Budgets and Purchasing During Tough Times

1. Budgets and Purchasing During Tough Times NAEP 89th Annual Meeting 2010 Procurement with Altitude

2. Overview • Key factors for the Financial Crisis in America • The Economy and Higher Ed • What We as Purchasing Directors Can Do • Texas A&M University-Commerce’s Plan • Overview of The Texas A&M University System Shared Services Plan • Opportunities

3. Key Factors for the Financial Crisis in America • A continuation of the “Dot-Com” Bubble? • Market Manipulation? • Housing Market…Sub-Prime Loans…ARMs? • Banking? • Fuel/Oil Prices? • Bernie Madoff types…Ponzi Schemes? • Automotive Industry? • Declining Dollar Value?

4. Economy & Higher Ed • Travel and Professional Development is usually first to be reduced during tough Economic Times. • Universities are continually under public scrutiny because of the rising cost of tuition. Must be fiscally responsible. • Must raise tuition in order to deliver the quality education as required by our students. • Universities must be committed to salary increases in order to remain competitive.

5. What We Can Do • Strategic Sourcing Initiatives • Cooperative Purchasing • Shared Services Opportunities • Research and Introduce Departments to Energy Efficient Products • Migrate towards a “True Paperless System” of soliciting bids/RFP’s. • Implement Procurement Card Program • Centralize vs Decentralize???? • Look at different industries/contracts that will pay rebates. • Collaborate with our peer institutions. • Basically we must think outside of the box….

6. Cooperative Purchasing Local governments cut costs with cooperatives – Texas Govt. Insider a publication of Strategic Partnerships, Inc. Bullard, Whitehouse, Lindale, ETCOG piggy-back with Smith County Though the current economic recession appears to be tapering, Smith County officials are taking steps to increase purchasing power and lower costs through cooperative purchasing agreements. The East Texas cities of Bullard, Lindale and Whitehouse, along with the East Texas Council of Governments (ETCOG), recently signed an interlocal agreement with Smith County, allowing each entity to save money by sharing the same (lower) purchasing rates the county receives. Smith County Purchasing Director Kelli Davis spearheaded the effort. Davis said she asked approval from Smith County commissioners, "so that all local government entities would have the ability to get the pricing that Smith County gets." The coop venture offers cities and other entities an added procurement resource, affording each greater buying power, Davis said. The program will likely appeal to taxpayers, too, giving elected officials more procurement options to review and added accountability. "Cooperative purchasing...provides for transparent spending," said Smith County Judge Joel Baker.

7. Cooperative Purchasing cont…… The Smith County Purchasing Co-op is open to all governments, nonprofits and other political subdivisions for no fee. Davis said she expects more cities to join the co-op without any solicitation. As for the participation of ETCOG, Davis said the agency wanted "an added procurement resource." "We are leveraging our buying power to maximize our services and minimize the cost," said ETCOG spokeswoman Deborah Butts. Co-op members purchase from and pay vendors directly without any mediation from Smith County. Members also have input on where bids are sent, though none of the cities involved has purchased through co-op buying yet, and won't without formal court permission and approval, according to Davis. Purchasing is set to begin Oct. 1. Although Davis said she did not have any examples of the program's cost-effectiveness, she pointed to other successful cooperatives such as Tarrant County's. The venture stands to save Smith County money, too, on products ranging from paper to janitorial supplies to asphalt. "The more ordered, the cheaper the price for everyone," Davis said. "All these municipalities have to buy these products anyway," Judge Baker said. "If they can piggy back and use the county's purchasing power to save money, it benefits everybody." At the very least, the cooperative ought to pique vendor interest. "Vendors will begin to sharpen their pencils a little more when they see we are in this together," Davis said.

