As director of strategic sourcing at the University of Iowa, John Watkins works to ensure that the purchasing department is maximizing the UI’s buying power by continually evaluating contracts and acting on opportunities for renegotiation.
As part of that process, Watkins and others from UI purchasing recently teamed up with administrators at the University of Iowa Hospitals and Clinics to re-evaluate one of the UI’s multiple furniture contracts—one previously developed from a joint Regent Request for Proposal led by the University of Iowa and including the "spend volume" for the University of Northern Iowa.
“Knowing that we were going to make a significant investment over the next few years, we wanted to discuss how we could work with the vendor to shift around our pricing so that we could lock in a discount structure for all project sizes moving forward,” says Watkins. With a new children’s hospital, a health care information systems building, and several other building projects on the horizon, Watkins and Purchasing Agent Greg Snipes sat down with George Mejias, executive director of capital management at UIHC and Anne Bauer, E&A project specialist and interior design manager at UIHC, to analyze whether the team could renegotiate one of the university’s current furniture-purchasing contracts in order to garner better long-term savings.
Though the university was currently working on a tiered discount structure—wherein the university received a discount on furniture based on the cost of each individual purchasing project—Watkins said the group wanted to lock in a discount structure for projects of all sizes.
That way, if, for example, a department needs one new chair for a conference room, they’d be able to get it from the same vendor, for the same price, even if it wasn’t part of a larger project.
To make sure they were getting a good deal during the negotiation process, Watkins said his team benchmarked against other contracts and institutions—a process that has been a best practice for many years.
After about three months, the team was able to negotiate a discount structure with the furniture distributor that’s expected to save the university just over an estimated $750,000.
“This agreement is the result of an incredibly successful collaboration between capital management and purchasing. We teamed up and formed a strategy that provided us with the opportunity to renegotiate an existing contract based on projected purchasing volumes,” Mejias says. “Because of this contract, we anticipate there will be greater savings that will probably be in the millions.”
That purchasing contract—which is open to the UI and UIHC—extends through 2018.