Universities Study Idea: Contracting Out Services

In an arrangement any student would envy, many colleges are getting others to do their work for them.

Universities have been studying how to contract out campus services to private companies in an attempt to save or make money.

The decision to outsource is primarily due to squeezed state budgets and ever-growing student fees, says William D. Eggers, director of the Privatization Center, a division of the Los Angeles-based Reason Foundation, which assists state governments in privatization efforts.

“Cost escalation at universities and higher education institutions is a strong incentive,” Eggers said.

Many schools have long hired outside businesses to handle trash collection, vending machines, cafeterias and travel arrangements. Now schools are hiring companies to handle campus security, housing, health centers and infirmaries.

“It’s not surprising to have food servicing. That’s pretty much expected,” said Richard Wertz, an associate professor at the University of South Carolina, who surveyed 934 private and public colleges and universities about outsourcing. “The newest trend is in the student servicing.”

The number of college bookstores under private management more than tripled in the past decade to 30%. The National Assn. of College Auxiliary Services predicts the number will grow to more than 50% by the end of this decade.

The move to contract work has meant added dollars for some schools, such as Penn State, which signed a $1-million contract with Barnes & Noble for the company to run its bookstore. Meanwhile, George Mason, a Virginia school and one of the most ambitious in outsourcing, last year signed a three-year, $8-million contract for Campus Hospitality to oversee its dormitories and even mediate roommate fights.

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Baylor University in Waco recently outsourced its bookstore to Follett College Stores.

“We’ve looked at it strictly from the standpoint as trying to provide a better service to our faculty, students and staff as well as cost savings,” said Kenneth Simmons, vice president of business affairs at Baylor, which also has contracted out its food, custodial, mail and duplicating services.

“We’ve found cost savings in just about all of our services. Our paramount mission is education. There are folks that are more experienced in those other areas than we are,” Simmons said.

Still, even with unprecedented growth, outsourcing is moving at a much slower pace on campuses than in the business world.

“They certainly have not done everything that could be done,” Eggers says, adding that colleges could easily get private companies to do as much as 40% of their support services. But there is resistance from some universities about giving up control, he said.

“Politically it should be easy to outsource services, but I think universities haven’t faced the real, real serious cost pressures that would encourage them to do so. They used to be able to always increase fees on students, but they’re getting to the limit,” Eggers said.

Tight budgets led lawmakers in Florida and South Carolina to tell public universities to consider contracting out campus services.

“We’re getting pushed by businessmen who are on our boards of trustees and businessmen who are in our legislatures,” Wertz said.

Another concern for some schools is that privatization can mean lost jobs for university employees.

“When you start talking about people who have been employees of the university and now those functions are going to be outsourced there’s always concern,” said Simmons of Baylor.

A 1989 study of state and county governments by the U.S. Department of Labor shows half of all employees go to work for the new company overseeing their privatized jobs. Most of the others retired or were reassigned, said Eggers.

The concern is real for university workers. In December, more than 200 protesters objecting to subcontracting of jobs at Yale were arrested and charged with creating a public disturbance.

“There is something seriously wrong in corporate America when a huge successful money-making operation like Yale . . . can outsource the jobs of dining hall workers,” AFL-CIO President John Sweeney said in a statement. Since the protest, the issue has been settled and Yale now allows limited subcontracting.

Many schools include a job security requirement in outsourcing contracts.

“That’s one of the requirements we put on the vendor--existing employees will be offered a job with the outsourcer,” Simmons said.

But regardless whether money or job guarantees are offered, many schools still aren’t interested in handing over their campus services.

Abilene, Texas-based Hardin-Simmons University, which has contracted out its landscaping and cafeteria services for a decade, says it probably won’t do a great deal more.

“Some schools in the country are outsourcing their dormitories. We think we can do better,” said Harold Preston, vice president of finance. The school also has no plans to outsource maintenance or security, he said.

Still, others say there will be no limit to the amount of privatizing that will occur.

“I think it’s only a matter of time before somebody outsources areas of instruction,” said Gordon Davies, director of Virginia’s higher-education council.