September 20 — 11:00 pm, 2006

Turning to outside organizations to do more jobs

Like private management of schools, contracting with private companies for curriculum and educational services has grown under the SRC, a study found.

Philadelphia public school leaders seeking solutions to pressing issues such as running disciplinary schools, training student teachers, or providing technology-based learning interventions have increasingly turned to external organizations to do the job.

Since the onset of the current wave of reform in 2002, the School District of Philadelphia has stepped up its contracting with a large and diverse set of organizations – local and national, large and small, for-profit and nonprofit-to assist with the work of school and District improvement, according to a new analysis of District contracts.

During the 2005-06 school year, the District budgeted about $500 million, a quarter of its operating budget, on contracted services of all types, up from $380 million in 2003-04. Another $96 million was allocated for contracts from the District’s “categorical” grants budget.

The school system has not only undertaken the largest experiment with contracting out of the management of individual schools to outside “education management organizations” (EMOs), but it has also been pioneering the use of external vendors and partners in areas such as curriculum and instruction, and not just for traditional areas of contracting such as school construction and transportation.

In a study by Research for Action in Philadelphia, we examined SRC resolutions for contracts exceeding $25,000 in the key areas of educational and management services from January 2002 through June 2006.

Preliminary results from our study showed that the number of contractors in these areas of work doubled from 2002 to 2003, and increased thereafter but at a slower rate. Overall, the number of individual consultants and organizations doing business with the District increased from about 80 in 2002, the first year of the SRC’s existence, to 183 in 2005, a year in which the Vallas-led reforms were in full swing. Partnership activity with external organizations has remained strong into 2006.

The numbers of contractors would have been higher had we taken on the extensive task of tracking the many providers of “supplemental education services” (tutoring) required by the federal No Child Left Behind Law.

In our analyses, for-profit firms and consultants formed a substantial part of the contractor pool – 26 to 46 percent depending on the year – but an array of nonprofit organizations, ranging from universities and other large institutions to community-based organizations, outnumber business-sector contractors.

Corporations and consultants, however, garnered a bigger share of overall contracting dollars. Our analysis of SRC contract resolutions during 2005, for example, showed that in the types of educational and management services we tracked, the SRC approved approximately $95 million in contracts for for-profit firms and consultants and about $50 million for nonprofit groups and institutions. (A substantial portion of the funds included in some of the contracts of nonprofit organizations, however, passes directly through to students or other participants in those programs. On occasion, a nonprofit may serve as a fiduciary agent for funds passing through to another contractor.)

The contracts over the four-year period that we analyzed included agreements aimed at management efficiencies, curriculum and instruction, supports for low-performing students, student behavior and school climate, recruitment and retention of teachers, lobbying, and activities focused on improving accountability of the system. (Our scope was limited to these types of educational services; we excluded the EMO contracts to manage schools, agreements for health and special education services, and contracts related to charter schools, early childhood placements, leases, facilities, legal services, insurance, workman’s compensation, systemwide school-year textbook purchases, and school construction and renovation.)

Million-dollar babies

To look more closely at the core areas where companies and nonprofit groups help carry out reform activities, we identified organizations with contracts exceeding $1 million for work carried out during the 2005-06 school year (see chart). Four of the 11 for-profit firms in this category were hired to run alternative disciplinary programs or schools. Another three provided materials and other assistance for the extended day program and summer school. Others provided services such as an intensive reading intervention; online access to student data, curriculum, and related professional development; and assistance writing the high school core curriculum and benchmark assessments.

In the 2005-06 school year, the District also turned to the city’s established infrastructure of nonprofit groups, notably Communities in Schools, the Philadelphia Education Fund, the Philadelphia Youth Network, and Philadelphia Academies.

These groups design and implement school improvement activities or those aimed at upgrading academic and work-related outcomes for teenagers during and outside of school hours.

Colleges and universities also play important roles in the reform. The number of institutions contracting with the District jumped from 17 in 2002 to 28 in 2005.

During the 2005-06 school year, Temple and Drexel Universities had contracts totaling more than $1 million, and if school management contracts were included, the University of Pennsylvania would be counted as a key partner as well.

Several contracts to private firms for the 2005-06 school year fell outside the bounds of our study but illustrate of the scope of District contracting: a $19 million contract with Aramark for school cafeteria services; a $12.4 million agreement with Sodexho for school custodial services; and a $2.4 million contract with Elliot-Lewis Corporation to manage the new District headquarters.

In addition, contracts to four EMOs and to Temple University and the University of Pennsylvania to assist with school management added up to $20 million for the 2005-06 school year.

District contracting activity since 2002 evidences outreach to a broad assortment of organizations in its efforts to scale up reform. The accompanying challenge is that the District must build its capacity to choose appropriate contractors and monitor their performance.

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