Gee to cut vendors, but no plan in place
Published: Tuesday, October 19, 2010
Updated: Saturday, June 16, 2012 00:06
University financial officials do not have a plan to halt the growing bureaucracy that Ohio State President E. Gordon Gee said is squandering OSU's resources, despite the pledge Gee made to address the issue last week.
OSU has accumulated an excess of vendor relationships, and there is no timeline for cutting the extra fat, said Brendan Foley, vice president of Financial Planning and Analysis at OSU.
The goal is to reduce the university's 35,000 connections by more than 70 percent, Gee said in his semi-annual address to the faculty on Oct. 13.
"Right now, it's more of an aspirational goal, something we think we could do," Foley said. "It's really going to be an ongoing process."
Dealing with so many suppliers is detracting from the university's development, Gee said.
"We are diverting our human and financial resources away from teaching and learning and like-minded activities that contribute to the future of the university," Gee said.
Ford Motor Co., in comparison, did business with 850 vendors last year.
"Now we're not a car company. … It is not unreasonable, though, to imagine and expect the university to have 10,000 relationships," Gee said. "In fact, we must make that mark and then keep refining our expectations."
Reducing the number of vendors is not an easy task, said Walter Zinn, chair of the Department of Marketing and Logistics.
"You have to decide who to cut and who to keep, and these are always very difficult decisions," Zinn said.
There is no estimate of how much OSU could save by reducing its suppliers, but Foley said it is likely millions of dollars.
Working with fewer companies often saves money through decreased administrative costs and improved bargaining power, Zinn said.
Gee put Geoff Chatas, OSU chief financial officer, in charge of the effort. Chatas did not respond to requests for comment.
The university plans to identify big-budget areas and consolidate its purchases in those areas, Foley said.
One such area is plumbing services, for which OSU depended on 99 companies last year. The university has not yet determined other areas where it depends on excess vendors.
Gee said buying from such a large number of companies consumes the university's financial resources and reduces its productivity.
"Negotiating, tracking and managing so many relationships presents a significant burden," he said. "Let me be clear: We must take this year to slay that dragon."
Relying on an excess of suppliers makes it difficult to negotiate long-term contracts and prices because business is split among so many vendors, Zinn said.
"You don't buy a high enough quantity from the same vendors," he said. "In addition to that, the administrative cost is high because you have to manage all those relationships."
Those processes are not the only forces hindering OSU's productivity. Government regulations on construction are another hurdle the university must jump.
OSU received permission for ProjectONE, the $1 billion renovation and expansion of the OSU Medical Center, to be exempt from those regulations, Gee said.
"Because of this, we stand to save at the very least 15 percent in total expenditures and will be able to complete the project much more quickly," he said.
Gee said ProjectONE demonstrates the savings and improved productivity afforded to institutions that are free from external control.
The government also regulates grant spending, which hinders faculty members from traveling and conducting research.
"Both state and federal regulations that are intended to prevent people from misusing public funds … create unnecessary paperwork," said Robert Perry, professor of physics and former chair of the Faculty Council, after Gee's address. "A lot of the paperwork … creates extra work for us, extra work for our staff, which creates extra costs that take money away from doing research."
Grant regulations used to be more relaxed but they intensified in the 1990s to address the misuse of public funds, Perry said.
"The cost of keeping people from cheating is much greater than the amount of money saved from catching the cheaters," he said. "It takes away from what we want to do, which is basic research."