Self-operated vs. Contracted Services

Decision Criteria

We are frequently asked why services like Dining Services are "contracted out". Although institutional auxiliaries may be self-operated and managed, the University of North Carolina has reviewed most auxiliary operations for possible outsourcing (privatization). Many of the auxiliaries are currently contracted (Bookstore, Dining Services, Reprographics (copy, laser printing, and associated services), Printing, and Vending). Others have been reviewed but remain self-operated, e.g. mail services. Outsourcing is strictly regulated by State Purchasing guidelines, and the procurement of external providers for auxiliary enterprises must follow state purchasing guidelines.

The decision to contract rather than self-operate is generally determined by an evaluation of which entity, institution or external vendor, can most efficiently and effectively provide the service at the specified quality levels. Although cost to provide the service is a major factor, the primary consideration is how the service can be best provided to meet the needs of the campus population, and support the academic mission. Quality customer service is critical. The initial outsourcing initial determination is made individually for each service area based on a comparison of the information provided from potential contractors against what is known about self operating the same service. Factors considered in making these decisions include but are not limited to the following:

• Financial performance
• Potential cost savings or revenue production
• Quality standards
• Ability to stay abreast of technology and changes in the service
• Access to specialized expertise and management practices for the service area identified
• Economies of scale and market
• Access to newer equipment and technologies
• Previous track record
• Capital investment considerations
•  The ability to efficiently handle cyclical workforce and other resource requirements
•  The mission service function (how critical control of the service is to the mission of the institution).

Once the decision is made to secure a contracted service provider, the successful vendor is determined by the Purchasing Process (See the Establishment and Regulation of Auxiliaries) based on a competitive bidding process designed to determine what vendor can most efficiently and effectively provide the types and levels of services specified in the Request for Proposals (RFP). The RFP for each service area outlines the criteria that will be utilized to make the selection.