8. Texas A&M University-Commerce Plan

9. Texas A&M University-Commerce Plan

10. Three Interlinking Elements Strategic Leadership Team University Institutional Effectiveness Committee Budget Review and Development Council

11. Budget Review Development Council Involvement

12. Budget Review and Development Council • Tie the most current strategic plan with the budget • Link resources to the achievement of strategic goals • Findings of University Institutional Effectiveness Committee and recommendations of the Strategic Leadership Team will serve as guides • Identify a forced one percent reallocation

13. Forced Reallocation for FY 2010-2011 • Texas A&M University-Commerce had to remain committed to the University Priorities, plus find areas to reduce budgets. This included programs and staff. All priorities were aligned with the University’s Strategic Plan. • 3% reallocation amounted to approximately $1.5 Million • During this process, the Texas Legislature requested that all agencies identify a total of 7% to cut if needed. This never happened. • In a nutshell…last year we had to identify approximately 10% of cuts in an already tight budget. • The President has charged this committee to do a 1% forced reallocation for the upcoming FY 2011 budget. This amounts to $434,688 • In addition, the State Legislature is asking for a 5% reduction for all State Agencies and Higher Ed.

14. Summary of Recommended Initiatives 2010 With the 3% reallocation of existing funds, the University was able to fund several strategic initiatives. Through this process, the Committee asked for proposed initiatives from all areas of the University. The Budget Review and Development Council prioritized the requests and submitted recommendations to the President, who in turn made the final decision. • Established University College for first time students • Increased scholarship budgets • Funded the purchase of Touchnet software • Funded Assistant and Full Professor positions • Increased support and number of Graduate Teaching Assistants and Graduate Research Assistants

15. Texas A&M University System Shared Services Opportunities Shared Services Opportunities report released Contact: Rod Davis (979) 458-6018 or Syscomm@tamu.edu September 24, 2009 Cost savings of $16.7 million identified under recommendations COLLEGE STATION, Texas – Annual cost savings of $16.7 million for The Texas A&M University System could be realized through shared services optimization recommendations presented today at a regular meeting of the Board of Regents. The recommendations were in an initial report from a special shared services opportunities committee created by the regents June 26 to increase efficiencies and reduce expenses in the A&M System through collaborations and best practices. The report focuses on shared services and cost reductions between the system offices and Texas A&M University. Subsequent evaluations will expand to include all parts of the A&M System.

16. Recent Outcomes from Shared Services • Consolidated the System CFO and University CFO to create one System Chief Business Officer. Dual reporting to the Chancellor and President of A&M University with consideration to an executive oversight committee consisting of System member CEOs. • Creation of a Chief Communications Officer. The Chief Communications Officer for the System will also serve as the VP for Marketing and Communications at the University. • Creation of a Chief Safety Officer. The Chief Safety Officer for the System will also serve as Assistant VP in the Office of Safety Security at the University. • Creation of a Chief Information Officer. The Chief Information Officer for the System will also serve in as the VP and Associate Provost for Information Technology at the University.

17. Opportunities for Procurement • Although times are tough, we as Procurement Officers have numerous opportunities in bidding Construction Projects. • Construction Projects – If money is available, we have the opportunity to receive very competitive bids during this time. • The prices for essential Construction materials have fallen throughout 2009 and have remained constant so far in 2010. • According to an article in the Chronicle, “Firms Are Getting Hungrier” Those numbers may mean that firms are turning to higher education for business — and that may translate into bargains for colleges.

18. Opportunities • In most situations, I have experienced an increased amount of competition on every type of bid. This has resulted in lower pricing on virtually everything. Examples: 40 + vendors showed up at a pre-proposal conference for several asbestos abatement and demolition projects. 20+ vendors showed up at a pre-proposal conference for the purchase and replacement of our telephone switch. • Purchasing departments have the opportunity to show their added value to the organization during tough times. Having the ability to save money for your institution can make all the difference when you are facing budget cuts.

19. References • A&M System Shared Services Optimization Report, September 24, 2009. http://www.tamus.edu/sharedservices/ • The Chronicle of Higher Education, 2009: Tough Times, Silver Lining: Builders Lower Their Bids.http://chronicle.com/article/Tough-Times-Silver-Lining-/21363/ • The Chronicle of Higher Education, 2009: A Straight-Talk Survival Guide for Colleges.http://chronicle.com/article/A-Straight-Talk-Survival-Gu/3268/