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Service Alignment Initiative

One of the important lessons learned from other institutions that have implemented RCM is that robust and efficient administrative systems must be in place to support the work of the colleges, campuses, and other academic units.  Controlling administrative costs while providing effective services is the challenge that all academic support units face under RCM.

In order to better understand how to align services with the needs of our academic units in an RCM environment, we engaged the Huron Consulting Group to conduct a review of the operations of Finance, Human Resources, and Information Technology.  A similar review of Facilities is currently underway.  As part of its review of Finance, HR, and IT, Huron surveyed faculty and staff across the institution.  Based on the results of its survey, Huron identified a set of issues to be addressed as part of a successful RCM implementation.  

As a means of helping Finance, Human Resources, and Information Technology make progress on the issues identified by Huron, we authorized the development of a Service Alignment Initiative (SAI) and asked Julie Allison, who currently serves as the controller in Finance, to lead the project.  Recognizing that recommendations based on the Huron surveys will necessitate changes in a number of administrative processes, we are constituting a group made up of faculty, deans, and representatives from different academic support units to act as an SAI advisory group to assist with implementation issues.


SAI Documents and Resources

Huron Report on BobcatBuy (OU ID and Password Required)


BOBCATBUY REPORT:  BACKGROUND, SUMMARY OF PRIMARY CONCLUSIONS,
AND INITIAL PLANS TO ADDRESS FINDINGS

Pam Benoit, Executive Vice President and Provost
Stephen Golding, Vice President for Finance and Administration




What is the connection between BobcatBuy and SciQuest?

BobcatBuy is the name that Ohio University uses for the e-procurement software program called SciQuest.  The program enables group purchasing and captures key information on expenditures.  That information allows the university to negotiate for better pricing and establishes the type of financial controls appropriate for a public entity with significant fiduciary responsibilities.  Currently half of the public universities in Ohio use SciQuest.


 

Why was BobcatBuy implemented?

In 2009, the Ohio University Board of Trustees endorsed a move to a modern, centralized procurement system linking purchasing and payment.  The Hackett Group had been engaged by the Inter-University Council (IUC) to review university business practices in Ohio and had recommended the purchase of SciQuest to IUC members, which included Ohio University. 

 

The rationale for the recommendation and the Board’s decision was two-fold.  First, the recession of 2008 created significant financial difficulties that resulted in a series of budget cuts.  Reducing administrative costs was seen as the best way to protect our academic activities.  Second, the Board wanted to improve the compliance environment at Ohio University.  Federal and state agencies were becoming more active in auditing university spending.  It was felt that the Purchasing Card (P-Card) program, which did not provide a mechanism for pre-approval of purchases, was no longer in alignment with increasing compliance expectations. 

 

In 2010, in response to encouragement from the state and a grant from the Lumina Foundation, members of the IUC were encouraged to work together to consolidate support services with the goal of reducing $100 million in operating costs state-wide.  University use of SciQuest was deemed to be a necessary part of the IUC commitment to this project.


 

Given that there are concerns about BobcatBuy can’t we
revert to using P-Cards for purchasing?

While the Huron report demonstrates that improvements are needed, a strong recommendation is made to maintain BobcatBuy/SciQuest.  In the realm of institutional e-procurement, this program is recognized as one of best products available and is being successfully used at universities across the nation.    

 

One of the primary reasons to retain BobcatBuy is that it provides the university with the ability to fully account for its expenditures.  At the time that it was implemented the P-Card based procurement approach aligned with the regulatory environment.  However, that environment has changed. 

 

The Office of the Inspector General (OIG) has been actively auditing institutions of higher education in recent years.  It is the expectation of the OIG that a university must be able to demonstrate that it maintains appropriate central institutional oversight on expenditures before they are completed. 

 

Beyond the basic requirements that govern the expenditure of public funds, many university purchases are subject to additional rules and regulations mandated by federal and state entities.  An example is the purchasing of hazardous materials used in research projects.  There are specific federal guidelines on how these materials must be purchased, shipped, stored, and inventoried.  Purchasing hazardous materials by means of a P-Card undercuts the university’s ability to determine prior to sale and shipment that the purchases are being made by qualified faculty and staff from approved suppliers/payees whose protocols are documented and certified. 

 

In BobcatBuy, only qualified purchasers using authorized suppliers/payees that meet compliance standards can obtain hazardous materials.  In this way, the university fulfills its regulatory obligations prior to the completion of the transaction.

