Alumni Urge Harvard to Cut Expenses Through Competitive Bidding
and More Unity Among Schools
By JULIANNE BASINGER
Harvard University wastes millions of dollars every year by failing to seek
competitive bids on the $1-billion in products and services that it buys, according
to alumni who have pushed the university's president, Lawrence H. Summers, to
confront the problem.
The small but influential group of alumni, who include businessmen and former
politicians, say that a mandate for competitive bidding could save Harvard as
much as $225-million annually.
Mr. Summers has agreed on the importance of making Harvard's everyday
operating processes more efficient and has begun taking steps to do that. But he
also has acknowledged the barriers posed by Harvard's traditions, in which each
of its 10 schools does business independently of one another. At an
administrators' meeting last Thursday, however, he called on the schools to work
together and emphasized the cost savings that could be gained, at a time when
even Harvard is feeling the economy's downturn.
"We at Harvard are very much engaged with the fact that we are comprised of 10
different tubs, that every tub rests on its own bottom," he said. "Much of what we
can most effectively do does not respect the departmental and school boundaries
that were established 100 years ago based on the intellectual conventions of that
moment."
He echoed those themes in an article published Tuesday in The New York
Times, adding that Harvard in the past couple of years has begun to take steps
to rein in its operating expenses and even hired a consultant last year to help find
ways to save money on everyday expenses.
"This is the lowest-hanging fruit for helping keep costs down for students and
making it possible to expand academic programs," he said. "This is an area with
a lot of potential that is crucial at a time when university budgets are going to be
a lot tighter."
Mr. Summers was traveling Tuesday and could not be reached for further
comment. His attention to tightening Harvard's operating budget comes after
members of the group of alumni in recent months became more impatient in
expressing their dismay over what they see as the university's squandering of its
assets, including their donations. The alumni include C. Boyden Gray, who was
White House counsel to the former President George H.W. Bush, and former
U.S. Sen. Timothy E. Wirth, who now heads the United Nations Foundation.
The alumni began pressuring Mr. Summers to look into Harvard's spending
practices for goods and services shortly after he took office in July 2001. Mr.
Wirth and John B. Henry II, an alumnus who serves on Harvard's Advisory
Committee on the Environment, had begun to examine the university's expenses
after they advocating the creation of a Harvard Center for the Environment, and
were told that new outside money would have to be raised for it.
At the committee's request in 2001, Harvard administrative employees analyzed
the university's expenses and found that Harvard could save 25 percent if it
unified its efforts and sought competitive bids. In a letter to Mr. Summers this
month, Mr. Henry and Mr. Wirth praised the university's recent efforts to curb
expenses and the hiring of the consultant to seek ways to do more.
So far, the university has been able to save about $26-million annually on items
such as travel and office supplies by unifying some spending processes among
the schools. But the alumni complain that Mr. Summers's strategy of seeking
voluntary cooperation among the various schools is insufficient, since as much
as $200-million more could be saved through even more centralization.
"The time for voluntary programs has passed," wrote Mr. Henry and Mr. Wirth.
"What Harvard needs is a mandate. The governing boards and alumni pressure
can help you realize the promise of a university-wide competitive-sourcing
program."
The alumni say that the attention to expenditures is all the more important as
Harvard's tuition and fees have climbed sky high in recent years. The amount
that could be saved approaches what Harvard now takes in in tuition, as well as
the earnings from the donations to Harvard's last capital campaign, they add.
"The real burden of this falls on the alumni and the students," Mr. Henry said in
an interview Tuesday.
"We have a corporate asset, and everybody agrees we can't waste our corporate
asset," he added. "Every member of the corporation has this duty of care. There
is a fiduciary duty to competitively source all goods and services."
Mr. Gray said Tuesday that unifying the university's bidding processes could
most help Harvard's less-wealthy divisions, such as the education and publichealth schools, although all would benefit. "To purchase heat and electricity and
bricks and mortar seems to me to be something that they could easily combine
and do competitive bidding for without sacrificing independence," he said. "It just
seemed to us sort of silly to forgo these savings."