BCG documents show far-reaching proposal to overhaul District
by Benjamin Herold on Jun 07 2012 Posted in Latest news
by Benjamin Herold
for the Notebook and WHYY/NewsWorks
In seeking a contract in Philadelphia, the Boston Consulting Group emphasized its previous work to transform education in New Orleans and streamline operations in other urban districts in a far-reaching proposal to design, roll out, and help manage a 21-week overhaul of the cash-strapped District.
“This project is a unique opportunity to help the School District of Philadelphia close its budget gap in the short- and long-term,” wrote BCG officials J. Puckett and Allison Bailey.
“We believe we are the best partner to help.”
The District agreed, hiring BCG days later to help stave off an impending financial meltdown and develop a plan to radically overhaul the delivery of public education in the city.
In recent weeks, however, a growing number of community and labor leaders, unhappy with the “transformation blueprint” and bleak budget that appear to be the primary outcomes of BCG’s work, have demanded to see the group’s analysis and recommendations.
- BCG’s response to the District’s Request for Proposals for consulting help;
- A full proposal detailing the work BCG planned to undertake in Philadelphia;
- The “Agreement of Services” between the District and BCG for an initial five weeks of work;
- A fee schedule detailing payment arrangements.
Together, the documents provide an illuminating look into the blue-chip management consulting firm’s background in public education, insights into its approach, and details of the controversial work plan it has undertaken in Philadelphia.
'The consultant of choice'
BCG was “by far the best” of the five major consulting firms that responded to the District’s Request for Qualifications, said Chief Recovery Officer Thomas Knudsen.
The “breadth of their experience around the country and their involvement with the sort of system-wide analysis” Knudsen sought was key, he said. So was the group’s capacity to put boots on the ground quickly to help the District avoid running out of cash this spring.
“We couldn’t afford to wait,” he said.
According to BCG’s RFP response, the firm’s "Education Practice" has worked with more than 30 U.S. school districts in the last five years.
BCG has helped Dallas, Cleveland, and Chicago save millions of dollars annually through central office redesigns, according to its proposal.
Touting their firm’s capacity to manage complex changes, Puckett and Bailey, who are partners and managing directors of BCG, described it as “the consultant of choice to help clients chart a way forward at pivotal and critical inflection points.”
As a prominent case in point, they cite BCG’s work in New Orleans.
“When New Orleans’ public school system was decimated by Hurricane Katrina, the U.S. Department of Education, state, and mayor asked BCG to help create a long-term transformation strategy for the District,” wrote Puckett and Bailey.
“Our work resulted in recommending a transformed school system that comprised a portfolio of public schools and charters.”
Knudsen said the District is not looking to New Orleans as a model, but saw BCG’s experience there “as an indication of the breadth of experience they have.”
For months, Philadelphia’s School Reform Commission and city education leaders have been vocal about their desire to move toward a “portfolio” model of school management, part of an overall strategy to expand high-quality educational options while reorganizing the District’s operations to avoid a recurring structural budget deficit.
On Feb. 16, the SRC approved a $1,447,941 contract with BCG to help design a plan for decentralizing the District and closing a projected $300 million budget gap for the 2012-13 school year.
That “Phase I” of BCG’s work was paid for with external funding provided by the William Penn Foundation.
The fee proposal submitted by BCG called for a team consisting of Puckett and Bailey, two project managers, six consultants, and a group of “expert advisors” including former U.S. Secretary of Education Margaret Spellings. They were to be paid $289,588 per week for five weeks.
As it turned out, five key BCG staffers have overseen the bulk of the firm’s work in Philadelphia, Knudsen said.
Puckett is the head of BCG’s Education Practice. According to a biography provided with the RFP response, his “recent experience with PK-12 education at BCG include creating a transformation plan and providing implementation support for the New Orleans Public School system, redesigning the State of Delaware’s education system [and] developing a transformation plan for the Dallas Independent School District,” among other engagements.
Bailey co-leads the Education Practice. Her biography cites work done to help Hillsborough County, Fla., schools secure a $100 million grant from the Gates Foundation for a teacher effectiveness program and “supporting the successful Race to the Top application for North Carolina, which resulted in over $400M in funding.”
Reggie Gilyard also co-leads the Education Practice. His biography cites financial restructuring efforts in Cleveland, developing a “district-wide Performance Management System for the Los Angeles Unified School District,” and “leading transformation planning for post-Katrina New Orleans Public Schools.”
Tyce Henry, the lead project manager for the work in Philadelphia, is responsible the day-to-day management of a “joint district/BCG team.”