 

Another significant compliance risk relates to documenting that suppliers/payees maintain an appropriate level of insurance.  It is standard practice at public universities that suppliers/payees demonstrate the possession of insurance coverage for workman’s compensation as well as general and automobile liability.  Under a P-Card only system, it is impossible to know whether suppliers/payees meet established requirements.  In BobcatBuy, suppliers/payees must demonstrate before any transactions take place that they have sufficient insurance coverage to protect themselves and the university if personal injury or property damage ensues as a result of the provision of goods and services. 

 

Relying on the P-Card alone will not allow us to meet heightened purchasing compliance expectations and a failure on our part to do so could be costly.  One recent OIG audit at Florida State University resulted in a finding requiring the reimbursement of $3,000,000 because of oversight failure issues.  The OIG noted that “although [the university’s] finance and accounting procedures often incorporated text from Federal regulations, the University largely left it to the discretion of its individual colleges, departments, and principal investigators to interpret the procedures correctly and to comply with Federal regulations.” OIG Report (A-04-11-01095), July 12, 2012, ii.  


 

If P-Card purchasing is problematic why is it still permitted?

Until recently, not every unit in the university had been transitioned to BobCatBuy.  That being the case it was important to maintain the P-Card program.  Moving forward, the P-Card program will not be eliminated entirely.  P-Cards are an important tool to have in the case of a defined set of purchases.  However, in general, over time we propose to reduce the number of university employees who hold P-Cards in favor of maintaining them only for key departmental or school personnel. 

 

Moving away from a P-Card-based purchasing system requires an adjustment of expectations.  In the past it was possible to purchase from any supplier, take advantage of discount pricing, and have goods arrive the next day.  An institutional based e-procurement system will not always be able to match past purchasing experiences or expectations.  But it does provide other benefits that our previous procurement approach did not offer in meeting compliance requirements and in developing a means of generating long-term savings on spending. 

 

Faculty and staff who are accustomed to obtaining goods and services on a P-Card will experience a difference in BobcatBuy that may be frustrating at times and will require adjustments in purchasing practices and planning.  We acknowledge this.  However, we believe that the changes we will make, which are described below, will substantively improve the BobcatBuy experience. 


 

If BobcatBuy is our primary procurement process
what will be done to address
faculty and staff
concerns about its operation?

As part of its report, Huron put together a list of BobcatBuy issues that need to be addressed.  Huron’s review recommended that we focus our attention on four key areas: the purchasing experience, pricing, cycle time, and communication. We aim to make meaningful improvements in all of these areas.

 

Improving the Purchasing Experience

The purchasing experience in BobcatBuy should be simple and efficient.  Based on the input received, the following steps have been prioritized as adjustments that will substantially assist users.

 

1.  For scientific supplies and equipment, we will move incrementally from hosted catalogs in BobcatBuy to punch-out catalogs as budget and resources allow.  Punch-outs save time for users by allowing them to buy directly at contracted prices through a dedicated Ohio University website within BobcatBuy.  A punch-out for Fischer Scientific will be available on February 18.

 

In its interviews with BobcatBuy users, Huron found the greatest dissatisfaction among individuals who purchase scientific supplies and equipment.  Most of these users indicated that their purchasing experiences were made more difficult by not being able to efficiently locate the goods that they needed. 

 

Punch-out catalogs are used extensively in BobcatBuy for office and IT supplies and equipment.  Users who purchase these types of products indicated to Huron that the punch-out option made purchasing simpler and faster.

 

2.  Create an interface between BobcatBuy and Oracle to allow for single entry purchase order closure.  This will ensure the prompt release of encumbrances and greater consistency between Oracle and BobcatBuy records.

 

3.  Make it possible for purchase order revision to be completed in BobcatBuy by creating an interface between BobcatBuy and Oracle.

 

4.  Create a two-way interface between BobcatBuy and Oracle that will allow additional invoice data to be integrated from the former to the latter.  The aim is to create a better way for users to review payment status.

 

5.  The development of procurement policies and procedures should involve meaningful consultation with end users.  Those policies and procedures should be easy to understand, easy to locate, consistently applied, and updated regularly. 

 

6.  New training options should be developed to meet the needs of users.  Some possibilities include:

·      Development of on-line training in addition to “in-class” training.

·      Breaking up user training into three different courses tailored to the responsibilities of different types of users.  Training could be offered in shopping, requisitioning, and approving.

In creating these new training approaches, Procurement will rely on input from a representative group of users.

 

Pricing

During its review Huron solicited pricing complaints from users who indicated that they found products outside BobcatBuy offered at a significantly lower price.  They received over 100 reports of possible pricing discrepancies. 

