by Dr. Kenneth A. Polcyn

Institutions of higher learning have expanded their outsourcing activity beyond the bookstore and the cafeteria.

More than 60 years ago, Robert M. Hutchins, president of the University of Chicago, noted in his book The Higher Learning in America, "It is a good principle of educational administration that a college or university should do nothing that any other agency can do as well. This is a good principle because a college or university has a vast and complicated job even if it does only what it can do" (i.e., teaching, learning, research).

While for years, institutions of higher learning have been outsourcing/privatizing some jobs, over the past 10 or so years, many have expanded contracting with private companies. Thus outsourcing momentum has been growing in the public as it has in the private sector-as costs soar, everyone is looking for ways to reduce and/or contain costs and offer new or improved services.

The cost to students attending institutions of higher learning has continued to increase. Because of the decrease in state revenues and reductions in state university subsidies, there have been warnings of tuition increases. Last year, according to an October 22, 2002 Wall Street Journal article by June Kronholtz, tuition for a four-year public college increased by 9.6%, with room and board charges adding an additional 6%. Four-year private college tuition has increased by 5.8%, and combined with living costs, averages $27,677. Community College costs have increased 7.9%.

Driving some higher learning outsourcing alternatives is state governments' commitment to find solutions. Numerous studies were undertaken during the early and mid-'90s by state governments, institutions of higher learning, and related associations.

The State of Florida's thinking has been the most innovative and its action unprecedented. In 2002 its HR agency, the Department of Management Services, outsourced the total HR system involving hardware, software, and support services to a single contractor. Included is HR services for all state agencies including its public universities. The system will have a self-service feature where personnel will be able, for example, to access retirement, personal history, and benefits information. Overall, HR outsourcing is expected to save considerable time and resources for the State of Florida and its employees.

A July 2000 UNICCO Service Company survey of business officers from 152 colleges and universities provides a broader look at higher education outsourcing: 82% percent were outsourcing at least one service, 54% from two to five, and 13% more than five. Consistent with other studies and surveys, food services and bookstores are the most commonly contracted out, followed by housekeeping, facilities maintenance, security, waste disposal, student-health services, transportation, student laundry services, printing, and architectural and engineering services. Roughly 20% to 60% of institutions outsource HR functions such as workers' compensation programs, retirement programs, unemployment compensation, and employee assistance programs. Less than 20% outsource HR functions such as payroll, employee training, and benefits administration/operation.

Lack of Providers

According to a November 1998 survey conducted by R. Wertz and D. Gribenas for the Teachers College, Columbia University National Center for the Study of Privatization in Higher Education, outsourcing growth has been slowed by the lack of providers. While it has been estimated there are more than 2000 companies offering at least 100 different types of services, it is highly likely most are local and cannot meet the needs of a national market. However, some large providers have seen the potential and have captured a sizable share of the market. According to David Kirp's March 15, 2002 article in The Chronicle Review, Barnes & Noble operates more than 40% of the higher education bookstores, and Marriott and other companies operate 60% of the dining room food services. Even American Express Tax and Business Services has moved into the market to provide, for example, budgeting, payroll, financial aid, purchasing, and student-billing services.

Higher-education outsourcing is a multibillion-dollar market, still in its infancy relative to the private sector. Giant steps have been taken and considerable progress made in the past decade. But the academic culture is complex, steeped in tradition, and slow to change. Providers need to pay attention to this culture if they are to have continuing success in the academic environment, for here they are truly developing human capital.