Bob Tevelson is an expert adviser on procurement.
Knudsen spoke highly of the capacity the BCG team has brought to the District.
“Without their assistance, expertise, insight, and intellectual support, we would not have been able to do this work,” he said.
Work remains private
In its proposal, BCG recommended that its consulting team report to a newly formed “steering committee” consisting of Puckett, Bailey, Knudsen, SRC representatives, key District staff, and “potentially other stakeholders.”
Knudsen and undisclosed members of the SRC were joined by William Penn Foundation president Jeremy Nowak on the steering committee during BCG’s first five weeks of work, wrote District spokesman Fernando Gallard in an email.
Since then, Gallard wrote, “The work of the steering committee was transferred to the District’s Executive Cabinet.”
According to the firm's proposal, BCG was expected on March 29 of this year to deliver to the District “a plan, with business case and options, to reach future-state academic model and a balanced FY2013 budget.”
That was to include an assessment of the District’s “special education/ELL support model” and “charter school performance and financial impact,” as well as recommendations for change in both areas.
It was also to include options for cost-saving measures in District operations and advice to “inform labor negotiations.”
Knudsen, however, said that it is difficult to separate out what BCG did independently from what was done in collaboration with District leadership.
“They didn’t go off in a corner and come back and suggest this is what we need to do,” he said.
“They delivered options to us that we conferred about. … It is a joint effort between the consultants and management as to what the end product is.”
In April, Knudsen and members of the SRC unveiled a “transformation blueprint” calling for the closure of 64 schools over five years, a dramatic expansion of charters, and largely replacing the District’s central office with autonomous, independently managed “achievement networks.”
BCG clearly played a role in developing that “blueprint,” but the presentation makes no mention of the consultants’ role.
Neither the District nor the SRC made public any documentation of BCG’s recommendations or work relating to the controversial $2.5 billion operating budget for 2012-13, adopted last week at a raucous SRC meeting.
The lack of public disclosure may be the result of a stipulation in BCG’s contract requiring the District to obtain prior BCG approval before sharing any of the consultants’ work products with anyone other than District staff and selected representatives from the City of Philadelphia, the Commonwealth of Pennsylvania, the United Way of Southeastern Pennsylvania, and the William Penn Foundation.
“That was a legal requirement on their part. It was negotiated,” Knudsen said.
In an attachment to BCG's proposal, the firm cites reasons for the restrictive intellectual property terms. They include the possibility that public disclosure “could constrain how we work with you, impeding the success of our work together” and that BCG hopes to “avoid the misunderstandings that may arise if our advice is shared with third parties, who may not appreciate the scope or other relevant details of a project.”
At the stormy SRC meeting on May 31, Chairman Pedro Ramos, responding to pointed questioning, said that the SRC had asked BCG to “synthesize and compile” their “analytical work” and present it “in a way that can be useful.”
That work to prepare documents for public release is now underway and will be done in about 30 days, wrote Gallard.
The SRC has not approved any contracts for work done after March 29 by BCG on behalf of the District. But the consultants have continued to a Phase II of their work, supported by private donors channeling money through the United Way of Southeastern Pennsylvania.
The scope of work for BCG’s Phase II work was “agreed upon and signed by the William Penn Foundation,” wrote Gallard.
Knudsen said he could not recall the specific reasons that led to Phase II of BCG’s work proceeding independently of an SRC resolution authorizing a contract for that work.
But BCG’s original proposal makes clear that an engagement exceeding five weeks was always the preferred option.
In February, BCG proposed a “Scope of Services” encompassing “three interconnected work streams over a period of 21 weeks from mid-February until the end of July, with a decision point after 5 weeks.”
“We would recommend keeping a BCG team until at least the end of July,” stated BCG’s RFP response.
As originally proposed, Phase II of BCG’s work was to focus on developing an “implementation roadmap,” providing a more detailed design of new academic and operational models for the District, and offering “execution support for savings initiatives,” including negotiations with suppliers and labor unions.
Knudsen said he was not prepared to talk in detail about the Phase II work now underway.
“Phase I was … sufficiently detailed that we could draw conclusions about a future direction,” Knudsen said. “Phase II then starts to take that substantive design and give us even more information, background, and data.”
BCG’s continued involvement in the District and the unusual funding arrangements supporting the firm have drawn fire from many labor and community leaders.
“I think the current level of criticism is not warranted,” Knudsen said.
“This is a work in progress. As we get a little further down the road, I think it will become patently obvious exactly how extensive is the value of the services brought to the District and the City of Philadelphia by BCG.”