COUNCIL Update on Outsourcing and Restructuring Initiatives
[At Council on December 3, Executive Vice President
John Fry outlined the next steps scheduled in employee turnover under the
Trammell Crow preliminary agreement, including blanket discontinuation of
University positions in facilities management and residential operations
followed by Trammell Crow offers to at least 70% of those affected. For
a report on the outcome of that stage, see Almanac
December 9, and for an update on the number who accepted the offers, see
page 2 of this issue. Mr. Fry's report to Council continued as transcribed
below and lightly edited for space and clarity.]
Trammell Crow Transition
Regarding next steps in the transition, we are working very, very hard on reshaping the way in which we deliver facilities services on this campus. Right now, as many of you know, services are delivered through functional departmentsa maintenance department, a housekeeping department, a grounds department. What we're doing is rethinking that, and organizing all of our services basically around the clients who receive those servicesin this case the schools, the centers and the residences.
We're designing physical geographies, or zones, in which to deploy our people, and that will be through a series of facilities managers who will be assigned responsibility and accountability for groups of buildings as well as local customer interfaces to make sure that anyone who resides in a building has an individual or group of individuals that he or she can go to and make sure that the servicewhether a basic housekeeping issue or a small or large construction projecthave the answers for them. We're trying to make this as convenient for people in the field as possible, and go to a model which we think is much more customer-focused.
We also are going to attempt to house as many of our people out in the field as possible to give them a sense of local ownership, of joining the school and center personnel and trying to foster a sense of teamwork. There are a number of other things that we're doing, as we really hope to deploy the Trammell people in a much different and much more effective way than they have been deployed in the past.
Other Programs in Review
You also requested that I spend a little bit of time talking about some future initiatives, things that have begun and are ongoing as well as some things that we plan in the future. I'll be glad on a regular basis to come back and update you on this list of activities as well as others. But let me just start with a few today.
Food Services: Quality, Convenience
First, food services. A little bit of background: We spend about $40 million annually on food both on and off campus at the Universityabout $14 million on the Residential Life side, $2.5 million in Houston Hall Food Court, $4.5 million on Campus Catering, about $12 million on the street vendors trucks and carts, and the balance on restaurant leases on Penn-owned property, vending machines, concessions for the athletic complex and others. It's a very sizable amount of money that we spend every year on food, and what we wanted to do is to take a look at how we deliver food services, primarily from a quality and convenience standpoint. We also obviously are interested in maximizing the cost-effectiveness but we are very concerned about making sure that we continue to provide services that meet the needs of students, faculty and staff, all of whom, as you know, keep very, very different hours and we need to be flexible as a result.
Last fall we hired a consulting firm, Coryn and Fasano, to develop a campus master plan for food services. We did a series of leadership interviews with many of the constituencies represented in University Council, including focus groups and surveys where we touched over 1500 people through the process. We formed a steering committee; they've been convened four times to understand the various findings and recommendations from Cornyn and Fasano as well as to begin exploring with us the various options that we have. I believe a meeting is being scheduled next week, which will be the fifth meeting. We'll continue to meet until early next semester as we bring forward recommendations.
Basically what we're finding from the analysis is that we have about 4000 seats on campus, for about 50,000 people who eat every day. That's clearly inadequate. Our on-campus food facilities as a result require major renovations and improvementsabout $13.5 million as we've calculated by going through each of the facilities and taking a look at the size and the quality of the space.
As I've indicated, food quality and convenience are more important to constituencies than any other factor including price; it's actually, surprisingly, a relatively price-insensitive market compared to the weight that people place on quality and convenience. We also have some other factors to contend with. The Residential Communities initiative will eliminate mandatory board plans. That means we need to provide more and better options for our resident students. And we have burgeoning off-campus providers, both the vendors and other retailers who are coming inwhich we actually think is a positive thing, because we think it's going to create more competition for our on-campus providers. So it's a very interesting context.
To understand what's provided externally in the market we've issued a request for information from a number of different providers of food services. We've basically found through that market exploration there are two types of providers. The first is a sort of a higher quality catering/dining-type set of operations which tend to be smaller, more entrepreneurial; and then the larger, multi-functional food services organizations, the more traditional ones that have served university campuses. We're now requesting more information from those two types of providers, as well as asking our own Dining Services staff what they can do to help us to leverage purchasing powerto think about extending hours and other things that we think would better satisfy their customer. In effect we're asking all our own internal groups to act as one of the basic groups that we will be considering to provide dining services in the future.
