In an ongoing effort to reduce administrative expenses and slow the growth in tuition increases, the university implemented a number of new initiatives in 2010 aimed at reducing costs and increasing efficiency. As a result, the university is expected to save $2.1 million per year.
“These changes impacted how we purchase goods, services, food and airline tickets,” said Mark Vangsgard, vice president for business affairs and chief financial officer, “… and change is not easy. The previous processes were in place for a long time and people were used to doing things a certain way. Since the savings produced by these changes are not necessarily part of everyone's position responsibilities, some folks felt frustrated that other people were telling them what to do and how to do it. But the result certainly benefits our students.”
“We have been working with the Board of Trustees for some time on ways to increase productivity and efficiency,” said Dr. Mark Dienhart, executive vice president and chief operating officer. “Many of our board members operate large and complex enterprises and were surprised that some of what they considered simple things to control costs had not been implemented at St. Thomas.”
Dienhart went on to say that “the pressure to reduce tuition increases in this difficult economy has led to various cost control methods over the years, but this set of changes was the most extensive I have witnessed at St. Thomas.”
“Tuition increases have been increasingly more stable over the past five years – an annual average of a 5.5 percent gross increase and 2.3 percent net increase after financial aid. With these and other efforts it is hoped we can continue this trend and keep St. Thomas affordable,” Dienhart said.
Specifically, the Board of Trustees asked UST to follow a number of recommendations regarding:
- Establishing and utilizing more preferred vendors to maximize volume with a lower number of vendors and therefore reduce pricing and processing expenses and achieve other favorable terms.
- Soliciting competitive bids on the purchase of goods and services over $3,000.
- Purchasing goods and services from internal providers such as Food Service, the Service Center and the Gainey Conference Center rather than purchasing these goods and services from external vendors to leverage existing infrastructure and keep the cash within the UST community.
- Developing a centralized travel vendor and process that all UST travelers would use rather than the having employees use whoever they wanted.
UST committees were formed to discuss the 2010 implementation of the guidance from the Board.
Preferred vendors:
- Purchasing Services has identified additional categories of goods and services used frequently by UST and has competitively bid and/or analyzed available pricing to select preferred vendors.
- Preferred vendors are either independently sourced by UST or sourced through a variety of consortia available to UST.
- Consortia utilized by UST include the Associated Colleges of the Twin Cities (ACTC), Educational & Institutional Procurement (E&I), State of Minnesota, Provista and U.S. Communities.
- Categories of preferred vendors include office supplies, scientific supplies, Physical Plant supplies, travel, food services, printing, advertising specialty and apparel, and floral.
- The number of preferred vendors has increased 74 percent to 66 vendors and the volume going through these preferred vendors has increased almost three times to $8.5 million.
- The financial benefits of having preferred vendors show up in the results of bidding.
Bidding process:
- Goods and services over $3,000 must be bid.
- Regular supplies’ vendors can be bid on a periodic basis and orders may be placed as needed, including office supplies, technology, janitorial and maintenance supplies and scientific supplies.
- Ad hoc goods and services or designed goods must be bid even when purchased from preferred vendors such as advertising specialty and apparel, printing, vehicles and furniture.
- The new eBid system was implemented to assist with centralized bidding and reporting. This system includes work groups that were assigned based on groups that do significant purchasing over $3,000. Bid managers were assigned and trained for these groups.
- The Purchasing Services and Account Payables groups are responsible for following up with departments.
- There were 74 bids placed in the last year which resulted in an estimated $1.4 million in savings compared to the cost of the prior year or the average of all the bids received.
Purchasing from internal providers:
- Utilize the existing internal services of Gainey, Food Service and the Service Center whenever possible.
- This allows UST to leverage its existing facilities, employees and expertise resulting in higher utilization of current resources.
- As a result, the cash that would normally be paid to external vendors stays within the university and saves UST money.
- Total annual savings from the increase in internal sourcing of Gainey, Food Service and the Service Center is $600,000.
Centralized travel:
- Vanguard Travel Unlimited for personal travel and Schilling Travel for group travel became the new vendors for exclusive use.
- The ability to consolidate travel vendors resulted in the following savings:
- Airline discount – $31,000
- Rewards (free) tickets – $17,000
- Car rental discount – $10,000
- Team Travel desk – $33,000
- Prepaid hotels – $13,000
- Low cost airfare question – $23,000
- Re-ticketing to lower price – $11,000
- Total savings – $138,000
“A great many people changed the way they did things, which may have created some extra work,” Vangsgard said. “They learned new software, stepped outside their comfort zones and helped the institution to remain competitive and affordable in these challenging economic times. The faculty and staff stepped up to save over $2 million per year, and we are appreciative of all the efforts and cooperation.”
