquette University," Rolf Wegenke, WAICU president and CEO, notes.

A dedicated staff does the research and brings vendors to the table. It's a labor intensive process, beginning with WAICU's 20 members contemplating, among other topics:

What is a big cost item?

Are prices running away?

What is the quality of service?

From the dean of students to the staff of the Registrar's office, members brainstorm on what they want. Once a priority is identified, WAICU asks members what the ideal outcome is for them, not just in price but in terms of a useful product. The formal bidding process commences by WAICU staff, with all the major vendors bidding. A representative advisory task force will review the bidders' proposals and WAICU selects a recommended bidder. Members then decide to go along with the bid, or not.

"They have a very strong sense of ownership and that is a good thing," says Wegenke, who in the past served in the administrations of five Wisconsin governors on business, technology, and community development efforts. "They know we are working for their best interests."

WAICU aims for continuous quality improvement, such as adding new items to an office supplies contract. Existing programs are also periodically rebid, with standards updated to fit the realities of how colleges are using a service.

WAICU's research and diligence pay off, says John Nicholas, vice president for Administration and treasurer at Beloit College, a member of the Wisconsin group. "They are the ones that do all the work and bring all the projects to the members for evaluation. That is the beauty of it all. The formality relieved us of doing all the research. Now, the members are the evaluators, judges, and ultimately the owners of the project."

Beloit's biggest pricing win has been in risk management; in the area of employee insurance, for example, the institution has realized cost savings of probably $100,000 a year, Nicholas adds.

Just as in Wisconsin, the Massachusetts Higher Education Consortium gets input from membership on contract needs. "If a contract is in place, you can pick up the phone and order [the product] today and have it tomorrow," says Jake Bishop, CEO of MHEC, which has 83 members and is the oldest nonprofit U.S. higher ed consortium. As an administrator, Bishop sees the savings in time and in getting the product "tomorrow" as huge.

These consortia especially benefit small private schools that don't have the same clout that large public schools may have, adds Bishop. "They benefit from the buying power. The savings in time and not replicating work is huge. Bringing continuity and consistency is as important as saving money," Bishop says.

For furniture purchasing, MHEC has 17 subcategories under one contract, which is posted online. Members can choose dealers and make specifications on furniture quality, material, and construction style. Savings on contracts within consortia can be as high as 28 percent-which Bishop notes is huge when dealing with contracts in the millions.

When DiCiaccio first came to UMass Medical School, he opposed the $6,500 yearly dues to MHEC. "But it became apparent [that the] networking opportunities with my peers is invaluable," he says. "And my staff of five can't stay on top of all the contracts."

For the Committee on Institutional Cooperation-made up of 12 research universities, including the The University of Chicago-a kind of reverse auction occurs online, says CIC Assistant Director Russell Snyder. For example, the consortium can agree to pay no more than $100 a ton for rock salt, but vendors don't know this and offer the lowest bid.

With a rock salt purchase for slippery, wintry roads, some members would consider delivery issues, while some institutions might stockpile rock salt. For example, spring is not a good time to discuss rock salt contracts as the winter season is over, but fall is a good time, Snyder notes. These issues are worked out in a committee of buyers representing the institutions. They negotiate Request for Proposal responses and service deliveries. If it saves good money and delivery concerns are met, they recommend it to the whole group and get a contract for rock salt.

"The purchasing directors are probably the most cohesive unit despite that volumes differ significantly," Snyder says. "There's no competition among institutions other than trying to do the best for each of their institutions."

"The main benefit is we're networking, and we talk about things happening in the industry and talk about changes and opportunities," adds Richard Disbrow, Michigan Life Science Purchasing Consortium chairman and the purchasing manager at Van Andel Institute, a cancer research organization.

The University System of Maryland, which includes 13 IHEs, also acts as a consortium, although it doesn't have a separate purchasing staff. Members meet quarterly, discussing concerns such as enrollment growth, labor relations, and information technology.

"When we work together, we can change the marketplace, instead of just buying off the shelf."

-Rolf Wegenke, Wisconsin Association of Independent Colleges and Universities

"It creates in management terms a high level of effectiveness in trading best practices," says Joseph Vivona, chief operating officer and vice chancellor of Administration and Finance at USM. With all of the issues facing higher ed leaders today, that extra support always helps.

The biggest headache among members of the Inter-University Council Purchasing Group of Ohio, comprising 15 four-year state universities (the voting members) and 30 community and technical colleges, concerns furniture buys, says Bill Wheelock, the group's chairman.

The Ohio State University, a consortium member, can't use IUCPG's furniture price agreement in part due to a pending lawsuit as a result of prior litigation over the competitiveness of the award. There are so many manufacturers that deal with chairs and so many for file cabinets and desks and dormitory furniture. "And we tried to make it a more competitive agreement but with so much diversity in product choices at the schools, we're pulling our hair out," says Wheelock, Bowling Green State University's interim purchasing director. "We probably have used eight local dealers at BGSU."