We will be going through a process with the committee where we bring in the results of these inquiries; we'll discuss the pros and the cons of the various models, and then we'll be coming back with a recommendation to the president, probably early part of 1998, on where we go from here.
So that's a quick update on dining. A number of others I want to mention quickly:
This is obviously something that touches most of our faculty. We have a plan to begin to consolidate various research administrative processes across the campus, begin to join those into one streamlined organization, give them one common spaceright now they're fragmented over severaland begin to invest in technology that's going to provide better information on grant opportunities, on the whole pre-award process, as well as to make the whole post-award process a much less complicated one for investigators to navigate. We also need to do a lot more in terms of providing reports that accurately track expenditures for people who are managing their grants, and we want to give the schools and others who are managing those grants a fair amount of independence in terms of reporting, using report formats that they feel comfortable with. So you'll see a lot of emphasis on trying to streamline and make easier the whole research administration process.
We have two pilots going. One, which is finishing up in the School of Engineering, is focusing on the post-award administration of sponsored projects. SAS is now scheduled as the next pilot. The School of Medicine is just completing an internal study of their own grants administration procedures, and they, too, will become a pilot. Those three are obviously some of the largest users of research administration services. Through these pilots we're hoping for some quick and early steps forward.
Acquisitions: Costs and Diversity
I've talked to Council before about our ongoing initiatives in streamlining and getting better value for our purchasing initiatives. As most of you know, we spend over $600 million a year purchasing goods and services. To date we have total savings and cost-avoidance of $9.2 million through renegotiation of contracts. We've actually gone out and rebid a lot of work that we're involved in right now. We saved $2.7 million on temporary services, $1 million on office supplies, $600,000 on facilities supplies, $600,000 on lab supplies, and a series of smaller gains in other commodities such as office supplies duplication, copier paper, industrial gases. No area is too small for us to look at, because there are all sorts of opportunities. We've also targeted travel, copiers, printing and computers. We believe conservatively that there are savings opportunities there of $7 million. So without the loss of a job, this is about a $16 million improvement in our cost position. All of those dollars stay locally, so they can be redeployed for more useful purposes by schools and centers.
Area Economic Opportunity: An emphasis in this whole effort is to make sure that in the process of purchasing goods and services we attempt to fully utilize minority-owned and West Philadelphia businesses. I did some numbers on that. Actual purchasing levels in West Philadelphia-based business have grown from $10 million in FY93 to $25 million in FY97. We're tracking ahead of the goals we've set for ourselves there. We're using 320 West Philadelphia firms as current vendors, so we feel good about the progress in West Philadelphia.
On the minority-owned business purchasing, we had $4.4 million worth of business in FY91. We now have $35 million worth of business with minority-owned firms in FY97again tracking well ahead of the goals we had set for ourselves this year. Using Sansom Common as an illustration, we have something called an equal opportunity program committee which is comprised of University representatives, public officials, and community leaders. This group meets every two weeks, on our site, and we're working with the project developers, the construction managers, Barnes & Noble, the hotel operators, and everyone who has anything to do with purchasing for the project, to think of ways in which we can source more business to these types of organizations. To date we've awarded 16 major subcontracts on the project. Sixty percent of those have been awarded to women-owned businesses and minority-owned businesses, many of whom reside in West Philadelphia. That's about $8 million, or 31% of the total contract value of Sansom Common, to minority-owned businesses, and $7.5 million or 29% of the total contract value to women-owned businesses. So we're very serious about this effort in procurement; it's not just about saving money, it's also trying to create economic opportunities for those organizations.
A few other quick things.
Student Administrative Services
If you've been over to the Franklin Building lately you've seen a lot of construction. What we're trying to do is create a state-of- the-art customer/student-friendly service that will bring together all the major areas that students need to utilizethe registrar, the cashier, the PennCard Center, the Penn In Touch after-hours facility, Student Financial Servicesinto one sort of easy-to-use facility that will make it as painless as possible for students to access these services. Through Penn In Touch and other technological upgrades we've tried to eliminate the reasons why students have to go over to the Franklin Building in the first place, but if they do have go over to solve a problem, we're trying to create a situation where the first person you interact with is the person who can solve the problemthat we don't have to pass you through sixteen different channels and three weeks of different bureaucracy. This also creates a number of job growth opportunities for our employees in Student Financial Services, because in effect they're becoming financial counselors, learning skills across many different disciplines. But you'll see, over the next several months, a much more professional and pleasing aesthetic environment combined with much more streamlined services in those areas.
