The Importance of Purchasing
- By Janet Wiens
- February 1st, 2007
Usually unheralded, but critical to the successful operation of any college or university, is the purchasing staff. They’re responsible for procuring supplies and equipment for the equivalent of a small city and yet they sometimes don’t have full authority regarding where or how items are purchased. Purchasing procedures vary between large and small institutions but the goal is the same — provide what is needed, on time and at the best possible cost.
Getting the Job Done
"Seventy percent of higher education institutions have purchasing staffs with fewer than five people, says Tom Fitzgerald, chief executive officer of Educational and Institutional Cooperative Services, Inc. (E&I), a not-for-profit buying cooperative established by members of the National Association of Educational Procurement.Larger institutions obviously have large staffs, but at small institutions purchasing may be done by a few people and may not even have its own department. The challenges, however, are the same. Purchasing staffs must deliver the materials and equipment requested by numerous departments when needed and at the best possible price.
Fitzgerald says that total spending for higher education procurement departments exceeds $100 billion, which includes supplies, technology, equipment, and construction materials, among other items. What is put under the purchasing department’s purview varies by institution, and may or may not include departments such as athletics or benefits. He further states that 45 percent of purchasing departments have centralized purchasing environments, while 55 percent have decentralized environments. While there are common threads and approaches, there is no set formula for what or how things are handled by a college’s or university’s purchasing department.
One trend we see is to expand the involvement of purchasing based on accountability and compliance issues, Fitzgerald said.An E&I survey showed that 41 percent of executive and senior administrators believe that purchasing adds strategic value to their institution’s operations. There is a correlation between a purchasing department’s depth of involvement and the strategic value an institution’s leadership attaches to this area.
Purchasing employees face four major challenges on a macro and micro level, according to Fitzgerald: the pressure of expectations, regulatory requirements, the rapidity of change, and doing more with less.
Administrators, faculty, students, alumni, and legislators all expect and demand different things, he said. The challenges faced by purchasing professionals will only intensify.
Better marketing of what purchasing does and its importance will help to increase its value, which Fitzgerald hopes will have an added benefit. He stated that the profession is graying, and that it must do more to attract younger professionals. People don’t go to college saying, ‘I want to go into purchasing.’ We need to communicate the importance of purchasing and why it is a challenging and rewarding career.
Technology Is Key at Delaware
Tory Windley is the director of procurement at the University of Delaware, an institution that enrolls over 16,000 undergraduates and nearly 3,000 graduate students and generates approximately $145 million in purchase orders in a year. The staff of 15 handles a range of duties, including purchasing equipment and supplies, space allocation, travel, and capital assets. We constantly evaluate our processes and the use of technology to make our processes better, she said. Being very user-friendly and selling the value of procurement to many audiences is very important.
The decision to combine purchasing and accounts payable into procurement several years ago resulted in a $250-million-a-year entity that Windley said changed the university’s relationship with suppliers. We speak with one voice and our relationship with suppliers is better, she said. We now have partnerships instead of arm’s-length relationships.
In Windley’s opinion, the three biggest challenges facing the procurement department are compliance with existing regulations, changing methods regarding how things are bought, and developing contracts for things that are routinely purchased in order to parlay quantity buys into greater cost savings. Buying changes every day and customer service is critical, she said. A researcher may only need an item one time, but we must provide what’s needed and when it’s needed to their satisfaction. If not, they may buy on their own next time.
UDMart (www.udel.edu/procurement/udmart) is the university’s answer to E-commerce. The Web-based program enables administrators, faculty, and staff to view new items available through procurement, order supplies, and dispose of surplus property or supplies. Approximately 1,500 items are available through the site, and requests for other items can also be made through this avenue. The university’s Procurement Card program, which was instituted 10 year ago, generates $68 million in use a year through the site. Users may order day-to-day department supplies that are purchased on an as-needed basis. All expenses are allocated to the appropriate university account.
Windley said that memberships in buying cooperatives are maintained and used where they will result in the greatest benefit from a schedule and/or cost perspective. We review whether it is more advantageous to buy through one of our cooperatives or whether we can purchase the required item more economically on our own. The decision comes down to what will save us the most money while delivering the required item according to the schedule that we need.
Facing the Same Challenges
Chesapeake College in Maryland is much smaller than the University of Delaware, but the challenges are the same. The college, which was founded in 1965, offers two-year degree programs to its 2,541 students, and encompasses 16 buildings on 170 acres. Karen Smith, the college’s director of administrative accounting and budget services, echoes Windley’s comment that controlling costs is one of the greatest challenges. We must do more with less and must continually evaluate how we can control our expenditures, she said. In addition, we face the challenge of finding qualified and interested parties to bid on college projects.
The FY2007 budget that Smith administers is $15,845,900, which is for the college’s unrestricted fund only. Purchases for supplies or services over $25,000 must be approved by the Board of Trustees. Cost center managers approve all other purchases.
Several years ago, we converted to an electronic requisition and approval system that is monitored by our cost center managers, Smith said. This has facilitated our work and makes procuring required items easier for everyone.
The college also uses cooperative purchasing agreements, which Smith said have been very helpful. Purchasing through this avenue, like at the University of Delaware, is done when it is most advantageous from a cost perspective.