1. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado STRATEGIC VALUE OF PROCUREMENT – Part I They Told Us Where To Go! Presented by:NAEP 2009-2010 Strategic Visioning Committee Nancy Brooks, MPA Iowa State University Jim Hine, MBA, CPIM Univ. of California-San Francisco Rob Kelly, CPSM, C.P.M., CPIM University of Notre Dame Noah Rosenberg, Practice Mgr., Education Advisory Board

2. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Challenges in Higher Education – Current economic conditions – Fundamental shifts in environment – Where procurement is positioned now Expectations of procurement Possible strategies to meet those expectations Overview

3. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Current Economic Conditions Current economic conditions combining to create extreme challenges: State underfunding of many public institutions Endowment losses crimping budgets at many private schools Federal research dollars threatened by ballooning federal deficits Drop in median income levels increases need for student aid Giving to colleges and universities, first to go, last to return

4. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Fundamental shifts in environment further exacerbate the situation: Brick & mortar competing with online delivery More emphasis on global involvement Possible increased state control of H.E. procurement Public scrutiny on tuition increases and endowment spending rates Managing corporate relationships now an institutional effort with multiple constituents Institutions are forced to keep up with technology demands (and costs) of their students Fundamental Shifts

5. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Speculating on the Next Decade Immediate Response to DownturnA Temporary Reprieve 5.2% Revenue Growth 1 4.0% Cost Growth 1 Hiring Freezes Salary Freezes and Employee Layoff Travel Restrictions Capital Project Delays Federal State Tuition Research Endowment 4.0% Cost Growth 1 Closing the Gap A Shrinking Core Reducing faculty lines Narrowing research footprint Consolidating programs A More Productive Periphery Hardwiring spend discipline Modernizing support services Tapping new revenue sources Time 20092010 Current Budget Austerity Unlikely to be a Temporary Phenomenon 1. CAGR 1994-1995 through FY 2004-2005

6. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Procurement Mission: First Line of Defense for the Core Disciplining Outside Spend Consolidating IT Optimizing Facilities Reducing Admin Labor Core Faculty Advisory Groups on New Technologies Collaborative Buying Consortia Standard Desktop Image Common Terms for Space Single E-mail Platform On-Contact Purchasing Incentives Volume Discounts from Top Suppliers Server Form Consolidation Utilization and Cost Baselining Central Strategic Sourcing Teams Health Benefits Audits Central IT Help Desk Space Utilization Chargebacks Outlier Unit Profiling E-Procurement Integration Enterprise Architecture Planning Energy Chargebacks ERP Code Sharing Spend Mapping Benchmark Against Private Sector Pricing Outlier Unit Profiling Energy Reduction Consulting Process Standardization Expanding Control Spans Process Automation Shared Services Business Service Centers Faculty Research Footprint Curriculum University Playbook for Managing Through the Recovery

7. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Outside Consultants Cast Focus on Procurement Savings Identified by Bain & Company at UNC-Chapel Hill (in Millions)

8. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado To meet these challenges senior administrators expects Procurement to dramatically drive down costs by: Increasing the amount of spend under management Reducing procurement processing time and costs Deploying new procurement technology Maintaining regulatory compliance Enhancing customer service levels Generating year-over-year efficiency gains Expectations of Procurement

9. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Procurement can meet these objectives by: Repositioning Procurement as a strategic partner with leadership Reinventing supplier relationships Leveraging technology more Creating true cross-country collaboration models Providing value in non-traditional areas and ways Understanding your potential and plan accordingly Possible Strategies

10. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Repositioning Procurement Develop Strategic (not tactical) Partners on Campus: – HR/Benefits – Research – Academics – Students Buy Solutions Aware and alert to institutional risks

11. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Your position: – How strategic are you to the supplier? – How strategic is the supplier to you? Build Trust – Takes time – Fairness Collaborate to find solutions Reinvent Supplier Relationships

12. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Need to Drive up the Evolutionary Path Level of Sophistication Paper Purchase Order Punch-Out Catalog ERP Procurement Module Contract Consolidation Electronic Invoicing and Payments Dashboards and Performance Metrics Standardization and Functionally Equivalent Mandates P-Cards Consortia Contracts Category Managers E-Procurement Price Benchmarking Involvement in Non-commodity Spend Automating Processes and Consolidating Contracts Maximizing Data Analysis and Strategic Sourcing Data Analyst Time Consolidated Shared Services Centers Procurement Investment Timeline

13. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Integrate Sourcing and E-procurement 13

14. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Leverage E-sourcing, e-RFX, Reverse Auction Overview: Systems designed to help automate, standardize, enhance and streamline sourcing processes: Market expanded with FreeMarkets reverse auction phenomena of late 90’s Interactive/distributed data/requirements collection, linked to spend analysis tools Standardized/modular RFP templates, with weighting/scoring criteria to support price/quality point type awards (total value), straight price based, or flexible bidding Optimization logic enables split awards, “what if” analyses, etc Can be integrated into contract management and procurements systems Multiple delivery models: managed, on-demand per event, hosted, ASP, owned Benefits Achieved savings of 25-30%, up to 50%, advanced techniques another 12% 40-60% reduction in sourcing cycle time 50% reduction in resource requirements/costs (admin, analysis, evaluation, etc.) Build in non-price based criteria (e.g., small/diverse/local business) Enables expanded supplier discovery: locating potential bidders Increase in defensibility of awards, archival ability etc. Ability to source non traditional categories such as HR Benefits, service contracts 14

15. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado UC Strategic sourcing example 15

16. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Consortiums/Cooperatives/GPOs – National – Regional – State – Other “interest group” oriented collaborations Collaborate with Suppliers Leverage New Collaboration Models

17. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Pursue opportunities in supply agreements to further institutional goals beyond savings and revenue – Internships – Research – Strategic Initiatives – Sustainability Leverage the skills and strengths of the procurement organization beyond supply management – Negotiation – Facilitation – Relationship Management – Project Management Expand into Non Traditional Areas

18. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Understand Your Potential & Plan Accordingly Staff the procurement organization to address the institution’s environment, needs and trajectory – Technology – Remote campuses and locations – Internationalization Prepare for the generational tide which has already started “going out” in 2009 – Succession planning – Staff development – Knowledge transfer

19. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Become a strategic partner with campus (not a process) Create beneficial/strategic supplier relationships Minimize administrative burden thru technology Implement best practices Provide value in non-traditional ways – expand your utility/value Where They Told Us To Go

20. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Stay tuned for: Strategic Value of Procurement – Part II Practical Approaches for Increasing Strategic Value How Do We Get There?

21. 89 th Annual Meeting & Exposition March 21 – 24, 2010 Denver, Colorado Thank You Questions?