RECENT OPERATING COST SAVINGS

• Purchasing
• Energy
• Health Care

Cost savings in purchasing

• Negotiation of favorable prices through the Prime Vendor Program: estimated savings of $6.6 million in FY2002.
• Use of information technology to improve processes in purchasing: nearly $580,000 annual savings in reduced staffing.
• Life Sciences purchasing consortium with U-M, MSU, Wayne State and Van Andel Institute: $650,000 cost savings for U-M in FY2002; other partners have additional combined savings of about $250,000.

Cost savings in energy

• Cogeneration of power through combined use of steam and electricity in U-M Power Plant: estimated $4 million annual cost savings. U-M Central Power Plant operates with 86% fuel efficiency, more than double that of most private power plants.
• Purchase of electricity from alternative suppliers through “open access” markets: estimated $3 million savings for Y2003.
• Energy Star program to install energy-efficient lighting, heating and cooling, and mechanical systems: $6 million current annual cost savings, with estimated annual savings of $9.7 million upon full implementation in 2005.

  Energy Consumption of General Fund Buildings
  —Progress Impact of Energy Star Program

Cost savings in health care

• Increase in co-pay for employee prescription drugs: $3 million reduction in health insurance premiums in FY2001.
• New pharmacy benefit manager as part of prescription drug coverage for all employee health insurance plans: estimated savings of $1.6 million in FY2003.