[CED/CD/EAT] Fwd: Thoughts on service provision in units

Wed Jun 29 13:18:23 MST 2016

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From: "Ratje, Jeffrey M - (jmratje)" <jmratje at email.arizona.edu<mailto:jmratje at email.arizona.edu>>
Date: June 29, 2016 at 3:13:51 PM CDT
To: "'calsbusofficers at list.arizona.edu<mailto:calsbusofficers at list.arizona.edu>'" <calsbusofficers at list.arizona.edu<mailto:calsbusofficers at list.arizona.edu>>, "Bradley, Gregory A - (gabrad)" <gabrad at ag.arizona.edu<mailto:gabrad at ag.arizona.edu>>, "Hernandez, Bert - (farmm1)" <bert at ag.Arizona.EDU<mailto:bert at ag.arizona.edu>>, "Husman, Stephen H - (husmans)" <Husman at ag.arizona.edu<mailto:Husman at ag.arizona.edu>>, "Main, Greg - (gmain)" <gmain at cals.arizona.edu<mailto:gmain at cals.arizona.edu>>, "Norton, Elbert R - (rnorton)" <rnorton at cals.arizona.edu<mailto:rnorton at cals.arizona.edu>>, "Rahr, Matt - (rahr)" <rahr at ag.arizona.edu<mailto:rahr at ag.arizona.edu>>, "Schafer, David W - (dschafer)" <dschafer at ag.arizona.edu<mailto:dschafer at ag.arizona.edu>>, "Siegwarth, Mark D - (mds2)" <MSiegwar at cals.arizona.edu<mailto:MSiegwar at cals.arizona.edu>>, "Silvertooth, Jeffrey C - (silverto)" <Silver at ag.arizona.edu<mailto:Silver at ag.arizona.edu>>, "Mcclaran, Mitchel P - (mcclaran)" <mcclaran at email.arizona.edu<mailto:mcclaran at email.arizona.edu>>, "Chorover, Jon - (chorover)" <chorover at email.arizona.edu<mailto:chorover at email.arizona.edu>>, "Farrell-Poe, Kathryn L - (kittfp)" <kittfp at email.arizona.edu<mailto:kittfp at email.arizona.edu>>, "Going, Scott B - (going)" <going at email.arizona.edu<mailto:going at email.arizona.edu>>, "Hawley, Jana - (hawleyj)" <hawleyj at email.arizona.edu<mailto:hawleyj at email.arizona.edu>>, "Marsh, Stuart E - (smarsh)" <smarsh at email.arizona.edu<mailto:smarsh at email.arizona.edu>>, "Schumaker, Karen S - (schumake)" <schumake at email.arizona.edu<mailto:schumake at email.arizona.edu>>, "Tabashnik, Bruce E - (tabashnb)" <BruceT at cals.arizona.edu<mailto:BruceT at cals.arizona.edu>>, "Thompson, Gary D - (gdthomps)" <GaryT at ag.arizona.edu<mailto:GaryT at ag.arizona.edu>>, "Torres, Robert Matthew - (rtorres1)" <rtorres1 at email.arizona.edu<mailto:rtorres1 at email.arizona.edu>>, "Wright, Andre-Denis Girard - (adwright)" <adwright at email.arizona.edu<mailto:adwright at email.arizona.edu>>, "Antin, Parker B - (pba)" <pba at email.arizona.edu<mailto:pba at email.arizona.edu>>, "Burgess, Shane C - (shaneburgess)" <sburgess at cals.arizona.edu<mailto:sburgess at cals.arizona.edu>>, "Staten, Michael E - (statenm)" <statenm at email.arizona.edu<mailto:statenm at email.arizona.edu>>
Cc: "Oden, Belinda K - (belindaoden)" <belindaoden at email.arizona.edu<mailto:belindaoden at email.arizona.edu>>, "Prado, Adriana E - (adri82)" <adri82 at email.arizona.edu<mailto:adri82 at email.arizona.edu>>, "Silvain, Lynda A - (slynda)" <slynda at email.arizona.edu<mailto:slynda at email.arizona.edu>>
Subject: FW: Thoughts on service provision in units

Dean Burgess suggested I share the email below with you.  This email is responding to a practice change in the University regarding fee for service activities.  Contract & Research Support Program (CRSP) has been instructed not to sign service agreements/contracts unless the service has undergone an approved rate study or unless the agreement includes the university’s IDC rate.  This issue has caused delays for several labs in CALS.

Sangita Pawar and my office have been enlisted at various times by CALS’ faculty to mediate with CRSP.  Denise Dellinger of FSO is on a working group including the VPR’s Office, CRSP, and FSO regarding a possible policy change.

Per Financial Policy 18.10<http://policy.fso.arizona.edu/fsm/1800/1810>, units that engage in fee for service activities should undergo a rate study if they charge any grants and contract accounts.  Activities that solely do business with non-UA customers (external customers), I recommend responding once we have clear guidance based on the issues raised below.  When in doubt, please work with your unit business officer first.

