Time for a Partner
Going solo to solve problems or provide new services can often be too costly for institutions. Some are finding that teaming up with an industry partner can result in needed expertise while reducing overall costs.
- See sidebar, "The Big Squeeze on Auxiliary Services"
For years many colleges and universities have felt the pinch from a steady decline in state and federal funding as a percentage of total institution budget. Now, coming off the worst recession in decades, all higher education institutions face the need to further streamline operations. No corner of the academy is immune from what seems a new norm of continuous cost-cutting, and some areas such as campus auxiliary services face greater expectations to increase—or at least maintain—revenue margins.
This reality, although difficult, can offer some positive outcomes. “Partnerships forged with the private sector can deliver not only increased service and cost savings, but may also improve town-gown relationships within the communities they serve,” suggests Dorian Page, vice president for finance and facilities, Southern Utah University, Cedar City. Page serves as a representative of the NACUBO Comprehensive and Doctoral Institutions Council, members of which have identified cost-savings initiatives as a key area of concern. This article highlights four diverse partnerships that institutions have developed with external service providers to improve delivery, reduce costs, or accomplish both. From implementing new programs to fine-tuning partnerships that have been in place for some time, colleges and universities are finding industry partners eager to address pressing campus needs.
Easy to Pay
Wanting to better focus institutional resources on educating students, leaders at Wellesley College, Wellesley, Massachusetts, began in 2002 to look for a firm to administer the college’s payment plans. Tuition Management Systems proved a good fit because of the company’s size and the way it structured its customer-service solutions. More recently, the college expanded its relationship with TMS, which now handles Wellesley’s e-billing solutions. In addition to paying for tuition, students can take care of athletic, graduation, and other fees through several methods, including credit cards and automatic withdrawal from checking or savings.
Previously the college used a paper-based system for billing and did not accept credit card payment of tuition. Wellesley’s small staff was also too overburdened by time commitments to provide all students with counseling on financial aid, loan eligibility, and payment options. As a result of switching to e-billing and accepting electronic payments, Wellesley’s collection rates on tuition have steadily improved. At the same time, a faster turnaround on receipt of payments has, in some cases, cut standard processing time by half (from 48 hours to 24 hours or less). Student satisfaction has also risen in conjunction with increased payment options, and students can now get answers to their payment questions by calling a toll-free number that connects them to knowledgeable TMS staff.
Wellesley was not required to provide any major outlay of resources to implement the payment plan or other program improvements. Instead, the college’s investment came in testing the system to ensure that proper checks and balances were in place.
“We are saving the cost of paper, labor, posting, mailing services, and time to run reports,” notes James Garrant, manager of student accounts at Wellesley. “Now we spend an hour generating a file that gets handed off, and within 48 hours of e-bills going out, we begin to receive payments.” The college’s cash flow has also improved as a result of students paying by the month.
Jon F. Dodd, TMS executive vice president, points to the value of a monthly payment plan for students and their parents. “A monthly plan enables a family to spread the cost of tuition. This limits their need for borrowing and incurring debt, therefore lowering their cost of attendance.” Approximately 680 of Wellesley’s 2,200 families are on the monthly payment plan.
Putting the partnership in place took time. TMS approached Wellesley before college leaders had even decided to research the possibility of outsourcing the institution’s payment processes, but that connection paid off later. “These days it’s hard to devote time to examining business processes. You might not have time to speak with every vendor who calls, but don’t ignore them all to the detriment of discovering a solution,” cautions Garrant.
Keeping the communication flowing once the process is in place remains crucial. “TMS continues to ask what we need,” says Garrant. “Wellesley is benefiting from the additional services to students and families, improved cash flow, and even a life insurance benefit that is provided so that in the event of the death of a payer, the amount owed on a contract is covered.”
Lots of Watts to Save
Extensive deferred maintenance and rising costs of refurbishing and repairs drove Angelo State University, San Angelo, Texas, to discover savings through a performance contract with Schneider Electric’s Buildings Business. The partnership guarantees that Angelo State will reduce its utility costs by nearly $800,000 annually.
Previously, upon inspection of the campus, state executives had identified deficiencies in some of Angelo State’s mechanical equipment. The university was required to address the deficiencies by updating or replacing major environmental systems for lighting, heating, ventilation, and air conditioning. Such comprehensive upgrades usually bring an opportunity to maximize energy efficiency, but they also typically require a huge up-front capital expense.
