Going To School On Consortia Purchasing

By | October 12, 2015

Purchasing consortia are big in the higher education space. Some have been around for a while and others are relatively new. When dabbling in travel, car rental contracts seem to be an entry point. Now, there are agreements covering hotels, travel agencies, T&E software and visa processing services. There’s even a rare consortium air contract in play. Collegiate purchasing collectives are looking to do more.

Colleges aren’t the only entities that band together for travel procurement. Some not-for-profits do it, as do some state governments and private-sector companies. The rationale is simple: the sum is greater than the parts when it comes to leveraging volume and realizing cost savings. But it’s also about finding process efficiencies, pooling resources and sharing best practices. For suppliers, working with groups has similar benefits, and exposes them to more business that they otherwise might not have pursued on an individual basis.

PrincetonIn higher ed, joining a consortium may help institutions apply analytical rigor to their finances, get better insight on travel data and actively manage the category for the first time.

“The trend in higher ed has been to engage with the procurement office much more than 10 years ago and the procurement office has gotten much more involved in travel,” said John Anthony, owner and CEO of Anthony Travel, a travel management company serving universities.

Being part of a consortium raises some natural questions on fiefdoms. Speaking during a Society of Collegiate Travel and Expense Managers conference last month, Enterprise Holdings regional sales manager Cathy Barthel said some travel managers “are not sure how to react” to consortia opportunities. “Some feel like they are giving up control that they like to have or some of the value around their job is eroding or disappearing,” she said. “But if you recognize that you are not big enough to get the best deal and can get together with others, you are able to bring some value. This happening in business, it’s happening in the hospital and medical community and seems to be happening on college campuses.”

The University of Washington is part of the Fore group of non-profit travel buyers. Pete Crow, a travel specialist at the school, said “it’s not an act of defeat” to seek assistance from peers. “It’s a sign of synergizing. The airlines are merging, maybe it’s a good idea for us to merge too. We’ve taken that approach to some of our better relationships.”

Also speaking at the SCTEM conference, Crow explained how travel managers at Fore members each handle one aspect — maybe contracting with airlines or car rental firms on behalf of the organization. He looks after hotels. InterContinental Hotels Group is a contracted supplier. “I don’t have to spend 20 hours a week working on A, B and C because I have very competent people handling it very well,” he said.

Crow later told The Company Dime that UW historically hasn’t had a big presence in developing countries. Joining Fore means he can “collaboratively troubleshoot with several of the industry’s top travel minds when it comes to emerging markets, as well as contemporary travel challenges.”

Fore isn’t the only collective in which UW participates. Crow noted that “the higher ed travel vertical is coming up with a number of solutions at the state, local, regional, national and athletic conference level.”

E&I Cooperative Services, a nationwide not-for-profit sourcing group with 3,700 members throughout the educational community, has started working on travel contracting. It’s got deals with Wyndham, Hertz (along with subsidiaries Dollar and Thrifty), Enterprise Rent-A-Car (and subsidiary National Car Rental), PanAm (a travel agency) and Concur. The organization also has a deal for the American Express Corporate Purchasing Card.

Gary Link, senior vice president of contracts and consulting, said E&I now is “researching the feasibility of going much, much deeper.”

Beyond The Big Ten

As it is elsewhere, a big challenge in collegiate travel management is “getting your arms around the dynamics of the spend,” said Jeff Oberg, associate director of operations at the Committee on Institutional Cooperation. “What is all the data saying in terms of your destinations, roomnights, etc.?”

CIC consists of The Big Ten universities and the University of Chicago. The organization was born in the 1950s; the purchasing component came about around 15 years ago. Travel started with car rental. Oberg said the current CIC deal with Enterprise/National is “a big one,” with 12 of the 15 member institutions using it.

It’s how Enterprise got into the consortia game. National had the Big Ten contract when Enterprise acquired it. From there it began exploring other groups and signed a deal with hospital consortium HealthTrust.

“Digging into the space led us to realize we can provide a tremendous amount of value to the members and probably find a new way of getting us a bunch of new business as well,” said David Heywood, Enterprise assistant vice president of business rental development. He explained how a menu approach helps when working with multiple customers under an umbrella agreement. Insurance needs, for example, will vary. In return for preferential pricing, Enterprise nowadays asks for marketshare commitments.

Meanwhile, CIC also works with hotels to extend local agreements signed by member institutions. This year it completed a solicitation for expedited visa processing when it selected CIBT.

The group has discussed collectively sourcing TMC services, but hasn’t pursued the idea. It’s a tricky proposition. Members of travel purchasing consortia have disparate policies, politics, management approaches and needs. That requires varying agency configurations.

“How do you put something in place that can appeal and apply to all the members, yet still have the flexibility that is needed to match the needs to the solution on any given campus?” asked Anthony. “That’s the challenge.”

