Shared services project to save millions less than originally estimated

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recent reportshows that shared services — a project to streamline campus administrative tasks into one location by December 2014 — would save millions less than originally estimated, throwing off overall projections for a campus cost-cutting project.The shared services project is an effort within the larger Operational Excellence initiative, a controversial bid to streamline campus operations and ultimately save $75 million annually starting in fiscal year 2016. In recent months, the campus has claimed that it can save much more than $75 million — estimates ran at as much as $112 million in a report released Jan. 13.

The $112 million estimate has now proved to be unrealistic due to a discrepancy in original savings estimates in an April 2010 report by consulting firm Bain & Company — Operational Excellence spokesperson Bill Reichle now estimates total Operational Excellence savings to be $95.2 million this year.

The report projected shared services would save around $18 million per year after having reached a steady savings rate three years after its implementation, according to Reichle. But the report was based on insufficient data that the company collected.

“The analysis in this report is based on best available data, but there are limitations due to the difficulty of assembling high-quality data from UC Berkeley’s existing systems,” the original Bain report on shared services stated. “This report contains decisionable data … further refinements will be made as needed in the Design stage.”

The campus originally hired Bain & Company at the cost of $7.5 million between October 2009 and December 2010 and charged it with finding savings for the campus.

Reichle said in an email that campus administrators based an “earmark projection for Shared Services savings” on the Bain report.

“The Bain diagnostic wasn’t a hard and fast estimate,” Reichle said. “It was to give a general idea of whether (shared services) was worth it or not.”

A Feb. 27 report sponsored by Vice Chancellor for Administration and Finance John Wilton and Dean of the College of Natural Resources Keith Gilless lowered shared services expectations from $18 million in the Bain report to “hard savings” of $12 million to $15 million per year.

The project’s finalized budget — which was approved March 8 by the initiative’s executive committee — has dropped the projected savings much more dramatically to $6.5 million, which would not occur until 2016. From 2016 to 2020, the savings are expected to rise each year to peak at $14.3 million in 2020.

Overall, the total savings projections of Operational Excellence for this fiscal year have now changed from $75 million originally to $112 million in January, ultimately landing on $95.2 million in the April report.

Afsana Afzal covers academics and administration.

Clarification(s):
A previous version of this article incorrectly stated the projected savings for this year could run as high as $75 million. In fact, this figure represents the projected savings per year starting fiscal year 2016.

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  • Anonstaff

    Shared Services is based on some pretty big assumptions: that staff have accurately listed the percent time they spend on various tasks (why should they tell the truth about how much time they spend on certain things, when telling the truth will only get them assigned to a cubical in the Power Bar building?), that a task expressed as a percentage is spread out evenly though out the year, that people expressing percentages are working full time and not overtime to accomplish those tasks.  If any of these assumptions is wrong, you have a recipe for chaos.  Shared Services is now proposing to go into most academic departments on campus and pull out any staff who work 50% time or more on things that will be moving to Shared Services.  Remaining staff will have to take over processes left behind by these disappearing staff members.  Staff may end up working small percentages of time in several departments, everyone will be confused and overworked.  And all of this is supposed to happen within a small amount of time, while a lot of new processing requirements are being introduced.  We are told that these changes are necessary in order to save X amount of money.  Gee, this figure is wrong now?  Who’da thought?

  • decal

    Does the Cal administration really think that their projections (as with the football stadium financing) are credible?

  • Calipenguin

    Every time a large organization like the UC wants to “consolidate” to save money, you can bet administrators like Diane Leite ( http://www.dailycal.org/tag/diane-leite/ ) will justify higher pay for the remaining administrators which then nullifies the cost savings.  And why does the administration pay $7.5 million to outside consultants for a “general idea” just to save a measly $15 million after 3 years of disorganization? Haas is full of experts who could do the work for free.

  • Guest

     Honestly the error margin on these numbers is so high it’s difficult to trust them at all.

    • JJMMC

      I’d find it more difficult to trust the calculations if the error bars were small.

  • U FAIL IT

    18 million, then 15-12, then 6.5 million as a projection some 8 years hence – one which conveniently ‘peaks’ at the end of the projected time period.

    Clearly Reichle is dissembling, but the reader isn’t privy to the assumptions hidden from view.

    As a technical matter is this chicanery akin to CBO assuming the Bush tax cuts to be long in duration (ie accurate but still horrible public policy), or is it more like a clinical trial where pharma has omitted a portion of the graph, thereby cherry-picking the data to give the false impression of favorable trend or beneficial effect?

    Bottom line: The NUMBERS ARE ALL FAKE, subject to continuous manipulation and shielded from independent review.

    • Gennie

      As a matter of logic, you can’t assert that they’re both “fake” and “shielded from independent review”.  If there hasn’t been an independent review, you don’t have any basis for your assertions that they’re fake. That and everything else in your comment is conclusory, without any evidence to back them up except your opinion.

      Unfortunately, it’s hard work to find the right facts and analyze them.  But if you’re serious about this, do the work, you might find something worth people listening to .  Not yet.