Financial Pressures Lead Colleges, Universities Toward Outsourcing

Although not without controversy, money saved can be directed to other needs
With college costs escalating, student populations increasing and state and federal funding on the decline, financial pressures are being felt at higher education campuses throughout the state. These financial pressures are leading to consideration by many of outsourcing of some services that campus employees currently provide.
The financial problem is being felt not only in Texas, but nationwide, as institutions of higher education are outsourcing their bookstores, food service, information technology, building maintenance, vending, landscaping, custodial services and more.
The private sector enters into service contracts with a college or university only when it is confident it can provide the same service the institution is providing – but do it for less money while providing higher quality services. Conversely, the higher education institution enters into the contract for the same reasons, but also because in many cases it stands to make money with up-front payments from the private company or commissions on sales. The result is new revenue streams that allow the institution to spend the money saved for its academic endeavors and other campus needs.
In Texas, the trend of privatization or outsourcing of services is growing.
Texas A&M entered into a 12-year contract with a North Carolina-based private sector firm last November for dining services, landscape management, custodial services and building maintenance services. It represented the largest outsourcing contract in Texas A&M University System history.
The System got $40 million of a $46.5 million signing bonus from the private firm, and System Chancellor John Sharp said the deal will be worth $260 million in extra revenue and cost savings over the life of the contract. By bundling the services, the System was awarded an additional $11.5 million multiple-contract bonus. And, almost all of the nearly 1,600 former A&M employees kept their jobs when the services they worked in were transferred to the private firm.
TAMU System officials expect to save $92.3 million at universities throughout the System over the 12-year contract period.
In fact, Texas A&M-Corpus Christi has plans to outsource its building maintenance and landscaping services to a subsidiary of the same private sector firm. The university already outsources its custodial services.
TAMU-Kingsville will outsource custodial services, building maintenance and landscaping with the same company, probably as early as April.
West Texas A&M will be looking at outsourcing possibilities this month.
“By outsourcing these services System-wide, we are ensuring our members located across the state of Texas can experience similar cost savings that our Brazos County system members have been able to achieve,” said Sharp.
Baylor University recently released a Request for Qualifications for campus dining services, facilities and energy management services, campus housekeeping services, campus grounds services and athletics grounds/field turf management services and athletics concessions services and athletics housekeeping services.
The RFQ does not guarantee any of the services will be outsourced, but depending on the responses, a Request for Proposals could follow that would likely lead to contracts for those services.
At The University of Texas at Austin, the outsourcing record of success dates back to the 1990s. Last year, UT President William Powers Jr. appointed a committee that performed an efficiency study to try to find new revenue sources. The committee results reflected that the university could save $490 million over the next 10 years by implementing some of its recommendations, including outsourcing of certain services, including food service, parking and housing services. The committee estimated that the university could save $92.2 million over a 10-year period if those three services were outsourced.
UT already outsources its e-mail accounts and food services. The J.J. Pickle Research Center recently outsourced its custodial services, saving $500,000.
Outsourcing is not new to college campuses. According to The Washington Independent, by late 2011:
Texas State University-San Marcos outsourced its food service and also outsourced its facilities and custodial services at its Round Rock Campus;
Del Mar College joined TAMU-Corpus Christi in outsourcing its custodial staff and groundskeepers; and
Kilgore College outsourced some of its custodial staff.
Although outsourcing is not without controversy, particularly among employees who will be affected by the change, colleges and universities in Texas continue to face budget constraints. That has led to outsourcing again trending as an increasingly popular financial tool on college and university campuses.