Telephones: Joint Venture with HUP
A quick word on campus telecommunications. We are examining the benefit of purchasing new telephone switching systems versus extending our current Bell Atlantic contracts. We're doing this in a joint effort with the Hospital of the University of Pennsylvania. We haven't had many efforts of that kind in the past, and we think it's important wherever possible to joint venture with the health system. What's relevant here is that we are very confident that over the next five years we will save $3 million to $6 million by simply going through this bidding process; by looking at basically becoming self-operating through using our own switch, versus continuing to contract with Bell Atlantic. That's a significant amount of savings that again can be redeployed to local users. In addition, we've decided to renegotiate our long-distance carrier contract and that is $400,000 per year for three years. Again, no jobs lost, just simple good, hard, periodic negotiating.
Human Resources: Training Initiatives
The last thing I want to mention on the reengineering side is a series of things that we're trying to do within Human Resources. I've been going out about every two or three weeks and meeting with groups of 25 to 30 employees and talking to them in open, off-the-record sessions about their concerns, their views on quality of life, and what we can do to make things better for them, particularly at a time of great uncertainty regarding job security. To date I've seen about 150 people. I plan to do these as long as I'm here, because it's the kind of forum that really keeps us sharp on the kinds of issues we need to be sharp on. I sit with the President after each of these and brief her on the major points, so she's aware of what we're finding.
One of the most significant thingsand I think Donna Arthur would back this upis that people are concerned about what we're doing regarding staff learning and education processes. What are we doing to invest in people's professional growth and developmentboth from an assessment and professional development planning standpoint as well as delivering a series of programs that would meet their needs? Donna referenced the Skills Development Center, which will begin in January 98 to develop and deliver continuing education and training to Penn employees and to community residents. Services will focus on building technological capabilities for those employees, customer service abilities, and key professional skills. Again, this is not only for the Penn employee, it is also for neighbors who wish jobs at higher education institutions such as Penn, and for Welfare-to-Work people who would like to participate in this program. So we're opening it up to all of West Philadelphia, not just our Penn employees. And we have great participation, not only from a number of our constituencies (the PPSA and A-3 Assembly; Jeanne Arnold from the African American Resource Center; the Center for Community Partnerships with Ira Harkavy), but also the West Philadelphia Partnership, University City High School, and the People's Emergency Center are all partners as well.
Questions & Answers
Matthew Ruben: I commend the EVP on some of the latter parts of report, particularly the community initiatives, and I hope the Skills Development Center flowers and turns into something significant. Two things, first dining: Is part of the strategy for the redoing of the in-house facilities to try to capture more market share from the total area?
Mr. Fry: I think it's to try to be as competitive as possible, knowing that we're going to be basically competing with entrepreneurs who will be trying through their facilities and their menus to try to capture as much share from us. My feeling is that we don't want to sit back and let that happen, we want to be as competitive as possible. And to do that we need to be flexible, so I think what you'll see is much more in the way of late-night venues, much more flexibility and choice, and also much more sort of appealing facilities, to make it easier for people to access them. So we're really looking to raise the level of competition in terms of the in-house food services.
Mr. Ruben: So the presumption would be that more market share would proceed from that, then?
Mr. Fry: There would be hopes that we would be more competitive and at least retain if not maybe even increase our current level of market share.
Mr. Ruben: I think I get that. The second thing is on the first item in your report, Trammell Crow. As you know GAPSA submitted questions to youactually, it's a month ago todayand we'd like to know if you can give us a date here when we can expect a response from you, because some of the questions are too long to go into at this moment, but we would rather get a date from you now for a response rather than me start asking you the questions now.
Mr. Fry: First of all, the reason I didn't respond in writing is that I think I've been responding in public over the last several weeks; you know, at the Budget and Finance meeting that we had, which you attended, I went through a fairly extensive presentation, but I'll be glad to put those in writing to you and I think you can have them by Friday.
Scot Kaplan: Some of the things you were reviewing sound somewhat understandable to me, one of those that price factor is not a big issue for the people being polled. I was one of the people polled, I'm one of the people in the dining program; I would say the lion's share of the people you have sampled are probably undergraduate students. In that case I don't think price would ever be a factor; I don't think the dollars are coming out of their pocket so I don't think that they have a full understanding of what the price structure is for the meals.... Obviously quality is an issue that they're going to be facing. There have been some things tried which are reasonably good...being able to bag your lunch and things like that.