 

Of these, 42 were validated as instances where true price differentials existed.  Huron determined that 38 of these discrepancies were related to a narrow range of specialized scientific products.  With this knowledge in hand, Procurement can begin to work on pricing issues for these goods.

 

Four of the 42 discrepancies were lab consumables.  The four items in BobcatBuy were 28.5% off list price.  Outside of BobcatBuy they were 82% off list price.  Huron believes that the items in question were being offered as “loss leaders” - that is, goods sold at a loss in order to attract additional business.

 

From the beginning of BobcatBuy, Procurement has been clear that it cannot guarantee the lowest prices on all goods and services at all times.  However, for goods that are routinely offered at deeply discounted pricing, Procurement can work to negotiate better pricing from suppliers/payees.  

 

A process was recently created to encourage users to submit pricing discrepancies for sourcing review.  Concerns have been raised about whether the process is the most efficient way to resolve pricing concerns.  Users have made the following points.

 

·      That it is time consuming to fill out the form, have it ticketed, and wait for a response from Procurement.

·      That goods are sometimes needed immediately.  Having another step will cause unnecessary delays.

 

In light of these concerns, we would like to offer some clarification about the process.  Participation in the pricing discrepancy process is voluntary and primarily intended as a research service to allow Procurement and purchasers to better understand pricing differentials. It was one of the recommendations provided by Huron.

 

The submission of a form initiates an investigation into a discrepancy thereby creating a record of the inquiry and Procurement’s response.  Using this approach we can aggregate pricing issues in a way that would be difficult under the current system of email exchanges.  Aggregated information will allow Procurement to detect patterns and create documentation that potentially could be useful in negotiations with suppliers/payees.

 

Cycle Time

Procurement has been working consistently to reduce cycle time and has made significant headway.  Statistics on cycle times are included in the Huron Report (pp. 21-24).  While we have made progress, there is room for improvement.  Huron suggested two actions that could further reduce cycle times. 

 

One recommendation involves an increase in staffing so that the processing of manual invoices, new supplier/payee requests, and responses to user questions can be completed more quickly.  Huron recommends adding 1 permanent and 1 temporary staff member to Accounts Payable and 1 temporary staff member to Procurement. 

 

The other recommendation concerns working with Grants Management, Payroll, and the Prevailing Wage area to identify sets of natural codes that will be exempt from review by these departments before a transaction can be completed.  This change will speed the processing time for a number of procurement activities.

 

Communication

The Huron Report makes a number of recommendations about the need to improve communication not just in relation to BobcatBuy but also more broadly in connection to university-wide initiatives that involve the Office of the Vice President for Finance and Administration (VPFA).  Some efforts that will be made in this area include the following.

 

1.  Development of a communication plan for VPFA.  Such a plan will designate a set of protocols that will ensure that meaningful consultation takes place before a new practice, policy, or program is implemented.  The plan will assist in the coordination of efforts across various VPFA departments as well as academic units.  It also will provide a set of guidelines that will help VPFA units develop effective routine communications.

 

A staff person will be hired to carry out the communication plan and manage VPFA communication efforts.

 

2.  In consultation with the academic units and in anticipation of the move to an RCM budgeting system, individuals within each academic planning unit have been designated to serve in the role of Chief Finance and Administrative Officers (CFAO).  A list of these individuals is available here http://www.ohio.edu/provost/rcm/resources.cfm.  CFAOs will meet monthly with the Vice President for Finance and Administration and his department heads. 

 

One CFAO responsibility is to serve as the primary communication link from her/his academic unit to VPFA.  Individuals in academic units will be asked to share their finance and administrative concerns directly with their CFAOs.  By providing designated liaisons for each academic planning unit, we aim to create an effective and timely method of information distribution and problem solving.

 

3.  Increase communication with Faculty Senate through the appointment of a VPFA liaison to work with the Finance and Facilities Committee.  Chad Mitchell, University Budget Director, will serve in this role for the remainder of the academic year.


 

Lessons Learned

A number of lessons have been learned as a result of the concerns that were raised about the implementation of BobcatBuy.  In the future, we need to do a better job at prioritizing and coordinating our administrative efforts, understanding the impact of changes on the productivity of our faculty and staff, employing existing oversight mechanisms, and equipping our staff and faculty with project management skills. 

 

In all of this, our shared mission will aid us at every turn.  We aim to serve our students as they seek to become successful citizens, to support our faculty as they work to expand knowledge, and to assist our staff as they contribute to a conducive learning environment--the type of environment where lessons learned matter.