Ohio State saves money through buying power

COLUMBUS -- A prime supplier agreement awarded to IBM in August 2003 resulted in savings to The Ohio State University of approximately $1.5 million in the first seven months, said Bill Shkurti, the university’s senior vice president for business and finance. Meanwhile, a recently completed enterprise-wide benchmark purchasing study suggests potential savings of up to $26 million annually through more strategic use of leveraged buying power.

Those figures were part of a report on purchasing and the university’s cost management plan, delivered June 4 to the Board of Trustees by Shkurti and Helen DeSantis, assistant vice president for business operations.

An enterprise-wide procurement study, done by Accenture, evaluated the university’s three procurement organizations — Central Purchasing, OSU Health System and the OSU Research Foundation by surveying both external and internal customers.

The consultants concluded that the procurement practices of Ohio State and higher education in general are below major corporations because the universities don’t leverage purchasing resources at maximum levels. Ohio State is about average in implementing emerging best practices compared with public sector entities such as state government, DeSantis said.

“If we’re going to become more effective in our purchasing practices, the university is going to have to establish an enterprise-wide view,” DeSantis said.

“The IBM preferred vendor contract is a perfect example of the significant savings that can be achieved through implementation of the university’s cost management plan, which calls for continued leveraging of the university’s buying power, educating departments about cost-saving opportunities, and redesigning business processes to gain efficiencies,” Shkurti said.

The three-year contract awarded to IBM for computers and computer-related products was a result of a competitive bid process, DeSantis said. Prior to awarding the contract, comparable pricing from computer manufacturers was only available to departments that consolidated 100 or more computer purchases on a single order.

“The IBM contract levels the playing field by offering best pricing on a full line of products regardless of volume,” DeSantis said. “Departments are not required to use the IBM contract but must document rationale for selecting another supplier.”

Following the IBM contract, Dell consequently lowered prices to remain competitive in the university’s marketplace. DeSantis said savings from IBM total $1.3 million from September 2003 to March 2004, while savings from Dell total $200,000 from November 2003 to March 2004.

“As an added benefit, IBM made this pricing structure available to Ohio State students, faculty, staff and alumni. The Inter University Council and members of the Central Ohio Organization of Public Purchasers (including the State of Ohio, County Government, City of Columbus, Columbus Public Schools and other public entities) are also eligible for this discounted pricing,” DeSantis said.

“It’s exciting when others serving the public in and around central Ohio can benefit from the work we do on behalf of the University,” she said.

Other benefits of the IBM contract include rebates on sales to fund a staff member in purchasing to serve as the institutional liaison with IBM, the services of a master inventor to work with the university on research and development, guest lecturers and bonus computers.