4 Untapped Opportunities for Cost Reduction in Higher Education
June 27, 20246 mins read
Written by: Dan Bradley

4 Untapped Opportunities for Cost Reduction in Higher Education

Insights from University of California Regent Emerita and former California State Assemblywoman Charlene Zettel 

Budget deficits plague universities across the country. It’s a perfect storm scenario with college enrollment declines, fundraising challenges, and state and federal funding issues stemming from the flow of dollars coming in, even while inflation and the need to reinvest in aging facilities and new technologies increases the dollars going out. This leaves institutions facing tough choices on cost reduction. On many campuses, staffing vacancies are going unfilled and larger class sizes have become the norm. Morale is deteriorating, driving staff and student satisfaction in the wrong direction. 

These trends make it a critical time for higher education institutions to take a closer look at their spending and get more strategic about how they are managing costs. For most institutions, it won’t be the first time they’ve had to get creative about how to tighten the belt. In fact, most leaders looking for insight as to what to do in difficult financial times don’t have to look past the Great Recession of 2008. 

California Regent Emerita and former California State Assemblywoman Charlene Zettel recalls the impact of the economic crisis well, having been appointed to her UC post in 2009. To gather her perspective and tap her considerable experience, Dan Bradley, Vice President of Higher Education at ProcureAmerica, an SIB cost reduction company, recently sat down with Regent Emerita Zettel to explore lessons learned and how those lessons can be applied to today’s budget deficits and spending challenges.  

Raising tuition is almost never a well-received idea. 

Not surprisingly, Regent Emerita Zettel shared that her university’s proposal to increase student fees as a means of offsetting budget deficits in 2009 “went over like a lead balloon.” With cost cutting representing the only reliable source of income at the time, every department faced the challenge of cutting spending without negatively impacting educational quality, a tough balancing act. 

Fast forward to early 2022 with institutions once again facing major budgetary concerns. Reconnecting with her old colleague, President and CEO of ProcureAmerica Fred Armendariz, Regent Emerita Zettel quickly understood the company’ value proposition.  By cutting costs on business services like utilities, telecommunications, and print management—some of which may directly affect student experience—institutions could potentially limit cuts to staff or other resources vital to quality education. Regent Emerita Zettel championed this strategy in her service as part of University of California leadership.

Smart spending can free up millions in budget dollars. 

Since the University of CA system began collaborating with ProcureAmerica, it has captured more than $9.6 million dollars in identified savings for both the university campuses and their associated health systems. Regent Emerita Zettel says some campuses have cut their utility costs so significantly that several UC departments continue to ask ProcureAmerica where else they can save. Secondary projects at UC Santa Cruz and UC Riverside are underway with ProcureAmerica reviewing their Telecommunications and Print Service expense categories.

By reinvesting realized savings back in their departments or putting the dollars in a short-term investment program (STIP) to earn interest, UC departments have been able to keep the educational experience top notch despite the budget cuts. 

Universities have multiple options for cutting costs without compromising the quality of programs.

While the savings opportunities will vary from university to university and department to department, Regent Emerita Zettel points to an article published by the business spend management platform Coupa in May 2023 that outlines four strategies for lowering costs in higher education

There are four untapped opportunities for cost reduction in higher education. Each of these, she says, continues to represent an untapped cost savings opportunity worth exploring more carefully for any university or institution looking to free up budget dollars. 

Procurement processes.

Universities are notorious for inefficient procurement processes. Many different departments buying many different products and services from a wide range of vendors is a situation ripe with inefficiencies and opportunities for overspending. By introducing efficient procurement processes, utilizing the right technologies and platforms to automate tasks, and consolidating the procurement function, universities can significantly reduce overall procurement costs.

But Regent Emerita Zettel says that sometimes universities need help from the private sector to fully realize their savings potential. For example, outside experts with deep knowledge of key spend categories can be invaluable partners when it comes to optimizing supplier negotiations, managing the often-complex RFP process, and overseeing contracts. Such partners often have benchmarking data and information that universities have no way of collecting or maintaining on their own.

Universities that can see the value in these partnerships and that are willing to bring these partners to the table can often find opportunities to save tens of thousands annually on procurement across a wide range of spend categories including waste services, utilities and energy, telecom services, print management, and more.

According to Joe Scicutella, Director of Energy Procurement at Cost Control Associates (CCA), an SIB company, an effective energy procurement strategy is built on creating price transparency. That transparency comes from knowing what other organizations are paying for the same or similar services. SIB’s energy team has the advantage of managing $3.5 billion in customer spend, giving the company’s experts unmatched insight that can be used to obtain the best price and terms possible.

Universities that partner with organizations with this type of knowledge and resources will clearly have an advantage at the negotiating table and throughout the RFP process.

Interdepartmental collaboration.

When university departments function independently of each other, this naturally sets the stage for redundancies in services, resources, products, and technologies. Universities stand to save a great deal by encouraging cross-functional collaboration, moving toward shared services and vendor-managed services, and creating greater awareness and accountability for spending in different areas.

Telecom and waste management are just a couple of spend categories ripe for consolidation and savings, given the competitive landscape, frequent contract negotiation cycles, and constant technological shifts. Software as a Service (SaaS) and Public Cloud subscriptions and licenses are key areas where unchecked sprawl often occurs. An audit almost always reveals significant underutilization of assets, supplier redundancies, and a lack of plan optimization—issues that can be addressed through rightsizing services and more informed contract renegotiation.

Simply getting organized and looking at spend holistically through contract and inventory management efforts, ideally supported by software, can turn up significant savings. With the right approach, vigilance, and management, these savings can be sustained over time.

Data-driven decision-making.

Today more than ever, data is critical, and it exists in abundance. The key is knowing which data is relevant, having access to it on a timely basis, and understanding the insights it affords. Universities that improve their data capabilities can optimize spending and more easily identify the best areas for improvement and additional savings on an ongoing basis.

When it comes to saving the most money across spend areas, benchmarking data is essential.  The only way to determine best-in-market pricing and see where different service vendors can and will give price concessions and improved terms and conditions is to know what other institutions pay for equivalent services.  This type of data, along with usage data and contract data, are the ingredients to develop a customized, go-forward Enterprise Strategic Plan to reduce expenses and enhance operational efficiency.

Sustainable practices.

Sustainable practices aren’t just about achieving social responsibility goals; they save money by reducing resource usage and waste. Universities have big opportunities to retain valuable budget dollars by looking for and implementing sustainable practices across campuses including energy-efficient buildings, waste reduction and diversion, and eco-friendly purchasing. Regent Emerita Zettel recommends a thorough audit of all systems with an eye toward resource-intensive practices that can be modified as well as any and all sources of waste, which can range from stranded telecom assets to leaking pipes.

Forward-thinking approaches to energy, waste management, and telecom should carefully consider green options including Energy Star processes, renewable energy sources, and community projects and resources including incentives and rebates for reducing carbon footprint and optimizing operations. Quantifying potential costs savings and creating sustainability roadmaps are great ways for institutions to stay on track and capture the savings they generate.

Savings add up to significant impact for university departments. 

Universities are large entities with often enormous budgets. Each individual spend area can feel like a drop in the bucket. However, at times when cost cutting represents the biggest potential influx of budget dollars, universities need to take all measures they can to find their most meaningful opportunities for savings. 

To learn more about how ProcureAmerica and SIB can help with a risk-free review of spending, reach out to our cost reduction experts. And start understanding and unlocking your organization’s cost reduction potential today.