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Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform. Read more from this blog.

Education Opinion

No Room for For-Profits in i3

By Rick Hess — April 06, 2010 2 min read
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I favor a more expansive role for for-profits in schooling. Not because I think folks in for-profits are smarter or more capable than people in public agencies or non-profits (hell, I work in a non-profit!), but because for-profits have some unique and useful features. Their selfish pursuit of profit gives them cause to be more aggressive about expansion, more nimble about abandoning failed efforts and seeking new niches, and more energetic about rooting out inefficiency. Anyway, I’ve more to say on all this in Education Unbound.

Now, believe me, I know for-profits also have their share of unique flaws, and I’ve no faith in their virtue. This suggests the need for sensible safeguards, smart monitoring, and savvy managers. All this comes to mind because of the Department of Education’s unfortunate decision to make it prohibitively difficult for for-profits to participate in the i3 fund--the program where innovative providers with evidence of effectiveness would most seem a natural fit.

The original statute made clear that for-profits would not be able to apply for grants; eligible entities would be LEAs and non-profits. Okay. But the Department’s guidance and frequently asked questions now also make clear that only “official partners” (e.g. LEAs and non-profits) are eligible to receive subgrants. This means that for-profit providers cannot receive a subgrant, but can only participate via a procurement.

What’s peculiar is that the Department didn’t need to restrict subgrants in this manner. As one veteran Washington hand points out, “Federal grants allow this all the time. [Enhancing Education Through Technology] funding goes to states, is subgranted to LEAs who in turn can subgrant it or [Request for Proposal] it to for-profit entities. Same with other federal funds at Energy (Cleantech), Commerce (Broadand), and DHS.” And, given i3 Chief Jim Shelton’s own longstanding appreciation for the role of for-profits, I’m real curious as to why the Department went this direction.

The Department’s policy creates several seemingly unnecessary headaches. For instance, consider two broadly similar assessment firms, like ETS and Pearson, where one is non-profit and the other for-profit. Both pay handsome salaries, spend lots on corporate travel and marketing, have their boosters and detractors, and are in similar lines of business. Yet, because ETS is a non-profit, a grantee can choose to include them as a partner. If that same grantee wanted to work with Pearson, though, the district would have to win the grant on its own and then initiate a competitive procurement. The logic for this distinction escapes me.

Similarly, New York City might be interested in partnering with other LEAs to replicate Wireless Generation’s ARIS data system, but a district partnering with New York would need to hold an open procurement competition that might be won by a data company other than (the for-profit) Wireless Generation. This would seemingly violate the i3 requirements that scaled projects be the same as the original. Hmm, that one feels positively Kafkaesque.

If we are really going to “invest in innovation,” doesn’t it make sense to open the process to commercial ventures--which, for my money, have the sector’s best track record of taking new solutions to scale?

The opinions expressed in Rick Hess Straight Up 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.