But part of the poll that I received was availability of dining services on the weekend; and I think that the information provided wasn't applied correctly. I read the survey and the survey said if Dining Services were provided on the weekends would you utilize them, and certainly I wouldI'm a fine arts graduate student and I'm here on the weekends, and accessibility of dining services is limited on the weekends. That's not really an option. Unless I specifically sign up for a full dining service, plus dining services on the weekends. I was seeing in the newspapers that dining service attendance on weekends is minimal. If I could apply some of my dining services meals to the weekends I think that would increase; so I think the answers to the survey questions need to be applied a little differently.
Also I've heard a lot of different things about monetary savings through outsourcing and through hard, fast negotiations. I'm curious about where those savings are being applied.
Mr. Fry: Most of those savings, for example in procurement, are basically applied back to the school and center budgets, as dollars that [say] the biology department doesn't have to spend on certain supplies: where it used to have to spend $2 to do something and now can spend $1.60, it saves the 40 cents. So our hope is that most of this filters right back through the schools and centers by just basically having more flexibility in their budgets.
Those savings that are centrally generated are basically being applied to Agenda for Excellence priorities by the President and the Provost. That's my commitment. For example, we negotiated with MBNA an upfront payment of about $4.5 million on the Campus SmartCard, and the President decided that a part of that use can go for all-new campus lighting. So all the lighting you see in Superblock and that you'll be seeing on the core campus and down in the University Museum/Franklin Field area, and then eventually north of Walnut, is completely paid for through sort of a third party payment that didn't come out of anyone's budget. It gives us the flexibility in this case to enhance campus safety, which is clearly a priority of the strategic plan, without impacting anyone who might receive less money in their operating budget.
So as much as possible we're trying to live by two principles: the first is that savings generated go back to local budgets, and secondly, anything that's centrally generated goes to fund strategic planning priorities, many of which are academic, many of which are public safety or quality-of-life related.
Deborah James: I'm on the food services committee. I went to a meeting a couple of weeks ago and I understand we're meeting next week. Vending came up in this meeting and we talked quite a bit about it. If this committee is not supposed to make its recommendation until the early part of next year, how is this vending ordinance going ahead without us?
Mr. Fry: We don't control vending; it's not a service that we provide. Within the scope of the [Cornyn-Fasano] study are all of the services that are basically Penn-providedcatering, residential dining services, and the athletic concessions and things of that nature, where we either provide them directly or we contract for them. The vending situation is clearly a situation that third-party providers are out there providing vending. We believe after a tough start that we've gotten our consultation straight on vending, and have worked very hard over the last four months to try to run an open and information-rich process to give us a sense of what people feel as we move the whole thing forward. So we've been doing consultation, but with other groups. But the $12 million I quoted as part of the $40 million that's spent is what's coming out of the pocket of Penn faculty, staff and students, in this case to go to vendors. We just felt it was an important statistic to understand the size of this market. It's a huge food services market out there that we frankly feel we haven't managing proactively and strategically. We've been just sort of letting it happen.
Alex Welte: It seems to me that the food committee should in fact be discussing the vending ordinance because Penn is writing the ordinance. Penn does not provide the vending but Penn seems to be writing the laws. In that case it would be appropriate for a committee that is concerned with food issues to have input on that, and it does seem to me problematic that that's been circumvented. I was told by someone that there was an attempt to have that discussion at that committee, and it was not possible to have that. I think that is a problem. It's not a natural division of "Penn's not providing vending therefore we don't discuss it"; Penn's actively involved in affecting vending in terms of the competition between the different food services, the ones Penn provides and the ones that the vendors provide.
Mr. Fry: I don't see a problem with having Jack Shannon come to the food services meeting next week, presenting the vending ordinance, walking through that, and having people look at it and ask questions about it and comment on it; because it is still in process and there is still room for inputplenty of time for that. So that won't be a problem.
Mr. Welte: There is a meeting next week?
Mr. Fry: I think it's December 8.
Mr. Welte: Are we to assume the vending ordinance will not be before [City] Council by that date, that in fact the discussion will have some potential to affect what's going to be submitted?
Mr. Fry: My understanding is that the vending ordinance will be introduced before the end of the calendar year, and that it will be then debated and discussed in City Council the latter part of January, early February.