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Business Officer Magazine
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Business Briefs

Short news articles based on research surveys and peers’ business experiences that can benefit institutions

RESEARCH
Improved Procurement Policies Lower Costs, Raise Efficiency

FY11 State Budget Woes

$89B

The cumulative state general fund budget deficit at the start of FY11.

46

The number of states with budget deficits as of July 2010.

$112B

The projected cumulative state budget deficit (as of July 2010) for year-end FY11.

900K

The total number of jobs (public and private sector combined) that could be lost due to state budget deficits.

Sources: New Fiscal Year Brings More Grief for State Budgets, Putting Economic Recovery at Risk, Center on Budget and Policy Priorities; FY 2011 Budget Status, National Conference of State Legislatures; “States of Crisis,” Bloomberg Markets magazine.

A joint survey conducted in November and December 2009 by the American Association of State Colleges and Universities (AASCU) and the National Association of Educational Procurement (NAEP) reveals the need for procurement policy reforms. The national survey of public college and university procurement officers suggests that considerable cost savings could be realized through reform of current procurement practices. Such benefits could be achieved by reducing barriers and adopting reforms at both the state level and within public higher education institutions and their systems.

Efficiency Inhibitors

Survey responses suggest that certain state policies inhibit the ability of their public colleges and universities to maximize purchasing power and efficiency—or to generate cost savings. For example, some policies result in the inability of institutions to participate in cooperative purchasing consortiums or reverse auctions (in which the roles of buyer and seller are reversed), or to negotiate competitive bids. State mandates to use state contracts and accept the lowest bids were also reported as barriers to effective procurement spending. Essentially, these policies rule out consideration of other key factors such as the quality of products and services.

Survey responses also identified as barriers particular restrictions imposed by institutional and system procurement policies. These include uncontrolled spending (often facilitated by a decentralized campus culture); purchasing card policies that don't specify preferred vendors; disjointed or nonexistent policies regarding key items such as computers, phones, and furniture; excessive reporting requirements and unnecessary rules; and a lack of adequate e-procurement software.

Positive Ways Forward

The study points to opportunities for enacting effective policies and practices that can lead to cost containment, improved accountability, and increased efficiency in the procurement process. Included are recommendations for states as well as higher education institutions and systems.

State reform recommendations. Among the key suggestions for state policy revisions are these:

1. Provide greater autonomy to systems and institutions regarding procurement policy.

2. Review, and if warranted, increase the minimum threshold for purchases requiring state approval and adjust minimum thresholds involving formal competitive (sealed) bids.

3. Eliminate state mandates requiring institutions to accept the lowest responsive bids when awarding contracts.

4. Make participation in state purchasing contracts voluntary.

5. Allow institutions to participate in group purchasing consortia.

6. Review, and where warranted, relax state preferences or mandates involving the awarding of certain contracts.

7. Allow institutions to conduct supplier negotiations subsequent to the competitive bidding process.

8. Enable institutions to participate in reverse auctions.

Suggestions for systems and institutions. Recommendations at the college and university level include:

1. Review, and where warranted, amend overly-burdensome or outdated institutional policies regarding the approval of decisions involving purchases that exceed a specified minimum threshold.

2. Evaluate the prudence of, and where reasonable adjust the terms of, institutional policies that mandate the acceptance of lowest responsive bids.

3. Where state policy allows, seek to fully use group purchasing consortium opportunities.

4. If able within the confines of state law, consider greater participation in reverse auctions.

5. To the extent that institutional resources permit, further analyze institutional procurement expenditures through greater use of e-procurement tools.

6. Review current system and institutional procurement rules to develop a cohesive and comprehensive policy.

7. Build a campus culture of procurement accountability.

8. Ensure that system and institutional procurement officers receive adequate training and ongoing guidance regarding current state procurement statutes, regulations, and policies.

State mandates to use state contracts and accept the lowest bids were also reported as barriers to effective procurement spending.

According to Daniel Hurley, AASCU director of state relations and policy analysis, and Doreen Murner, NAEP's chief executive officer—both of whom presented the survey's findings at NACUBO's annual meeting in San Francisco—the current trend in state procurement policy is toward deregulation, as more state legislatures are eager to find new places for additional savings. However, the onus is still on institution leaders to do their homework and to approach state lawmakers with evidence of potential savings through alternate procurement practices.

RESOURCE LINK For the full study, see “Public College and University Procurement: A Survey of the State Regulatory Environment, Institutional Procurement Practices, and Efforts Toward Cost Containment.”

SUBMITTED BY Karla Hignite, Universal City, Texas, a contributing editor for Business Officer.

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Task Force Focuses on Future Transportation Needs

Virtually every college and university struggles to meet the transportation needs of its faculty, students, staff, and visitors. The 15 college and university presidents—many from NACUBO member institutions—who serve on Second Nature's national task force have concluded that higher education institutions cannot meet these challenges unless Congress makes fundamental changes in national transportation policy. Task force co-chairs, Judith A. Ramaley, president, Winona State University, Winona, Minnesota; and George M. Dennison, president, University of Montana, Missoula, are urging business officers to add their voices and experience to the national dialogue.

