The Board of Regents formally accepted the JP Morgan Chase request for proposal for banking services at the Student Center and ATM services around campus last Tuesday.
Regents had accepted the agreement in a special meeting Aug. 12, which allowed Chase to start its build-out and be open for business at the beginning of fall semester.
In total this deal is worth $1.325 million. The agreement calls for Chase to spend $525,000 over five years in rental space fees and marketing bonus fees.
Chase is currently constructing out of the old TCF bank space, making it into a full-service branch. This will be done around Oct. 18 and cost Chase $800,000.
“The decision came down to PNC Bank and Chase Bank,” John Lumm, EMU’s chief financial officer, said. “We have a very public and robust bidding process.”
According to the outcome of the Board of Regents meeting, Chase will be paying an annual rental fee of $60,000 for the branch space in the Student Center, annually $24,000, with 3 percent increase annuals for ATM rent space around campus and an annual $20,000 marketing bonus.
“We are driven by the customers we serve… the students, faculty, parents and alumni,” Purchasing Director Dean Backos said. “That is our focus when choosing a service provider.”
Chase Bank is currently using a temporary setup in the Student Center. It is also in the process of constructing four ATMs around campus and three or four more ATMs are in the planning stage.
For the banking contract, EMU’s purchasing department used other means outside just the RFP to decide on a banking service provider at the Student Center.
“Student surveys were handed out at the Student Center,” Backos said. “Fifty percent of the respondents said they used either Chase Bank or Bank of America.”
For Lumm, this constituted another million-dollar vendor deal to go along with the Pepsi contract. The Pepsi contract, signed in 2008, includes annual payments of $2.3 million over 10 years with a percentage share of vending revenue. Another aspect included in the Pepsi contract is a price adjustment in vending prices in 2013.
Almost all the revenue from vendor service contracts goes into EMU’s general fund. The part of the revenue from these deals that don’t go toward the school’s general fund include the Chase Bank build out and Pepsi’s purchasing of home football game tickets.
The Pepsi contract calls for Pepsi to spend $150,000 for EMU home football games annually.
“Pepsi pays that amount even if EMU does not request Pepsi to pay for tickets,” Lumm said. “The tickets are [usually] distributed to local area schools.”
Like the Pepsi contract, the Chase Bank contract could run 10 years.
“The [Chase Bank] arrangement includes a possible five-year extension with board approval,” Backos said.
Overall, EMU has signed two long-term, lucrative vending services in last few years, bringing money into the school’s general fund. The Chase Bank contract was especially accelerated and efficient due to a revised RFP system put into place at EMU’s Purchase Department.
In With the New, Out with the Old
The JP Morgan Chase RFP process illustrates the changes EMU has made since 2004. Seven years ago, EMU was subjected to a performance audit by Michigan Office of the Auditor General for the University House project. The project went over-budget with numerous internal problems, including a lack of competitive bidding for contracts and lack of control of expenditures.
In 2004, former EMU interim president Craig Dean Willis said, “After a careful review of all relevant issues, we are optimistic that the lessons learned as part of the University House project will result in long-term positive change for EMU.”
The “positive change” came to fruition 5 1/2 months ago when the purchasing department launched a successful test of the use of the electronic RFP system by the Public Group.
“I was shown the University House project documents… and I was appalled by the lack of internal controls,” Backos said. “I was hired to fix the things that went wrong [in University House Project].”
A little more than a year ago, Backos was hired by EMU as the director of purchasing. He spent 20 years
working in the purchasing field, mostly with Compuware, which included the construction of the $450 million Compuware building in downtown Detroit.
“When I first got here, the department was a reactive business with no define processes,” Backos said. “I was shocked to see typewriters when I first arrived in the purchasing department.”
When Backos first started as the purchasing director everything was on paper and $25,000 to million dollar bids would take the department weeks to work on.
“We [the purchasing department] were not being efficient,” he said.
The Public Group has allowed EMU to transform its paper-intensive RFP system into an electronic system. EMU does not have to pay for ERFP; Public Group makes its money on its enhancement and upgradeable services.
“The result is a more streamlined bidding process with improved response times… and less time spent on tactical activities,” Backos said.
Since being hired, Backos has had all the EMU purchasing documents rewritten and uploaded online. He has started on plans to increase public transparency by allowing the public to view contracts under construction.
“I want students to be able to walk through the website and understand the purchasing process,” he said.
The new electronic system tracks the vendors, has a repository of EMU vendors and the time/date vendors open RFPs. This has allowed more people to get involved in the bidding process. EMU departments involved in the vendor services are able to view the vendor’s proposals and questions. This creates a healthy collaboration between the purchasing department and other EMU departments.
“The [banking] RFP process is example of the efficiency of the new electronic purchasing system,” Backos said.
Chase Bank asked 18 questions during the RFP process, which a year ago would have caused delays and loads of paper work for the Purchasing Department.
