Procurement—the process by which an institution obtains necessary goods and services—is a major part of the financial life of any institution. While operationally procurement is downstream of the trustee’s role of “big picture” governance and oversight, knowing how their institutions’ processes work can give boards helpful context about how the fiscal decisions they make (e.g., approving new capital projects) will be implemented.
Moreover, as fiduciaries, higher education trustees have a responsibility to understand processes that have impacts on the financial status of their institutions. From a risk management perspective, part of that responsibility requires ensuring that the means by which their institutions procure goods and services reflect sound, ethical business practices, and that proper checks are in place so that resources are utilized in a responsible manner.
While it is, on one hand, important that trustees refrain from micro-managing, it is also essential that they maintain familiarity with the big picture of university finances—which includes procurement. Striking a proper balance between too much and too little involvement on the part of trustees can be difficult, to be sure, but ultimately it is trustees who are responsible for procurement, because they are ultimately responsible for the institution as a whole.
The Role of Trustees and Its Relation to Procurement
A trustee’s role at an institution of higher education is to establish policy guidelines and look at the long-term issues that affect the institution’s ability to serve its mission. Lay governance means that trustees bring into the boardroom their perspectives as employers and community members. They must always consider how the decisions they make have an impact on the public at large, much as the board of a hospital or other charitable organization would. This means that part of trustees’ work involves assessing the purposes and ends of initiatives before they even consider the procurement cycle.
Trustees can support procurement processes by ensuring that the institution has clear policies that mitigate the risk of conflicts of interest, and that take into account alternatives to procuring the goods or services sought, particularly those above a given dollar threshold. More careful scrutiny by trustees could help to avoid situations like a recent debacle at the University of South Carolina, in which millions of dollars were spent for duplicative administrative software. Colleges and universities that receive federal student aid funds through Title IV (i.e., the vast majority of institutions of higher education in the U.S.) bear some obligation to ensure that public monies are being spent responsibly.
Trustee oversight may not help speed up processes, but it could help make the processes more deliberate, saving time and money in the long term.
Where Trustees Should Step In
Procurement is vital to the successful functioning of any institution, and colleges and universities are, of course, no exception. While trustees should avoid being overly involved in the minutiae of procurement, there are a few things that trustees should be aware of concerning the process.
Several years ago, these pages published an op-ed suggesting that higher education institutions should consider shifting from a request for proposals (RFP) process to an interview-based process, particularly for technology procurement. Not only could that likely speed up the process, but it could also allow the institution to seek and identify partners with “a shared vision around a technological need for the university and its faculty and students.” This may also hold in other areas beyond technology.
When considering big purchases, governing boards should have checks in place to ensure that the product is not duplicative, that it is, in fact, needed, and that it represents an improvement over what is currently in place. For example, when considering whether more classroom space is needed, the institution should be aware of its classroom utilization metrics. In many cases, classrooms and space are under-utilized, and building expenses can be spared by simply improving scheduling practices.
The first step trustees should take to becoming part of this, however, is understanding the procurement process at their institutions: knowing which units are involved in procurement; having a sense for how the process works; and seeing what kinds of checks are already in place. They should work to build relationships with the procurement officers, and should consider having them address the board occasionally at board meetings. Once they understand the process, the board should consider instituting checks on the process, if they are not already in place—perhaps, for example, requiring that all purchases over a certain amount be approved by the board chair or appropriate committee.
In summary, it is very important that the board refrain from micromanaging, while ensuring that its fiduciary duty is fulfilled. Again, this can be a difficult balance to strike, but it is incumbent upon trustees to strive for it—complete disengagement is not an option.
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