University Strategic Sourcing
Universities evaluating whether to transition utility services to an external provider face a high-risk decision with long-term financial and operational consequences. The tension is immediate: unlock potential cost savings and upfront capital, or retain control while absorbing uncertain lifecycle costs and capital exposure.
Across multiple university clients, Strategic Sourcing Studies were developed to evaluate the feasibility of shifting utility service provision from internal operations to a third-party provider.
These engagements addressed complex utility systems, requiring integrated analysis across engineering, finance, and contract strategy.
Clients included:
- University of Oklahoma
- Oklahoma State University
- Purdue University
- University of Kansas
Approach
A structured, decision-grade methodology was applied to quantify costs, validate assumptions, and define the sourcing strategy:
- Developed operating and maintenance expense forecasts for university utility systems
- Assessed asset useful life and projected lifecycle costs
- Verified capital costs for required near-term equipment upgrades
- Validated potential savings from energy conservation measures
- Benchmarked projections against university budgets and planning forecasts
- Defined performance measures for private-sector contracts
- Built private-sector comparator models and valuation frameworks
- Formulated the business case, procurement scope, and documentation
- Coordinated transaction structure with financial and legal advisors
Outcome
At the University of Oklahoma, this process supported the outsourcing of six utility systems under a 50-year concession-type agreement, including generation, distribution, and supporting infrastructure.
The result:
- Projected savings exceeding 10%
- Approximately $120 million in upfront cash payment
- Long-term exclusive service rights granted to a single utility provider
Strategic sourcing decisions for utility systems demand rigorous financial modeling, asset validation, and contract structuring. When executed with discipline, institutions gain cost certainty, capital flexibility, and a defensible path forward.