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Education Inc.

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Interested in better schools? Just sign on the dotted line. Across America, public schools are increasingly contracting with private companies for educational services.

Historically, if school districts contracted at all it was for support services. Now, however, administrators are inviting private firms into public schools--not only to cook, clean, and drive the bus, but to design curriculum, teach classes, and in some cases run entire schools.

Ideas recently dismissed as radical are now reality. In Baltimore, nine public schools are run by a private company. (See related story, page 1.) In Massachusetts, Gov. William F. Weld has met with a for-profit organization about running charter schools. In Minneapolis, the school board recently hired a consulting firm to serve as superintendent.

There is seemingly no limit to what companies are being asked to do. The question is, can the profit motive be harnessed to serve students? Or will profit-seeking firms just take the money and run?

Though no magic bullet, contracting for school management and direct educational services has the potential to improve the educational opportunities for public school students. Contracting should be viewed as a management tool that offers administrators two important benefits: cost-effective services and accountability.

The use of contracting is common practice by state and local governments, and long has been. Thomas Jefferson even backed the idea. "It is better for the public to procure at the common market whatever the market can supply,'' he said, "because there, it is by competition kept up in its quality and reduced to its minimum price.''

Contracting does not entail the abandonment of the public interest in public education. To the contrary, it simply represents another option for public school administrators trying to serve their students on a limited budget. As Gov. Mario Cuomo of New York has noted, "It is not government's obligation to provide services, but to see that they're provided.'' This is an entrepreneurial view of a government that steers rather than rows.

"Contracting can help schools offer a wider variety of classes while holding down overhead,'' says Chris Yelich, the president of the American Association of Educators in Private Practice. "Once administrators stop being afraid of the idea, they see the practicality and benefits for the school.'' That was certainly the case in Colorado, where last spring the Colorado Association of School Boards vigorously opposed charter-school legislation that paved the way for alternative public-school-management structures. Soon after the legislation passed, however, the school boards' group began to recognize the flexibility the new law offered. The charter-school legislation is "an opportunity to do something new and creatively different,'' says the group's executive director, Randy Quinn. "Rather than serving as provider, the board has an opportunity to become the purchaser of education services.''

Increasingly, school administrators are asking themselves, "Should I make it or should I buy it?'' Like their counterparts in the corporate world, schools frequently find it more cost-effective to contract for a service than to produce it in-house. This doesn't mean all school districts should hire companies to run their schools, but it is an option that should be considered. The decision should be made with the interest of students and taxpayers in mind. If a private company can do a better job for less money, the district should contract. This is true whether the job is driving a bus, serving lunch, or running a school.

The issue is not one of public versus private, but of monopoly versus competition. Companies will be competing for business on the basis of performance and cost, and school districts will have the opportunity to choose whatever option best suits their needs.

The profit motive provides incentives for school providers to make improvements in the way they do business. For example, Educational Alternatives Inc. and its partner Johnson Controls have improved preventive maintenance of the physical plant to reduce costs for their clients. Spending a little money up front to clean the boilers is expected to save some schools $100,000. In contrast, an Arthur Andersen management review commissioned by the Los Angeles Unified School District found that "the district has no process in place to achieve continuous improvement in its service level and cost structure.''

With competition from outsiders, inhouse providers will be spurred to streamline their operations or risk losing their role as educational providers.

And the competition to provide public school management is growing. In addition to Educational Alternatives, which operates public schools in Baltimore and Dade County, Fla., Christopher Whittle's forprofit Edison Project is interested in managing public schools. Benno C. Schmidt, the former president of Yale University who heads up the Edison Project, recently met with Governor Weld about running charter schools in Massachusetts.

In addition, companies such as the Nashville-based Alternative Public Schools Inc. and Houston's Performing Schools Corporation are interested in providing public education. In Minneapolis, the private consulting firm Public Strategies Group will step in as superintendent.

"The board will be paying for results, not for someone to keep a chair warm,'' says Public Strategies' president, Peter Hutchinson, who will lead the management team. Rather than a typical employment contract, the board will contract with P.S.G. for specific, measurable outcomes, such as closing the gap between the achievement of white students and minority students, with compensation tied to performance.

Will the desire for profit result in the neglect of students? Not likely. Businesses know that the surest path to prosperity is to please your customer. Likewise, public schools, in order to better serve their customers, are adopting a more business-like approach to management decisions, choosing to make use of the private sector if it offers efficiencies or expertise that are otherwise unavailable.

With proper public oversight, profitmaking firms can be a valuable resource for school administrators, helping them stretch their budgets. After all, the bottom line is to provide students with the best education possible with limited funds. Ev- erybody profits from that.

John O'Leary and Janet R. Beales are policy analysts with the Los Angeles-based Reason Foundation, and co-authors of "Making Schools Work,'' a report on public-schoolcontracting management.

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