Universities trim costs by pooling buying power

Thirty-five miles and several degrees of prestige separate Yale University and St. Joseph College, a small, Roman Catholic, predominantly women's school in Hartford, Conn.

But they share at least one thing: thirst. Both campuses consume spring water by the truckload, and when Yale scored a good deal on a delivery contract, St. Joseph piggybacked on to it.

The arrangement cut St. Joseph's water-cooler bill in half, saving $2,000.

For years, sometimes decades, colleges have pooled their buying power in areas like insurance and computers. But now, under particular pressure to rein in tuition increases and tighten budgets without cutting from the classroom, many are trying to think creatively about new ways to save on overhead costs.

Experts say that private institutions are mostly leading the way, though schools within a state system often have a lot more in common -- computer systems, missions, even trustees -- than do the St. Joseph's and Yales of the world.

St. Joseph's is looking beyond water bottles, aiming to trim the $10,000 it spends annually on trash bags, for instance. It's part of a consortium of independent Connecticut schools exploring buying pools for everything from organic groceries to lawyers.

Similar efforts are underway in other states, where some buying compacts claim to have saved tens of millions of dollars for their members. There's even a soft drink contract shared by several Christian colleges.

"The big schools need my volume to further their savings, and I need the big schools' buying power to get down my costs," said Mike Jednak, St. Joseph's associate vice president for facilities. "Everyone's reading about how the cost of education is just skyrocketing. This is a fantastic way to get our arms around it and save dollars for students."

Connecticut's state university system participates in a number of group buying programs. But public colleges still face hurdles private schools can often ignore -- like requirements to solicit bids from minority- and locally owned business -- that can make it harder to work with colleges in other states. Each of the Connecticut system's four campuses still buys its own bottled water.

Nationwide, public four-year schools spend an estimated $40 billion annually on administrative costs -- everything from heating oil to office supplies. That comes to about $7,500 per student, or about a quarter of the cost of educating each pupil.

States understandably want to minimize those costs, so they often require universities to buy off state contracts in order to get volume discounts. But experts say that doesn't always produce the best deal.

In Wisconsin, many of the state's independent colleges buy property and casualty insurance through their own consortium. But the public University of Wisconsin system, with 160,000 students on 26 campuses, is still on a state policy, which also covers prisons.

Prisons, however, are considered risker than schools and are more expensive to insure.

Grouping them together, while it does increase volume for the policy, amounts to a hidden tax on students to subsidize prisons, says David Olien, the Wisconsin system's senior vice president for administration. He wants Wisconsin to follow Michigan and Iowa in allowing its public colleges to collaborate on their own.

"I believe we could save millions of dollars," he said, more than enough to offset potential extra costs to the prison system.

Wolf Wegenke is president of the Wisconsin Association of Independent Colleges and Universities -- the independents' consortium -- and has also held state positions under five governors. He said independents envy the publics' taxpayer support but not the red tape that comes with it.

"The way a lot of administrative decisions are made is political," he said.

Private colleges aren't pretending collaboration is a panacea. A number of consortia have failed, victims of too much paperwork or an inability to prove their value.

"Mostly we're tweaking here for small gains here and there," said Charlie Fiskeaux, vice president for business affairs and treasurer of Asbury College, a Christian college of 1,200 students in Wilmore, Ky.

But supporters of collaboration note that tuition at independents rose on average 6 percent this year, compared with 14 percent at public schools (though independents are, of course, generally still more expensive).

The independents also increased their financial aid more last year. Wegenke says his group of Wisconsin colleges awarded $17 million more in financial aid last year than the year before. That's precisely the minimum figure his purchasing group calculates it will save for members once its collaboration program is fully up and running.

Many public universities do participate in purchasing cooperatives, including the Midwest Higher Education Compact, which estimates it has saved members $168 million over the last decade on a range of products, including long-distance telephone service.

A private Tennessee company, Horizon Resource Group, has negotiated contracts for 300 schools, about half of them public, serving nearly 1 million students.

But HRG currently operates in only 21 states, and executives say the flexibility of public colleges to participate in such interstate compacts varies considerably.

The company and others have lobbied for change. A new Tennessee law gives public universities much greater purchasing flexibility, and a similar bill recently unanimously passed the California legislature.

Wayne Brown, HRG's senior vice president, recalls his own days as a state higher education official in Louisiana and Tennessee, where it was virtually impossible to buy anything without going through the state.

"You'd have to go through some high-level war every day and get your head bashed in, and you'd say 'Why am I doing this?"' he said. "I knew that we could do better."