View AASCU members

Cost Containment: A Survey of Current Practices at America’s State Colleges and Universities

Executive Summary

Member institutions of the American Association of State Colleges and Universities are witnessing measurable success in identifying and implementing cost containment strategies in order to reduce operating costs. Nearly all survey respondents at AASCU institutions place high importance on cost containment, with most having implemented cost control strategies in multiple operational areas. As a result, a majority of the state colleges and universities participating in this study indicated sufficient satisfaction with their cost containment efforts.

Institutions rely more on support and business functions in their cost control efforts than on core academic functions. Energy management and consortium purchasing are the two most common areas of focus for cost containment. Although responding AASCU members’ cost containment efforts have chiefly focused on support functions and business operations, the large majority of respondents are willing to consider any area of operation for potential cost containment opportunities. Breadth is key: Institutions witness greater satisfaction with their cost containment efforts to the degree they achieve savings in a broad range of operations and services.

Despite progress made to date, the data suggest there remains significant opportunity for AASCU members to benefit further from implementing additional cost containment strategies. While three-fourths of responding institutions indicated satisfaction with their cost containment activities, a quarter indicated some dissatisfaction, pointing to a desire for increased progress and accomplishment in realizing cost savings. Data suggest that institutional investment in identifying and implementing cost containment initiatives could be increased, producing an even greater return on investment at more colleges and universities.

The breadth of operational areas relied upon by survey participants for cost containment is impressive. However, evidence suggests that additional cost savings can be realized by judiciously utilizing a broader cross section of college and university operations, especially those associated with the academic core, where greater operational resources are expended. Currently, over one-half of participating institutions rely on contingent faculty and online learning to reduce operating costs, while only three percent indicated that this area is not considered when crafting future cost containment strategies.

Finally, the study’s findings illustrate that improved accountability and transparency can be realized through a more proactive and regular reporting of both cost containment activities and the results generated.

Based upon the study’s findings, and in an attempt to identify the most productive and replicable practices, American state colleges and universities may take several actions to achieve further success in realizing operational cost savings. Provided here are six recommendations:

Harness Costs through Enhanced Energy Management
A resounding 83 percent of responding institutions have successfully relied upon energy management strategies to reduce operating costs. Identifying specific energy management practices was beyond the purview of this survey, however, it is evident that various strategies are being utilized to contain costs and realize savings through sound energy conservation investments.

Take Advantage of Cost Containment Opportunities in Business Services/Processes
 Perhaps not surprisingly, public colleges and universities have achieved cost savings by turning to their own business services and processes. Many of the services and processes utilized by institutions are inherent sources of cost saving opportunities as a result of Web-enabled technologies that permit service process redesigns to simultaneously improve cost structures and service quality, the forces of market competition, and business applications that are easily outsourced. Bookstores, dining hall and residence hall operations, information technology services, electronic self-servicing, cashiering and other financial services, and vending operations have yielded cost savings.

Realize Enhanced Cost Management through Judicious Academic Programming Measures, While Taking into Account Core Academic Functions
The survey demonstrated that areas associated with institutional academic programming have the potential to deliver cost savings. Between one-third and one-half of responding institutions have achieved cost savings in six of the eight academic components surveyed related to academic programming, ranging from a review of course loads, course offerings and departmental mergers to program consolidation/discontinuation. Additionally, over one-half have achieved savings via the remaining two sources: utilization of contingent faculty and distance/online learning. Institutions should look to these areas for further potential cost savings while carefully considering the consequences so as not to degrade academic quality. As one example, technology-enabled course redesign—as pioneered by the National Center for Academic Transformation—is a method for institutions to reduce per-enrollment costs while measurably improving student learning outcomes.

Exploit the Full Potential of Purchasing Consortium Participation
A majority of respondents currently participate in purchasing consortia, illustrating that group purchasing is a critical vehicle to achieve cost savings. Expanding consortia participation and increasing the range of goods and services purchased through such arrangements may well provide additional savings opportunities.

Report and Quantify Cost Containment Outcomes
While most of the institutions that responded to the survey are actively engaged in cost containment, only a minority regularly quantify and/or report the results of their efforts. To improve accountability for results and the transparency of institutional cost containment efforts, state colleges and universities are encouraged to quantify the effectiveness of cost management efforts and to publish the outcomes. For example, realized cost savings can be presented longitudinally in terms of annual unit expenses (such as per student-FTE operating expenses) and can be reported alongside average net tuition and state appropriations (such as per student-FTE state contribution).

Invite Ideas and Solutions from Employees and Students While Also Tapping Outside Expertise
The study’s findings suggest that those institutions which encourage employees to offer cost savings ideas have a greater satisfaction level with their cost containment achievements. Colleges and universities are encouraged to actively invite employee and student involvement in the identification of potential cost reduction strategies. While many cost savings initiatives implemented by AASCU institutions are internally developed (84 percent indicated that employees are the primary source for ideas), college and university officials should also look beyond their respective campuses to identify best practices. Two-thirds of respondents indicated that other higher education institutions and participation in professional meetings served as key sources for cost containment ideas and strategies. College and university officials are encouraged to utilize the full complement of available sources in their efforts to identify and implement effective cost management strategies, including external consultants and non-profit organizations that possess valuable expertise.