Consulting costs: The “other kind” of administrative bloat



Although the number of administrators and of administrative staff, as well as the levels of administrative compensation, have continued to increase inexorably, those are hardly the only elements of administrative bloat. Paradoxically, although one would think that, at some point, there would be enough administrators to cover almost any administrative need, the “need” to contract with outside consultants seems to have more than kept pace with the growth of other administrative costs.

At my own institution, we have now allocated $2.3 million to hire a consultant with expertise in institutional branding. I believe that the budget allocation is for the consulting work: that is, it seems to be covering the cost of a plan and not any implementation of the plan.

But a group of universities in Iowa seems to have done us one better. In a recent article for the Cedar Rapids Gazette, Vanessa Miller reports that three universities have contracted with the New York firm Deloitte Consulting to provide an efficiency study. The University of Iowa and Iowa State University are each covering 45% of the cost of the study, while the University of Northern Iowa is covering 10% of the cost. The initial bills have been submitted and total about $1.55 million, with the final total expected to be at least $3.3 million.

It does not seem likely that any of this would have been deemed newsworthy, except that Deloitte Consulting has not provided any receipts to document the expenses summarized in its billing. Miller reports, very pointedly and rightly, that university employees cannot be reimbursed for professional expenses without providing receipts.

With what amounts to considerable dry irony, Miller also notes that members of the Board of Regents have asked for assurances that the institutions are not being billed for first-class travel or for liquor and that Deloitte has assured them that they were not billing for such expenses—but still without providing any receipts. In addition, she notes that although the firm seems to be billing for some employees’ time at a rate of $425 to $450 per hour, the threshold for the charges to be deemed excessive seems well above that, at something closer to $1000 per hour.

It is not clear from the newspaper story who is reporting the following information, but, reportedly, Deloitte Consulting has already identified 17 areas in which efficiencies might be achieved, saving the universities “as much as $30 to $80 million over time.” Not only is $50 million an ambiguously wide range of potential savings, but the phrase “over time” is so open-ended that it can mean almost anything. For instance, those who have been making a cause and an industry out of attacking pensions often resort to the same ruse. They calculate the potential pension liability over a thirty-year period and then juxtapose that intimidating figure against the current annual revenue.

Moreover, the hints provided about how the massive savings will be achieved seem all too predictable—“more efficient operations and possibly job cuts.” Indeed, although the public attention to the current billing for the consulting may derail such plans, Deloitte is apparently in line to contract with the universities to implement the new efficiencies in the “universities’ sourcing and procurement practices” that the firm is recommending. So presumably the clearly significant cost of that implementation will need to be subtracted from the ostensible savings that might be achieved. More broadly, like most of these deals, even if this one does not end up being a zero-sum game, it will probably not produce any truly major savings. My support for this assertion is simply this: our administrations have been “saving money” in this manner for the past three decades or more, and yet our institutions’ fiscal solvency never seems to have improved as dramatically as the announced savings would suggest.

One reason why that is the case may be that it is close to a sure bet that the savings achieved from eliminated positions will almost certainly occur largely, if not entirely, from the elimination of the lowest-paying jobs, and not from any purging of the many marginally justifiable administrative positions.