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How States Could Improve Online Options & Save Money

By Tom Vander Ark — May 23, 2014 4 min read
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A new paper written by four Stanford Students, in coordination with Digital Learning Now and The Stanford Public Policy Program, outlines a framework for states to solicit and select providers of
online and blended learning services. It builds on the innovative Louisiana Course Choice model and “presents a coherent payment mechanism for supplemental
courses that incentivizes quality student outcomes and forms the basis for practical and adaptive state level policy.”

The paper,

A Framework for Selecting Quality Course Providers at Competitive Prices

, was authored by three Stanford students--Scott Ferron, Paige Gonye, Adeeb Sahar, Kyle Vandenberg--with the guidance of Professor Alvin Roth, a Stanford
Professor of Economics and Nobel Laureate, leaders in the online education field, and state officials responsible for implementing course choice programs.

As full and part time online learning expands, “an emerging problem confronting state policymakers and education leaders is determining what states should
pay for a specific course as part of an offering of supplemental courses.” This is particularly true if, like Louisiana, the state opens the process to
blended courses and student support services delivered onsite.

Some early course choice models use a common fee for courses. The largest provider of part time online learning, Florida Virtual School, was initiated with
half the reimbursement based on completion--but it was the same price for every course and for a number of years they were the only statewide supplemental
provider.

A single provider models limit options for students and, as the paper argues, a fee-for-service model may exclude some full service providers while
encouraging low cost providers to overcharge. Given this tension, the authors “created a framework using a sealed bid auction to identify quality providers
at competitive prices and to reward providers that promote student success.” The framework includes 7 steps:



  • State issues a Request for Application: the request could be broad or targeted (e.g., math, special education);

  • Providers submit course applications;

  • State conducts quality review: using iNACOL standards and emulating Louisiana’s four-step process for assessing and approving course providers;

  • State invites qualified applicants to submit sealed bids: applicants submit bids for base pay (up front) and incentive pay (on successful completion);
    state may or may not set a price ceiling; and

  • State reviews bids: reviewers consider total price and breakdown of base and incentive; and

  • State Offers Agreements to Provider(s).

Winning providers then compete on perceived quality to maximize their enrollment.

The authors suggest the following potential benefits of this auction model:



  • Equity of Access: more student access to vetted courses;

  • Targeted Approach: states could target specific topics or school populations and incentives make it more likely that providers will provide targeted
    supports to struggling students;

  • Quality Incentives: providers will focus on completion rates;

  • Educational Accountability: a portion of the compensation is based on the performance of individual students;

  • pay-for-performance;

  • Cost Savings: states could share savings with district which could reinvest in core programming;

  • Adaptability: states can adjust variables to meet specific goals; and

  • Districts Benefit: fill gaps in hard to staff subjects and encouraging effective teachers to extend their reach by offering courses.

This framework represents an advance in thinking about soliciting and selecting providers of supplemental courses and services. This model would work bests
for single payer market like Louisiana. It could work under a Utah or Texas model too but would be more complicated since the payment would be coming from
the district. The paper notes the challenge many states will face in timely data (i.e., test scores and student evaluations).

The paper proposes a system that would encourage bids weighted toward payment on completion. This would provide a great performance incentive but it could
inadvertently screen out small providers (e.g., the teacher providers approved as statewide providers in Louisiana) that can’t afford the working capital
requirements of delayed payment.

The paper also notes the need for each state to determine how to enroll students across online courses, how to assess a provider’s impact on student
learning, and how to allocate the incentive pay to providers based on their bids.

Any state or district considering expanding access to part time online learning (also called a la carte or self blending) need to consider guidance,
transcript management, and support systems--how they work, how they are funded, and how they span multiple providers.

Digital Learning Now and FLVS are Getting Smart Advocacy Partners.

The opinions expressed in Vander Ark on Innovation are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.


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