W&M among 12 partners leading new procurement cooperative
Through its Business Innovation Initiative, William & Mary has helped lead the creation of the Virginia Higher Education Procurement Cooperative (VHEPC).
“We are trying to do something that hasn’t been done successfully before at this scale in Virginia higher education,” said Sam Jones, co-chair of VHEPC and senior vice president for administration and finance at William & Mary. “The opportunity for savings achieved by working together with other colleges and universities to achieve greater savings is immense.”
VHEPC was founded in the fall of 2014 with the help of the University of Virginia, Virginia Tech and Virginia Commonwealth University. The cooperative is intended to serve all public colleges and universities in Virginia; currently 11 four-year institutions and the Virginia Community College System are members. This spring the group negotiated its first contracts.
The VHEPC model is straightforward, said Greg Johnson, director of procurement at William & Mary.
“Vendors want volume. If we are offering [a vendor] the opportunity to deal with up to a dozen schools all at once, then not only is it more likely they will provide us better service, but we are also going to be more important to them and ultimately we are going to get better pricing.”
In the past, institutions were able to piggy-back on contracts awarded by other Virginia institutions, but without any recognition of additional spend in the vendor’s pricing, Jones added.
“The cooperative expands this model to leverage spending statewide – driving better pricing for all,” he said.
Examples of the cooperative’s impact include contracts now available with The Supply Room, a regional office supply company, and Grainger, a national vendor of maintenance, repair and operations (MRO) supplies. So far, Johnson said, the contracts have also been customizable to each school.
“Each institution has its own ‘market basket’ that contains the items they buy most, and the largest discount gets applied to those items,” he explained.
The advantages of the cooperative contracts include both cost and time savings, added Johnson.
“When a true cooperative contract is created by leveraging VHEPC’s cumulative volume during negotiations with the vendor(s), the resulting contract provides a superior value to each institution,” he said. “Ultimately, the contracts save procurement officers and departmental purchasers not just money but valuable time. You end up with both real dollars and real efficiencies.”
What do these contracts mean at the department level?
“Freed-up money,” said Amy Sebring, chief financial officer. “For the William & Mary community, we want departments, schools and administrative units to understand that what we are trying to do with these cooperative contracts, and therefore with the resulting savings, is to free-up dollars at the department or unit level that can be used for other priorities in their own budgets.”
Johnson added there will be instances where the university or the department is saving as much as 50 percent on some items, with a normal expectation of three to eight percent.
“Given the campus-wide volume, with some vendors such as The Supply Room, three to eight percent can result in $10,000 a month in savings for purchasers at the college,” he said.
VHEPC’s role is to not only provide the savings opportunities, but to make it easy for members to take advantage of them.
“VHEPC has already ‘cut the coupon’ for the shopper,” Sebring said. “Resources are always constrained; this could provide departments with a real opportunity for savings.”
Johnson said there is no doubt the contracts will save William & Mary money; it’s just how much that remains to be seen.
“Participation by departmental buyers is key to the ultimate success of this project,” Sebring added. “Moving forward, much of our effort will be on educating buyers at the department level about the availability of these cooperative contracts and the savings they can recoup. We are only going to save as much as people participate in the program. And getting wide-scale participation is hard. People will need to recognize this as their business opportunity.”
More than 97 percent of purchases at William & Mary are completed at the department level within their delegated authority, Johnson noted. Delegated authority purchases are those that fall below $5,000 and where the purchaser is not required to go through procurement beforehand.
Ideally what procurement would like to see, Johnson said, is for a unit to take savings and apply it to another budget priority, perhaps a maintenance contract for a piece of equipment that they previously didn’t have funds for.
While a number of savings opportunities have been identified, William & Mary Procurement and VHEPC are looking for more.
“If there are members of the William & Mary community that have ideas of where money can be saved, we hope they will contact us,” Johnson said. “The more information we have, the better we are going to be able to fulfill everybody’s needs.”
Identifying the products people on campus use most is imperative, he added.
“If we have a story to tell and can go out to a vendor and say ‘the total spend across the colleges and universities is really increasing and the higher ed community is committed to this,’ it will help in future negotiations with other vendors for other products,” Sebring agreed.
In the end, success will beget success, she added.