in-plants support their parent organizations’ missions so the competition should be unfair.

By Burr Millsap

Remember Why It Was Created

If Department A provides a service to Department B, should A charge B for that service?

Some thinkers promote the notion that if the service is otherwise available in the general economy, then Department B should be free to buy it there rather than being forced to buy it from Department A. This brings natural forces to bear to keep Department B honest, on its toes, productive, efficient and price competitive. The argument has logic, but I believe it is fundamentally flawed.

In my view, the stronger logic is rooted in the decision to create Department A in the first place. If Department A is brought into being to provide responsive, reliable and controlled service to Department B (and other departments), then that is the fact that prevails above all others. Even in the face of counter-arguments that the outside economy could provide the service more economically, Department A's founding charter is what should govern.

Of course, the other edge of the sword of my argument is that SDAEs must stay relevant and indispensable to the institution. They should not be allowed to take extreme advantage of their "inside" status. They must be managed and operated effectively and efficiently. They must demonstrate reasonable price-competitiveness, even if perfect competitiveness is not possible. They must deliver, and they must do it excellently. If they cannot do that, then the basis for their existence is suspect, and they should perhaps be shut down.

THIS IS an argument for unfair competition. In the end, it will conclude that service departments and auxiliary enterprises (SDAEs) should have an unfair advantage. It will suggest that institutional customers (i.e., departments) should be made to do business with the SDAEs and should be asked to pay a higher-than-market price for the related products or services.

About the Author

Burr Millsap is the associate vice president for Administrative Affairs at the University of Oklahoma, and serves as adjunct faculty for Oklahoma City University and the Francis Tuttle Technology Center. Mr. Millsap, who is a CPA, teaches courses in accounting and financial management. He has written three texts: Accounting Lite, Accounting and Finance for Nonprofit Organizations, and Accounting and Finance Fundamentals. He is the 2002 recipient of the NAEP Neil D. Markee Communicator Award and the 2004 recipient of the NAEP Professional Perspective Award. He has contributed several articles to the NAEP Journal, and serves as associate editor.

Reprinted by permission of the National Association of Educational Procurement. Article first appeared in the September 2005 issue of the NAEP Journal, pages 10-13.

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The Case for Unfair Competition

The Case for  Unfair Competition