In addition, they suggest that CBOs urge their presidents to endorse the task force recommendations, which fall under the following broad actions:

  • Make reducing greenhouse gas emissions a top-tier goal for transportation programs.
  • Make U.S. leadership in vehicle efficiency and cleaner fuels a national priority.
  • Structure transportation financing and pricing strategies to reinforce energy goals.
  • Expand transportation options to meet local needs.
  • Improve the condition and efficiency of our transportation system.
  • Encourage innovation and expand research, data collection, and evaluation.

These efforts, the task force contends, will help align national transportation policy with energy and climate goals to lead state and local programs in making our transportation system sustainable.

“Our institutions have the expertise and capability to address these challenges as well as a real stake in the game,” note Ramaley and Dennison. “Consequently, higher education leaders are uniquely positioned to elevate the national dialogue about transportation policy above the usual push and pull of parochial interests. Across the country, colleges and universities have moved aggressively to ensure sustainability in their own institutional plans, to test and evaluate a wide range of low-carbon transportation strategies, and to conduct cutting-edge research that can lead to new energy-efficient technologies.”

The task force suggests that higher education leaders help focus the national conversation on transportation and energy. “The disaster in the Gulf has shaken the public from complacency and prompted many Americans to think twice about the way we obtain and use energy,” explain Dennison and Ramaley. “Even if Congress fails to tackle climate and energy legislation this year, it must still reauthorize federal transportation programs. By introducing energy goals related to sustainability into the debate, we can help to determine the most efficient, effective, and sustainable investment of the $500 billion in federal transportation funds projected over the next five years.”

To learn more about the task force's work, contact Ulli Klein, Second Nature's operations manager and executive assistant.

RESOURCE LINK See a copy of the report documenting the work of the Second Nature task force on national transportation policy.

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SPOTLIGHT: COMMUNITY COLLEGES
Spiraling Enrollment Outpaces Space, Resources

Like many of our peer institutions, Northern Virginia Community College (NOVA) system experienced tremendous growth in recent years, with a 33 percent increase in the number of full-time equivalent students from 2006 to 2010. The trend has brought welcome revenues to a funding model based on diminishing state support.

But, booming enrollment has its challenges. Growth must be managed efficiently or it can lead to poor customer service, lower-quality education, frustrated employees, and higher turnover because of overwork.

We've learned that we must react wisely in managing our resources while we develop and implement other plans that make the institution more streamlined and efficient.

Stretched Resources and Services

Some of the increased costs to support higher enrollment, of course, come in the areas of administrative support and student services. Financial aid and cashiering offices were inundated with requests for help and directions, in part because of the larger volume of financial aid and payments to be processed. The back office experienced a similar increase in transactions related to everything from checks and collections to a higher volume of parking tickets.

Other areas, such as campus safety, required us to modify emergency plans and safety strategies to accommodate the increased student population. Similarly, technology services have been in great demand.

They've Come, Now Build It

Space becomes the deal breaker when a growing volume of students and faculty need not only classrooms and laboratories but also study and recreation areas, parking, support offices, and even warehouse space. Last year we developed a database of existing space throughout the six campuses, which allowed us to evaluate the way changes in classroom setup, timing of classes, and particular use of the space can increase the net availability.

Near-term tactics. To satisfy immediate needs, we took some specific actions:

  • Revised class schedules and made better use of existing space. Spreading start times of classes more evenly throughout the day and week helped us accommodate new class sections as well as relieve some of the demand for parking on our suburban campuses. The various campuses have handled schedules differently; Reston Center started classes earlier in the morning to accommodate the needs of people who attend class before going to work. Overall, more classes are being offered in the evenings, on weekends, and online. 
  • Leased additional space when necessary. In the past four years, we've acquired approximately 80,000 square feet of new classroom and academic space near our campuses to accommodate credit programs and workforce development initiatives. The additional space has increased our leasing costs by 115 percent.

Long-term logistics. NOVA leadership is pushing ahead with aggressive plans to accommodate future growth, including:

  • Additional space. We'll be completing 200,000 square feet of new construction within the next two years. Based on growth estimates of 5 percent a year, we've also requested permission from the state to add another 800,000 square feet of new and renovated space between now and 2015.
  • Transportation options. Along with plans to develop more parking capacity, we're discussing alternative transportation methods and efforts to change faculty, staff, and student commuting habits.
  • Classroom efficiency. We're developing plans to change and standardize room layouts to increase space efficiency and reduce setup costs for classrooms and laboratories.

As the space needs grow, we're looking to our foundation, new revenue sources, and some rebalancing through budget allocations to accommodate necessary expansion. Well-managed and -planned growth is the cornerstone for achieving our goal of serving our expanding student and faculty population.

SUBMITTED BY Miguel Angel Garcia, vice president of finance and administration, Northern Virginia Community College system

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