Cutting costs while maintaining value: The challenge for higher education

Key points: 

• AI-driven tools can enhance transparency in the education sector’s procurement processes
• HBCUs and the potential for disruptive AI innovation
• Slashing budgets, saving futures: Can AI rescue higher ed?
• For more on AI in higher ed, visit eCN’s AI in Education hub

The Trump administration’s announcement that there will be a reduction or suspension of funding for university research has cast a new wave of uncertainty over a sector that is already grappling with demographic challenges, such as that of an ageing population, and the threat posed by growing inflation.[1]

Northwestern University, MIT, Washington State University, North Carolina State University, and Columbia University, among others, have declared they will be putting new hiring on hold, reducing PhD admissions or cutting back on budgets as a result.[2]

More specifically, as the National Institutes of Health revealed it plans to cap reimbursement for indirect research costs at 15 percent, universities are realizing they will be feeling a serious pinch. In fact, institutions typically negotiated indirect cost rates with NIH, reaching over 60 percent in reimbursements. [3] Add to this that enrollment rates have continued to dive, with estimates showing that by 2039 there may be 15 percent fewer new graduates per year compared to current levels.[4]

Higher education therefore needs to strengthen its efforts to “do more with less.” One key way to stretch budgets further without cutting back on research is to improve spend management. Specifically, institutions should examine how other sectors are leveraging the integration of managed services to support smaller teams, and how they are introducing new AI-powered technologies. The latter can help cut costs, tackle inflation, and navigate uncertainty through added insight. Harnessing these services and tools into their procurement operations could be the key to continuing to invest in the young talent that will fuel future innovation for the country.

In an increasingly connected world, higher education procurement teams need to be able to manage and understand much larger volumes of data to ensure that their decision making is sound and withstands the test of time. Information from their suppliers can range from availability of products, potential bottlenecks, predicted price spikes or troughs, and changes in composition and design. Add to these all the information coming from within the campus from different departments regarding users, varying volumes, and demand, and the amount of data to be processed is clearly overwhelming. This calls for greater automation to enable staff to make the best possible decisions. Greater visibility across day-to-day transactions can help increase agility and streamline the procurement needs of different departments, faculty, administrators, and executive teams across campus.

AI-driven tools are available to enhance transparency in the education sector’s procurement processes by automating repetitive manual tasks such as data entry, NDA filing, or certification expiry monitoring. These AI-driven tools can also help unlock additional intelligence by connecting the dots between many different data points. AI can help bring clarity to complex areas such as supplier selection, can help optimize inventory, and can improve cost efficiency while also driving best-practice contract management through part-automated supplier interactions, contract proofing, redlining and more.

This kind of support means not only that resources are used in the most efficient way, but that institutions are able to access the information they need to weave important ethical considerations into their procurement choices and face implementation challenges head on. Sharing visibility over agreements with temporary workers can help optimize how these resources are deployed across campus. Similarly, understanding the detail of affiliate and partner agreements can reveal underutilized or overlooked areas that are not being leveraged fully.  

Being able to gain a comprehensive but user-friendly 360-degree view of contracts and budgets when purchasing can help make budgeting more proactive, improve contract compliance, and enhance spend management, ensuring that more cost efficiencies (such as those related to bulk or regular purchasing) are achieved.

Within higher education, this kind of visibility will not only provide a box-tick compliance but can help offer clarity over existing inventory to stretch budgets further, to share contracts across campus, and access agreements to improve buying power. The data derived from these activities can then be fed into reports on common purchases and supplier performance to inform future bidding negotiations. By leveraging AI-powered procurement tools, universities can build more efficiency and financial stewardship into how the organization purchases goods and services, improving compliance while also cutting costs and allowing FTEs to be reallocated to more business-critical initiatives. 

[1] Forbes, More Universities Slow Spending, Admissions Over Federal Funding Chaos, March 03, 2025, https://www.forbes.com/sites/michaeltnietzel/2025/03/03/more-universities-cut-budgets-admissions-due-to-federal-funding-chaos/

[2] Facilities Dive, Colleges tighten budgets amid NIH funding uncertainty, February 20, 2025, https://www.facilitiesdive.com/news/colleges-nih-budgets-hiring-freeze-spending/740512

[3] Ibid.

[4] NPR, A looming ‘demographic cliff’: Fewer college students and ultimately fewer graduates, January 8, 2025 https://www.npr.org/2025/01/08/nx-s1-5246200/demographic-cliff-fewer-college-students-mean-fewer-graduates

About the Author:

As a seasoned supply chain strategist and former COO, Brad Micciche has developed an innate understanding of what it takes to drive operational excellence and deliver results that matter.

At the heart of his approach lies a deep-seated belief in the power of purpose-driven leadership.. From optimizing logistics to streamlining processes, he has consistently led teams to surpass their goals while staying true to their core values. Currently, in his role as SVP, Global Indirect Procurement Advisor at JAGGAER he is leveraging his expertise to drive meaningful change and inspire others to reach new heights.