9-24-2004

Contact: Elizabeth Conlisk, (614) 292-3040

Systems in place to achieve $12-$32 million in savings

Progress made in leveraging university's buying power

Ohio State University’s three procurement organizations — Central Purchasing, OSU Health System and the OSU Research Foundation — have instituted university-wide purchasing initiatives anticipated to generate savings of $12 million to $15 million this year and between $26 million and $32 million over two years, William J. Shkurti, senior vice president for business and finance, told Trustees Wednesday (9/22).

“This is one of several initiatives designed to increase efficiency and generate cost savings in core administrative processes,” Shkurti said. “The purpose of these initiatives is to free up additional funds to strengthen core academic programs at a time when new funding is limited.”

Shkurti was joined at the meeting by Helen DeSantis, assistant vice president for business operations; Eric Kunz, associate vice president of health services; and Frank DiSanto, associate vice president for research and executive director of the research foundation. The group delivered the progress report on a procurement study conducted by Accenture and the university’s resulting cost management plan. Action items from a recent Deloitte Consulting Materials Management Study in the Health System also were included in the presentation as part of the planned savings.

Accenture had identified $17 million to $32 million in potential savings over two years through more strategic use of leveraged buying power, with possible ongoing savings estimated at $26 million annually, Shkurti said.

DeSantis said Central Purchasing, the Health System and the Research Foundation will continue to work collectively to leverage the university’s buying power by consolidating contracts and reducing the number of vendors, standardizing processes, developing unified measures, adopting best practices and developing and implementing incentives to make it easier for customers to use preferred procurement methods.

Cost-cutting initiatives have been identified in the areas of computer hardware and software, furniture, medical products, pharmaceuticals, temporary labor, travel and lab equipment. For example, bids have been solicited to reduce temporary labor costs by 10 to 13 percent, she said. A contract is expected to be awarded in October, with an estimated FY 05 savings of $2.5 million to $3.2 million.

Continued leverage of a contract establishing IBM as the university’s preferred computer vendor is estimated to save $1.7 million to $2.2 million in FY 05, DeSantis said. Additionally, bids for standardized medical products in the Health System are currently being sought, and contracts also will be used by Central Purchasing and the Research Foundation for an estimated savings of $4.5 million to $5.2 million for FY 05.

“The university’s senior leadership is encouraged by the group’s aggressive efforts,” Shkurti said. “By leveraging purchases as a collective body and reducing overall costs, the university has the potential to be recognized as a leading procurement organization in higher education,” he added.

Other purchasing initiatives include:
· A three year, university-wide licensing agreement with Microsoft for computer software, estimated to save $1.5 million to $1.8 million in FY 05;

· A Web portal, Ibuy.osu.edu, that directs university departments to preferred or prime supplier contracts;

· And a business plan for e-Procurement in Central Purchasing and the Research Foundation. The Health System will implement e-Procurement in December with their integration to PeopleSoft.

Purchasing is one of six areas Trustees identified in May 2003 for routine reviews of core processes. Progress reports are presented to Trustees on a regular basis.