University of California Office of the President

FOR IMMEDIATE RELEASE
Friday, May 27, 2005
Paul Schwartz (510) 987-9924
paul.schwartz@ucop.edu

UNIVERSITY OF CALIFORNIA WINS "BEST-IN-CLASS" AWARD FOR COST-MANAGING INITIATIVE

Purchase card program is part of new UC "strategic sourcing" initiative to reduce costs

The University of California recently was awarded U.S. Banks' "Best-in-Class" award for its Purchasing Card program, besting such large corporate payment system customers as Johnson & Johnson, Lockheed Martin Corp. and Daimler-Chrysler.

The award, which was announced Thursday (May 26) by UC Vice President of Financial Management Anne Broome in a presentation to the UC Board of Regents, is an important affirmation of the success of the university's aggressive business approach to managing costs. Considering a mid-year conversion to the new "strategic sourcing" contract, the university has achieved a 4 percent annualized increase in spending on the card program with incentive dollars increasing 20 percent over the last year, to more than $3 million.

The purchasing card program is one of a number of significant steps the university has taken to streamline and reduce costs in a number of its business operations as part of a new strategic sourcing initiative.

Strategic sourcing is a process designed to maximize the purchasing power of large, decentralized organizations, such as the University of California, by consolidating and leveraging common purchases. The primary objective is significant cost reductions without sacrificing quality or service. Strategic sourcing is also intended to increase efficiencies in purchasing and to allow better monitoring of prices and supplier performance. The university expects to reduce costs of procuring goods and services by millions of dollars.

Two primary strategic sourcing programs are currently underway at the University. One addresses information technology (IT) spending, the other addresses non-IT related spending.

The non-IT strategic sourcing initiative was launched in July 2003. Originally piloted in 1996, with success at the UCLA campus, the strategic sourcing model is being implemented throughout the UC system. In addition to developing the human and technological infrastructure necessary to implement and sustain strategic sourcing, seven sourcing initiatives aimed at specific procurement areas have been launched across the system.

The university has recently awarded several systemwide contracts that should reduce the university's costs of doing business by millions of dollars. Among the recently awarded contracts is one for office supplies with Office Max. The university spends over $20 million on office supplies each year. With pricing provided under the contract, the university projects to save $3.5 million annually. The university has also awarded contracts for office equipment and for general laboratory supplies.

Another initiative, the Information Technology Licensing and Procurement Program, has saved the university more than $30 million annually on a spending volume of approximately $180 million. The program's success is the result of active participation by all of UC's 10 campuses, the five medical centers, three national laboratories and the Office of the President. Under direction of the Office of the President, the university has achieved the high level of savings by consolidating its spending on computer hardware and software at significant savings. Equally important are dramatic reductions in administrative overhead that result from the consolidated contracts.

While the IT Licensing and Procurement Program has existed since 1994, the Office of the President expanded the program in July 2002. Recognizing an opportunity to benefit campuses through systemwide action, the Office of the President worked with the university's IT Leadership Council to build sponsorship for this more aggressive program.

Large software contracts have been the primary focus of the recent program expansion. Unique characteristics of software procurement, along with the current business climate in the software industry, create an environment well-suited to consolidating contracts, negotiating discounts, and obtaining more flexible terms and conditions.

The University of California is moving forward to leverage its buying power in other areas.

The university will soon award systemwide contracts for computers, faxes and printers, janitorial supplies, text books, appliances, gases used in its research laboratories, travel, and hazardous waste disposal.

Most recently, UC has engaged the professional services of the Huron Consulting Group to assist the university in accelerating its current initiatives and to provide resources for pursuing further opportunities for savings.

# # #