New York-based TMC Altour in 2012 inked a three-year deal with Bowling Green State University that stipulated pricing terms be made available across the Inter-University Council Purchasing Group of Ohio. That organization has 88 members across the state, including state universities, community colleges, technical colleges and private educational institutions. According to Altour senior vice president of sales Doug Payne, only Ohio University and Miami University in Oxford, Ohio jumped on.

It was Altour’s first foray into consortia contracting. When the deal expired this summer, Altour negotiated new, individual agreements with Bowling Green and Ohio University.

In terms of more consortia work in the future, “if an opportunity comes about and it’s structured correctly, we’d certainly purse it,” Payne said. “We learned a lot.”

At E&I, PanAm Travel secured a contract “based on their ability to customize for the institutions,” Link said. He acknowledged that fewer members than expected make use of it, “but it is continuing to grow.”

E&I has a new TMC solicitation scheduled for the first quarter of next year.

Members seem more attracted to a deal with Concur. “We are getting more and more institutions that are interested in managing their travel more effectively,” Linked explained. “The expense management aspect of that is very critical to gain that knowledge, to consolidate and to understand where their travel dollars are going.”

On hotels, Link envisions a rate category for higher education that is similar to a AAA rate. “You go to a Hilton or a Marriott site and they have E&I rate,” he said. “That would be my future goal. I am not sure we can make it happen.”

A Rare Exception

Cindy Shumate is Princeton University’s travel services manager and a veteran of corporate travel. She, too, said purchasing consortia can help college programs understand their travel data.

“If you don’t know on which airline you are spending money, it all goes into a big bucket called airfare,” she said. “That’s not helpful when you are trying to negotiate with specific carriers or for specific routes. For some universities that don’t have a managed program, once you join the consortia contract it helps you measure your data. Everybody in the consortia still gets separate reporting, so you still have visibility into your piece of that larger contract.”

Princeton is getting in on an airline contract with the Philadelphia Area Collegiate Cooperative. “Our participation raises the volume and challenges a certain carrier to go back and sharpen their pencils on what they offered,” Shumate said. “I would like to see them offer a deeper discount so in the booking tool they are more competitive.”

Established in 2000, PACC has about 20 member institutions. Drexel University is one. Debbie Rizzo is the school’s procurement services director of diversity, p-card, travel, expense and external relations. At the SCTEM conference she said the group sourcing contract with Delta Air Lines “is just unbelievable” and “we want to do more.”

Delta’s involvement is interesting. U.S. airlines typically don’t agree to deals with multiple entities. They don’t focus narrowly on volume. With their thin margins, the quality of that volume matters (read: higher yield). Accounts often must prove they can manage their travel, perhaps through strong policies. Corralling multiple entities with diverse policies and geographic travel patterns isn’t an attractive model to most carriers.

Southwest Airlines’ multi-state government program was a rare exception. The carrier doesn’t seem interested in others. “We always look at opportunities on an individual basis,” according to a spokesperson.

Fore has deals with two foreign airlines but hasn’t approached any domestic ones. Members are happy with their existing unilateral relationships.

For other universities, “it goes back to the challenges of understanding what the spend is and how much control you have over it, and being able to channel the spend through the agreements that you actually source,” said CIC’s Oberg.

Link contrasted air sourcing with car rental. “We’re able to obtain car rental data easier from universities which we then can apply to negotiating discounted rates, and car rental companies are more open to negotiating with a consortium,” he said. “Airlines haven’t been – unless you want to buy inventory, and we’re not interested in doing that.” But he is interested in citypair deals with airlines. “We just don’t have the data right now to do that to such specificity,” said Link.

Additional info: With roots back to the 1930s, E&I Cooperative Services claims to save members $200 million annually with “best-in-class competitively awarded contracts, electronic procurement platforms and expert consulting services.” Based on 2014 activity, it returned to members about $3.5 million in “patronage refunds,” determined by a member’s annual purchases. Link said the consulting group “from time to time” gets involved in travel. That may mean help with policies, processes like approvals or expense management. He noted that next steps for E&I include exploring bus and air charter opportunities for collegiate athletics, limo services and potential cooperation with the likes of Uber and Lyft.

The Committee on Institutional Cooperation encompasses $77 million in consortia spending across 28 active contracts. The current deal with Enterprise/National covers both business and personal use. According to CIC’s website, projected savings exceed $1.2 million a year more than a previous agreement.

The Massachusetts Higher Education Consortium is open to various education and not-for-profit entities in New England. It claims that members in 2014 purchased $162 million worth of goods and services via more than 50 MHEC contracts. Those include travel management from PanAm Travel, vehicle renting and sharing through Enterprise/National and deals for charter transportation and airport parking. According to the MHEC website, the procurement staff on average spends 480 hours per bid. “If each member school bid all of MHEC 57 contracts individually, each school would need almost 13 full-time procurement and purchasing staff.” MHEC primarily is funded through a contract service fee paid by suppliers based on how much is purchased through the collective contract.

Delta did not respond to requests for information.

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