Uncertainty around federal and state policy changes poses a significant challenge for procurement leaders across all types of higher education institutions. Community colleges, public universities, and private institutions alike must navigate the potential for budget cuts, shifts in federal aid programs, and changing regulatory requirements. One major concern is the possibility of reductions in public service funding, which could lead to cuts in state appropriations for higher education, putting greater financial strain on institutions that rely on government support. Since many public institutions operate under performance-based funding models, changes in enrollment, graduation rates, or workforce outcomes could directly impact their budgets, forcing procurement teams to find cost savings and reassess long-term vendor contracts.
Another critical issue is the uncertainty surrounding federal financial aid programs for students, in particular Pell Grants and loan forgiveness initiatives. If funding for these programs is reduced or eligibility criteria become more restrictive, community colleges and mid-tier universities could see enrollment declines, leading to further budget shortfalls. Additionally, institutions must remain adaptable to changes in compliance requirements related to federal grant-funded purchases, sustainability mandates, or supplier diversity policies. These could be amended, scrapped or introduced by current and future administrations. In such an unpredictable environment, procurement leaders are advised to take a risk-management approach, focusing on cost efficiency, contract flexibility, and strategic supplier relationships to ensure institutional resilience.
Procurement leaders in mid-tier US higher education institutions face a unique set of issues shaped by financial constraints, regulatory requirements, and evolving institutional priorities. Here are seven challenges that your institution might be tackling:
1. Budget Shortfalls
First, the good news. College enrollment, which peaked in 2010–2011 and fell sharply during the pandemic, rebounded with the fall 2024 intake. Enrollment of first-year students grew 5.5% in fall 2024 compared to the year before, representing an increase of about 130,000 students, according to a final tally from the National Student Clearinghouse Research Center. Community colleges, in particular, have bounced back. Whether this increase will be sustained is, of course, very much open to question. Financial support may be cut or restricted for American students, while nervousness about restraints on travel, especially from Muslim-majority countries, is one of the factors that may depress international enrollment in 2025.
In fact, the number of high school graduates is forecast to peak in this year. After 2025 the college-age population is expected to shrink for the next five to 10 years.
Worries about declining enrollment also make it difficult for institutions to increase tuition fees. These are being held at between 2 and 4% in the 2024-25 academic year at a time when costs are rising, according to Fitch Higher Education Outlook.
Funding freezes and cuts are a second major cost pressure. In February 2025 the Department of Education abruptly canceled about $881 million in multiyear research contracts. The current federal congressional budget proposes billions of dollars in further cuts in federal funding for research and institutions across higher education. “Congress is advancing a budget bill that could impose deep cuts to federal programs that support students and colleges—while also introducing tax changes that could make it more expensive for students to afford college and harder for institutions to sustain their missions. These proposed tax measures, combined with significant funding reductions, pose a dual threat to higher education,” according to the American Council on Education.
This comes at a time when institutions not only face inflationary costs but are compelled to invest in order to compete effectively. Research institutions are especially challenged. Research and development (R&D) spending by academic institutions increased 11.2% to a total of $108.8 billion in 2023, the largest growth rate in current dollars since 2003. Since 2013, higher education R&D has grown at an average compound annual rate of 5.0% in current dollars and 2.3% in constant dollars, according to the National Center for Science and Engineering Statistics.
Many institutions are taking drastic action such as hiring freezes and pauses on admission in order to cope with these budgetary pressures. Despite this, dozens of institutions have closed in recent years, with small to mid-sized institutions especially affected.
2. Decentralized purchasing & compliance issues
Faculty, research departments, and administrative units often make independent purchasing decisions, leading to inefficiencies and a lack of spend visibility. But for procurement leaders, this lack of spend visibility across categories leads to missed cost-saving opportunities through supplier consolidation, volume leverage, and negotiated discounts. Decentralized buying often results in fragmented contracts with inconsistent pricing and terms.
Poor visibility can often result in off-contract or ‘maverick’ spend which may expose the institution to compliance risks. Ensuring compliance with federal (e.g., Uniform Guidance for Federal Awards), state, and institutional procurement regulations can be challenging, especially when dealing with grant-funded purchases.
3. Supplier management & diversity goals
In many states higher education institutions are under pressure to engage with diverse and local suppliers, aligning procurement with institutional diversity, equity, and inclusion (DEI) goals. Finding reliable vendors that meet DEI, cost and quality requirements can be difficult, particularly for specialized academic or research-related procurement.
4. Sustainability & ethical sourcing
Likewise, many higher education institutions are expected to adopt sustainable procurement practices, including environmentally friendly purchasing and ethical supply chain management. The pressure comes not just from federal and state authorities but from students as new generations are increasingly concerned with climate change and other environmental issues. Further evidence for this comes from the Bureau of Labor Statistics (BLS), which reports that the demand for environmental specialists is growing at around six percent per year—faster than the average of other jobs—and adding nearly 7,000 new jobs each year. Procurement professionals in higher education can make a major impact on reducing waste, conserving energy and water and supporting the circular economy. However, balancing sustainability initiatives with cost-effectiveness is a significant challenge.
5. Emergency preparedness & supply chain disruptions
In higher education, buyers are often up against hard deadlines for essential resources. COVID-19 highlighted the importance of resilient supply chains, but many institutions still find it a struggle to diversify suppliers and ensure continuity in critical areas like IT, lab equipment, and facilities management. Current uncertainty around global trading networks, especially in light of the tariffs imposed on some countries, is only adding to concerns.
6. Group purchasing organizations (GPOs) may distort spend
Many mid-tier institutions participate in cooperative purchasing or GPOs to leverage collective buying power, reduce staff costs, and streamline the ordering process. These could be ‘vertical’, i.e. specific to higher education, or ‘horizontal’, i.e. open to organizations in other sectors. But these agreements may not always align with institutional needs or local supplier preferences. They can often limit the choice of suppliers and reduce collaboration and control.
However, GPOs and specialized cooperative buying organizations are not all the same—E&I Cooperative Services, for example, which is a JAGGAER customer, member-owned, non-profit sourcing cooperative exclusively focused on serving the education community.
We will dig deeper into GPOs in a subsequent article.
7. Outdated or inadequate technology
Many institutions still rely on ERP systems with little or no dedicated procurement functionality, outdated and inefficient procurement systems, or even manual processes. This means they are unable to tackle any of the foregoing six challenges efficiently and systematically. For example, if the central procurement infrastructure is not easy and intuitive for ordering by faculty and other non-procurement specialists, they will simply short-circuit the system and go their own way. This accentuates problems such as poor spend visibility and off-contract spend, with consequent pressure on already stretched budgets.
Of course, implementing a source-to-pay platform capable of addressing all of the concerns listed above requires funding, staff training, and stakeholder buy-in. But now is the time to step up to the next level. Many institutions have testified to the savings and efficiency gains made when investing in JAGGAER, as well as additional benefits such as risk mitigation and increased ESG compliance.
Addressing this challenge is the key to tackling all the others—as we shall demonstrate in a subsequent article!