The CALS Rate & Review Team is available as well (Lynda Silvain and Adriana Prado).  Given the limited resources at units, the college, and at FSO, it will be a challenge to address all accounts that require a rate study in short order.

This information should be used to inform, not cause alarm.

Jeffrey Ratje

-------- Original message --------
From: "Ratje, Jeffrey M - (jmratje)" <jmratje at email.arizona.edu<mailto:jmratje at email.arizona.edu>>
Date: 6/29/16 11:19 AM (GMT-07:00)
To: "Dellinger, Denise A - (dellinge)" <dellinge at email.arizona.edu<mailto:dellinge at email.arizona.edu>>
Cc: "Antin, Parker B - (pba)" <pba at email.arizona.edu<mailto:pba at email.arizona.edu>>, "Pawar, Sangita C - (sangita)" <sangita at email.arizona.edu<mailto:sangita at email.arizona.edu>>, "Oden, Belinda K - (belindaoden)" <belindaoden at email.arizona.edu<mailto:belindaoden at email.arizona.edu>>, "Prado, Adriana E - (adri82)" <adri82 at email.arizona.edu<mailto:adri82 at email.arizona.edu>>, "Silvain, Lynda A - (slynda)" <slynda at email.arizona.edu<mailto:slynda at email.arizona.edu>>
Subject: Thoughts on service provision in units
Denise,

Per our phone conversation Monday, I’m writing to share my thoughts about the pending policy on sales and service activities.  While there is no doubt that the UA undercollects on its true costs of business, a policy that doesn’t recognize the importance of this revenue source to units and the university will do as much harm as undercollecting.

Clearly my comments are limited to service activities selling to external entities.  Internal activities should be under the rate study umbrella.  CALS has 77 accounts that have solely done business externally over the last three years.  I also admit that I am not aware of the full slate of central admin concerns.

After speaking with many faculty members and unit heads within CALS, I encourage you to take into account the following concerns before making a decision.

1.       Units and colleges pay for the subsidization of service activities now.  The financial harm from undercollecting is connected to the unit that makes the decision to undercollect through the subsidy costs it bears.  If units are to be empowered to be entrepreneurial as RCM and other initiatives suggest, units and colleges must be allowed to make decisions.  Some of these decisions may be viewed centrally as mistakes; however, units are in the best position to assess how to spend their resources.

2.       Requiring external-only service activities to undergo a rate study is unnecessary per my understanding of Uniform Guidance and burdensome on the entire system from unit to FSO.  If it is not required, why would we self-inflict this?  A prescriptive policy that burdens the system further is likely to not be implementable.

3.       Charging 53.5% IDC on top of actual costs will price most of the service activities in CALS out of the market.  Most of these activities are not unique or novel.  There are competitors at other universities or in the private sector.  The activities employ dozens of employees in CALS alone.  If they are uncompetitive on price, these jobs will be eliminated, and along with it the economic impact that those jobs contribute to the UA.

4.       Given the scope and financial importance of these service activities, there is a financial incentive to maintain the revenue stream by individual labs, faculty, or groups.  A policy that fails to recognize this importance will encourage employees to seek circumvention.

Having said this, are there problems with the current service activities?  Yes.  Units must recognize and be aware of the subsidy they are investing in activities.  This can and should be encouraged through “management-level rate studies.”  My team and I have been working with units on these for more than a year to ensure unit leadership is aware of their subsidy contributions.  In most cases, these have encouraged units to increase the price to recover more costs, but still remain in the price market.  To me, this is a management issue, not a compliance issue.

Another concern is the “squirreling away” of resources these activities can generate.  Arguments for this are to pay for expensive equipment and service contracts not easily purchased otherwise.  CALS continues to push for greater use of common core facilities.  However, the requirement that colleges invest a portion of their non-allocated revenues to support the multi-year salary increase is a step in the right direction to liberate these funds.  Again, I view this as a management issue that deans and unit heads must be charged with solving.  I know in CALS we have been working on these unallocated balances intently over the last year.

My thoughts are surely junior to the concerns of everyone on your review team.  Humbly, I encourage the group deciding the matter to first visit with faculty and tour some of the labs or groups that will be affected.  Discuss with them the concerns you have and build a bridge before setting a new policy or protocol.  Central to many of their concerns is a clear determination on what is service provision as opposed to research.  The change in practice we’ve recently been responding to with CRSP has revolved around this very issue.  Is there room for service provision at the UA that is not labeled as novel research activities?

Thank you for your consideration.

Jeffrey Ratje
Associate Dean, Finance and Administration | Treasurer, Arizona Experiment Station
College of Agriculture and Life Sciences (CALS) | The University of Arizona
PO Box 210036, Forbes Building, Rm 314C
1140 E. So. Campus Drive | Tucson, AZ  85721
Phone: (520) 621-1468 | Fax: (520) 621-8558

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