Other schools may use the same manufacturers or choose their own, depending on their standardization efforts and relationships with local dealers in their area.

But major problems in being part of a purchasing consortium are few and far between. "We're actually a much more congenial group," Wheelock says. "I think it's because we're all there to help each other and we all find things to be frustrating, but when we get together once every two months, it's much easier."

Disagreements do surface, but members say no hard feelings exist when price agreements are created.

It might take more time to come to a consensus on certain points of an agreement, but the Ohio consortia members develop a Request for Proposal, send it to vendors, send out proposals, and then evaluate them. "All the departments are getting squeezed, with fewer people, so then it's hard to get people to do extra jobs," notes Gene Stephens, director of Purchasing for The University of Akron, an IUCPG member.

"Anytime you get more than one person involved there is going to be disagreement," Stephens admits. "[But] we work well. We don't have all the same needs or desires. Everyone understands what this is about and we provide for the majority of the people. Each of the members has other avenues to procure products."

Another drawback to consortium buying power could be a fear of self-preservation. "The biggest misconception of purchasing agents is that they might think, 'Gee, if we are part of a consortium, are they going to replace me and take my job,' " Bishop says.

"Far too many people resist collaborative buying because they see it as a sign of weakness" in management, adds Ralph Maier, director of Purchasing Services at the University of Pennsylvania, which uses Educational & Institutional Purchasing, a nonprofit buying cooperative. But collaboration involved in being consortium members helps free the purchasing staff time so they can work on bigger projects and get a bigger return on investment.

Disagreements can also erupt with common purchases like paper, paper towels, and trash liners among five UMass campuses, explains DiCiaccio. "You'd think that would be simple, but we can't get universities to agree on going to bid," he says. The campuses all use different holders or trash bins and to agree on one vendor for the products would mean some would have to change their holders or bins.

Computers are another issue, as one university might only use Dell or another vendor. That's when a school might decide it's better to go it alone on the purchasing process, DiCiaccio notes.

Software licenses might also be a challenge, as far as juggling all the start dates, since one school might not need new software for another year or two, says Barbara Allen, CIC director. "Vendors are willing to be flexible when it makes sense," she adds. When building an RFP, stagger end dates for contracts and "that will save you a ton of trouble."

To help avoid the pitfalls of consortia life, members use the gift of gab. "There is shared savings and also, by virtue of communication channels we have, we are able to pick each other's brains for ideas" on, for instance, who has a good commencement photographer or a good contract for printing diplomas, Wheelock explains. Communication in Ohio's consortium is fostered through Internet chat rooms, listservs, and a spring retreat. "If there are any concerns or wishes, we get that all in before the RFP is developed," Stephens notes.

Four times a year, members of MHEC meet to discuss and vote on contracts. They also hold training, seminars, and demonstrations. They are so geographically close that members often visit members' campuses to check out, for example, overhead projectors in use. The chance to vent also helps. A member might have had a bad experience with a vendor. Or, a vendor might mention that one school is not paying its bills, which reflects badly on the other members. "We are the facilitator and mediator to work it out," Bishop says.

Much trust is built, as higher education purchasing agents tend to stay put in their jobs. So they share stories of their children as they grow old together, he adds. "It's like a family."

Even for decades-old consortia families, there are always lessons to be learned.

Consortia members need to consult extensively with administrators because, as Wegenke says, "They know better than we do what the needs are. But you need the professionals here to interact with the vendor."

Members learn, too, that procurement never ends. "There are always tweaks to a program due to problems that arise," Wegenke says. For example, a college may sign up for the WAICU Travel Solutions program, which the academic dean may use for recruiting faculty. But the alumni director might not have heard of the program and will seek bids for the alumni seminar in the Greek Isles. "Communication from WAICU to the colleges and among the personnel on each campus is therefore vital," he adds.

Another common lesson learned, Wegenke says, is that "we can really invent our own programs." A few years ago, the deans of students at member institutions collectively did not want to sacrifice student health insurance as insurance costs rose and/or failed to cover mental health or alcohol-related problems. WAICU sought bids for discounted health plans but the plans that came back weren't good enough, Wegenke says. They took another year to design their ideal student health insurance policy and vendors bid on it. WAICU found a Florida firm offering a "spectacular student program with better coverage. When we work together, we can change the marketplace, instead of just buying off the shelf," Wegenke says.

Stephens at The University of Akron adds that he can always learn from others. "And then the next day you get a question that you never even thought of," Stephens says. "I might feel like I'm a real smart guy, but the fact of the matter is that 14 people can help me. I'm that much better."

Angela Pascopella is a Norwalk, Conn.-based writer who covers education.

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