Angelo State’s performance contract resulted in new equipment plus energy-efficient lighting and plumbing fixtures to return a quick payback. So far, the actual savings at Angelo State have exceeded original projections. Sharon Meyer, the university’s vice president for finance and administration, is quite pleased with the outcome. “The savings have allowed us to reallocate funds to major enrollment growth initiatives,” she notes. In addition to funneling resource savings to new recruitment and retention efforts, leaders at Angelo State are especially happy to have achieved long-term capital improvement in the midst of difficult economic times.
Among the other benefits realized by the university’s 6,000 students and its faculty and staff is a more comfortable climate inside classrooms, meeting rooms, and other spaces, as evidenced by a sharp decrease in the number of complaints regarding room temperatures.
Safeguards are also in place for the long-term success of the partnership. These include a clear mapping of accountability and an understanding that the contract must be honored. In the case of Angelo State, cost savings are guaranteed throughout the payback period of 15 years.
According to John Russell, the university’s director of facilities planning and construction, when a campus needs to make significant energy improvements but doesn’t have the funding to do so, a performance contract offers a great opportunity to pursue upgrades and efficiencies without major out-of-pocket expenses and to pay for the improvements with the program’s savings.
Students at East Tennessee State University (ETSU), Johnson City, were turning to online providers for their textbooks in greater numbers each year rather than shopping at the university’s bookstore. As of the spring 2010 semester, the administration unveiled a textbook rental program in partnership with Nebraska Book Co. to bring students back to the campus store.
Rentals have quickly become a popular way for students to save money, since rental prices tend to be about 50 percent of the retail purchase price for new textbooks. Nearly 1,300 ETSU students participated in the pilot program. Combined, these students saved an estimated $73,000. The on-campus rental program also ensures that students receive the right textbooks and the correct editions of those books. That’s not something they are guaranteed with online purchases, which may end up costing students more if they have to return merchandise.
The university has likewise benefited from the program in key ways. Students are back shopping at the campus store as satisfied customers. And, while ETSU and Nebraska Book Co. work together to identify the textbooks that are the best candidates for rental, ETSU does not have to worry about implementation costs. Rather, the book company partner bears the cost of the assets and all the risk. Those risks include losses from occasional unreturned books and new editions of texts that make the older ones in the inventory obsolete.
“The program has gone very well at our campus store and at our off-campus store,” says David Collins, ETSU’s vice president for finance and administration. “We’re looking forward to benefiting more students with the program in the fall.” According to Collins, the only limitation to a rental program is that it doesn’t apply to all textbooks, since only books that will be reused the following semester are eligible for the program.
A textbook rental solution is not only easy to implement but is also workable on any campus, notes Sue Riedman, vice president of marketing and corporate communications at Nebraska Book Co. The company currently offers rental programs at 106 stores and anticipates significant growth in that number within the coming year.
Enhancing the Neighborhood
Despite the volatile economy, Arizona State University (ASU) was in dire need of new student housing. However, university leaders wanted to avoid negatively affecting the institution’s balance sheet or its credit rating. The young and rapidly growing research university has many capital needs—including labs, classrooms, and other academic facilities—so preserving debt capacity to fund those high priorities was essential.
Along came a partner that would not only assume the expense but also manage the now-completed facilities: American Campus Communities is owner, developer, and manager for two ASU student housing facilities. Vista del Sol, an apartment-style student housing community, and Barrett Honors College, a selective, academic community housing facility, were recently added to the university’s main campus in Tempe. (See also “Facilities Funding Thaws” in the January 2010 issue of Business Officer for more on this project.)
The partnership has allowed ASU to use land that defines the border of the campus to create a housing neighborhood, by combining the two new facilities with existing student housing. While the university retains control of residence life, ASU does not have to hire additional facilities staff. Instead, American Campus Communities employees report to the ASU campus director of student housing. The university also receives an annual ground-rent payment for the land on which the two facilities are constructed.
ASU’s implementation costs for the two student housing assets were fairly minimal. They included management and executive staff efforts, development of a request for qualifications, evaluation of respondents, and legal fees associated with the contractual partnership. According to James Wilhelm, American Campus Communities’s executive vice president of public-private transactions, “ASU leadership has aggressive plans for capital improvement. We are pleased to help carry out the vision, increase the campus’s sense of academic community, and attract new students.”
In fact, the biggest benefit to the university has been the partnership’s unique structure, says Morgan R. Olsen, ASU’s executive vice president, treasurer, and chief financial officer. While the partnership itself requires significant effort to ensure that interests are properly aligned, ASU does not have to capitalize the housing investments. “Our debt capacity remains available for high-priority capital needs that are instruction- and research-related,” says Olsen.
DAVID RUPP is director, business development, and MARYANN TERRANA is director, constituent programs, for NACUBO.