KU University Relations

University Relations

kurelations@ku.edu
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I. Privatization/Outsourcing

Define process to be improved:: Privatization means many things to many people. For the purposes of this report, we refer only to outsourcing of services, the provision of one or a bundle of services through contracts with private providers. More dramatic "asset transfer" types of privatization, which shift the core institution itself to non-governmental control are not, in our opinion, practical in the near term in Kansas and therefore are not considered.

What are the desired outcomes from outsourcing?: Postsecondary school outsourcing has been expanding in use across the United States. Reasons given include: gaining rapid access to the best management practices and specialized knowledge; avoiding idle resources internally; applying competitive, market-based incentives for improved service and/or lowered prices; avoiding capital investments; gaining a revenue flow from fees charged to contractor for the use of university resources. Additionally, in some states, outsourcing expands a university's flexibility to manage by avoiding many state rules on contracting, purchasing, and employment practices.
Privatization, even simple outsourcing, is no magic bullet: It involves disruptions in known practices, contentious issues in worker fairness, and subtle long term costs. For example, it is well understood that risk of sudden future loss of an outside contractor can be costly for an institution once it has eliminated its internal capacity to provide; for this reason, competitive options must always be kept open, even in long term contractual relationships. Failure of outside vendors to appreciate the University's mission and meet University expectations can be problematic. There also remains a need to manage and monitor the contracting process and the inherent structure this implies.

What outsourcing "process" needs to be improved?: Currently, neither a process nor a support structure exists to systematically evaluate opportunities or to project long term effects of outsourcing. Efforts in the past have typically been ad hoc in nature, and little outsourcing has been done to our knowledge. Needed is a continual, rigorous evaluation of outsourcing opportunities across the university.

What appears to be the problem?: The problem is that some processes at KU are not working satisfactorily. Because we do little outsourcing we have little direct evidence of the impacts of competitive outsourcing. Thus, the "counter factual" argument (what might have been) is rarely considered and opportunities for major improvements may be overlooked. Also, because outsourcing often substantially affects employees and relationships in the community, internal political considerations are invariably raised. Given our deliberate and inclusive style of governance, the decision-making process favors expunging those approaches, such as outsourcing, that appear harsh.

What is the evidence of the process(es) problems? Consumer input, relevant data?: Interviews with senior administrators, September-October 1995
Letters from campus community, Fall 1995
The interviews and focus group discussions in the fall of 1995 suggested frustrations with some internal service providers.

What additional information and/or data are needed?: Initially, an inventory of those activities that currently are being "outsourced" across the campus.
An ongoing means to uncover outsourcing opportunities within KU.
A comprehensive understanding of the advantages and disadvantages of outsourcing.

Who are the stakeholders in this process? Who should be involved in its improvement?: All KU employees are involved. This (and the points immediately above) suggest developing a systematic approach for evaluating outsourcing that might resemble the Kansas Council on Privatization's proposed approach for the state: A KU Council on Outsourcing, composed of members of the KU community, charged to identify, evaluate, and recommend specific targets.

Is the improvement of this process likely to be a short-term or long-term task?: Long-term.

Are administrative savings likely to result? How?: The university needs to invest in learning more about the prospects of privatization in order to answer this question. At this stage, we simply do not know enough to judge. Such an investment in knowledge, building an approach to systematically examine outsourcing options at KU is worthwhile.