Haaga-Helia University of Applied Sciences wanted to improve cost management at all of its six operating locations. It decided to review travel costs and office supplies and to outsource the task to Expense Reduction Analysts’ experts.
Effective competitive tendering requires much groundwork and commitment of human resources. Haaga-Helia does not have its own procurement organisation for these cost groups; financial management is responsible for procurement at all operating locations. The Act on Public Procurement obliges universities to handle the procurement process in specified ways.
“The Act requires public competitive tendering in the case of large purchases. This demands careful preparatory work, because planning competitive tendering and scoring the offers of participants in the tendering process depends on the client’s needs and the nature of the purchase. Precise specification of the selection criteria, as well as transparent and well-justified scoring are of key importance for the success of competitive tendering. These ensure that the client not only obtains a good price but also finds the right service and goods supplier in terms of quality,” explains Jari Hailikari, Expense Reduction Analysts’ expert responsible for the project.
“Our cooperation with Expense Reduction Analysts was very clear. Their experts carried out the planning of the competitive tendering process, ensuring that the scoring criteria for the tender met our real needs. Our cooperation model involved risk-free work on a success fee basis; i.e. Expense Reduction Analysts’ invoicing was based on the savings achieved”, adds Haaga-Helia’s Chief Financial Officer, Jorma Alkula.
The competitive tendering of office supplies has been completed and a two-year monitoring phase is now under way. Expense Reduction Analysts’ experts will track the realisation of savings during the monitoring phase to ensure that the savings are not of a one-off nature, but become permanent. Average savings of over 30 per cent were achieved as a result of competitive tendering.
Knowledge of the present cost structure is the basis of cost management
The next step is the initiation of a cost management process for travel costs. This also involves an Expense Reduction Analysts expert first making a detailed study of the present cost structure.
“Very few organisations can show as much involvement with these issues as the experts from Expense Reduction Analysts, who have the experience and do so routinely. We collect data from various sources, analyse them, form an overall picture of the cost groups and identify savings targets. Then we proceed to competitive tendering and the selection of new suppliers. To ensure quality and savings, we track the prices of products and services as well as service quality during the monitoring period,” says Hailikari.
A common error in cost management is to launch a competitive tendering process with inadequate information about the current situation; in other words, not knowing what the purchase really consists of and where the costs arise.
“Ultimately, it is just as much a question of quality as cost savings. When you know what you need, then the supplier can safely offer precisely the right service. Both parties benefit and customer satisfaction improves,” concludes Hailikari.