The True Cost of Savings
“All Shook Up” blared from the ballroom in Baker Center as an Elvis impersonator and Ohio University mascot Rufus the Bobcat sauntered around the perimeter and posed for photos. A variety of food, from popcorn to make-your-own snow cones, and swag bags festooned the various tables. It was a warm day in early October, and the university’s first preferred supplier fair was in full swing. The event showcased the preferred suppliers that the university uses. Many of the represented companies were from large corporations, such as Office Depot, Pearson and Staples. In August, the Staples in Athens closed due to lack of business; it did not become a preferred supplier until June.
In 2015, Governor John Kasich established the Affordability and Efficiency Task Force, a mandatory initiative that requires all public universities in Ohio to purchase goods only from specifically contracted suppliers. The long-term goal of the preferred supplier policy is to save money in order to eventually lower tuition, thus making higher education more accessible for college students across the state. The policy aims to increase efficiency and decrease overall costs for the institution via negotiations with preferred suppliers, OU Vice President of Finance Deb Shaffer says. If all universities across the state follow the policy, they can collectively negotiate a much bigger discount and decrease costs – including tuition – for the institutions.
Athens County is the poorest county in the state of Ohio, and according to census data, the median income in the county is $37,191. Devastated by the slowing of the coal industry, many people in the county are trapped in the vicious cycle of poverty. OU both alleviates and exacerbates the economic strain on southeastern Ohio. The preferred supplier policy can harm local businesses when services from non-local businesses are preferrenced.
Encouraging Diversity, Growth and Equity [EDGE] is a state-sponsored program that encourages economic growth in distressed regions such as Appalachia, says Mary Nally, the director of OU’s Center for Campus and Community Engagement.
The EDGE program has pushed OU to consider local businesses when it opens the applications to become a preferred vendor, Nally says.
“Currently, OU has set a minimum of 5 percent … of bidders have to be from this EDGE-designated list of vendors,” Nally says. “In reality, the number of those bids is closer to 15 percent, so they do get a fair amount of local bids. That doesn’t necessarily tell us if those are the bids that get chosen, it just means that they’re included in the pool of options.”
Currently, OU as an institution has different definitions for what is considered to be a local product. The definitions are currently being reworked by the university. Food and non-food items must be grown, processed or manufactured within a 250-mile radius of campus. Food can also be considered local if it is grown in the state of Ohio. Such standards do not necessarily aid the economy of southeastern Ohio because of the wide-reaching parameters.
The university tries to ensure that local businesses have the opportunity to apply to be a preferred vendor, Shaffer says.
“For example, if we wanted Casa [Nueva Restaurant] to be able to bid on something, we would send and say ‘Hey, we’re inviting you to bid on this,’” Shaffer explains. “We also help some of our local vendors through some of the state bureaucracy and different levels of state compliance … not all of them have the same level of online presence that makes that easy.”
Sometimes local vendors have an advantage in becoming preferred vendors because of their proximity to the university, Shaffer says. Lower costs of shipping and cost savings from operation efficiency can benefit the institution.
“The other thing we can do with a number of our commodities is do multiple awards to the extent that as long as our local vendors can be competitive in their pricing,” Shaffer says. “Then we can award multiple contracts so we have multiple preferred suppliers so that our local vendors are one of those amongst sometimes national or international vendors as well.”
The process to become a preferred supplier is competitive. Interested businesses have to file a request for proposal (RFP) and go through an extensive interview process, and the RFPs are only open every few years.
A few local businesses, like Tim Martin's Red Tail Design, had tables set up at the preferred supplier fair. Martin, an OU graduate from the College of Fine Arts, gave away OU themed postcards and wooden keychains emblazoned with the university’s logo at his company’s booth. Red Tail designs websites and does course development and videography for the university.
“It’s kind of a sticky situation,” Martin says. “There’s definitely some local businesses that may have to let someone go because of how [OU is] changing the structuring of things. When that RFP is closed for another three or four years...that’s a huge life cycle in a business. The way things are being tightened on the university only being allowed to use certain preferred providers is definitely hurting [local businesses].”
Career Connections, a temping agency on East State Street, had to lay off four full-time employees when they lost their contract to deliver staffing services to OU, says Kristi Kinnard, the operations manager of Career Connections.
“It was a significant loss, not just because it was a substantial amount of our business, but because our team here really liked working with the university,” Kinnard says. “Some of the departments and contacts that we worked with were people we worked with for 30 years.”
While she understands the need for the policy, Kinnard says those on the selection committee should be better educated on the local economy, rather than looking simply at cost benefit.
“There is such a benefit to the local economy rather than [using] a business based out of Texas,” she says. “The four staff that we laid off were all OU alumni, they had kids at the Childhood Development Center, they had Wellworks passes, they bought houses here. I don’t think anyone understands what it means to the economy and what it means to the university, because it’s not tangible evidence in front of their face. It’s a sad thing, but I do understand it. We make vendor selections all the time as a small business, and we have to make choices, but the local providers are always at the top of our list when we pick.”
Kinnard says the loss of the preferred vendor contract was a “devastating blow and a huge loss” to Career Connections.
The presence of the university largely impacts the economy of Athens County. Many Athens businesses have found success on Court Street, which boasts an array of restaurants, boutiques and other local gems. However, without the presence of students, uptown Athens would likely be marred with vacant storefronts, says Michelle Oestrike, the president of the Athens Chamber of Commerce.
“Things are just busier when there’s 20,000 more people in town,” she says. “The students really help the businesses in Athens: they eat uptown, they drink uptown.”
Because of that relationship, local businesses cater to the desires of students and those affiliated with the university. Dawn Worley Sims, the director of operations for the Athens Chamber of Commerce, says the preferred supplier policy has frustrated businesses that “just want a little bit back towards them.”
“Some of the businesses feel that they support the university by supporting the projects when the fraternities and sororities come to them,” Sims says. When the university allows for outside companies to buy books at the end of the semester, rather than encouraging students to sell their books back to local bookstores, local businesses do not feel supported by the university.
Because local businesses often lack the infrastructure of larger, national corporations, they often cannot provide the scope of services needed by the university, Shaffer says.
“We have to be careful to maintain a consistent and conflict-free process so we aren’t giving any additional information to local vendors that is inconsistent with what anybody else would be provided,” Shaffer says. “We probably can’t do as much individual hand-holding as we would otherwise like to do and still remain in compliance with state and federal requirements.”
Many businesses do not want to speak out against the university because it is the largest employer in the region, Martin says.
“It’s tricky, since we all still do business there,” he says. “We don’t want to hurt what we have.”