When Brittany Miller was chief of staff for the Denver school district’s deputy superintendent of academics, she was often called upon to weigh in when the district was struggling with “contracts gone wrong"—when the products or services didn’t meet expectations, didn’t arrive on time, weren’t easy to implement, or didn’t end up helping students and staff as expected.
This happened so often, in fact, that a few years ago she left her job there and decided to start a new venture to address that very problem.
The result is the Center for Outcomes-Based Contracting, an arm of the nonprofit Southern Education Foundation. Miller serves as executive director for the center, which works with cohorts of school districts and vendors to help them reach contract agreements that use an “outcomes-based” approach.
The gist of this emerging practice in school district procurement is simple: Districts pay for part of the contracted product or service upfront, but they only pay the rest if the product or service helps them achieve certain concrete outcomes, as spelled out in the contract.
The arrangement also applies to the school system buying the service: If the district doesn’t meet its deliverables to the service provider it has to pay the full price of the contract whether it achieves the desired outcomes or not.
So far, more than a dozen districts have participated in the center’s cohorts, working on contracts with providers of tutoring programs and technology tools. Next up will be a cohort of districts working with curriculum providers.
A handful of participants have already seen vendors live up to a majority of their contracted commitments. One district saw its contractor fulfill 100 percent of its promises, Miller said.
It’s a big shift for districts, and a slow process of transition from the traditional approach to contracting and procurement.
“We need to have leaders from the academic function and from the finance function working in tandem,” Miller said. “One can’t work in isolation of the other.”
Districts are strategizing how to ensure money leads to outcomes
Every school district leader wants to spend money wisely, on products and services that make a meaningful difference for students and staff.
That’s especially true now, at the onset of the post-ESSER era. Most districts have either exhausted or committed the vast majority of the federal relief aid they received to help them gain ground they lost during the pandemic.
On a large scale, those funds made a positive difference, several recent research reports have shown. Thousands of school districts used those dollars on wide-ranging services and upgrades, like tutoring programs, after-school offerings, summer school opportunities, mental health services, building improvements, and technology tools.
Some investments inevitably paid off more than others. But vendors get paid regardless of whether the school district achieved what it hoped from making the purchase.
School finance researchers have long argued that districts should take a more proactive approach to ensuring the money they spend translates to tangible positive impacts. The Edunomics Lab, a school finance research group based at Georgetown University, examined more than 260 meetings where school boards across the country discussed budgets and found that only a quarter contained even a stray mention of student outcomes.
But K-12 administrators do see the value of a tighter focus on outcomes.
More than 90 percent of school and district leaders who answered an EdWeek Research Center survey earlier this year said aligning finance, budget, and purchase decisions with instructional goals has at least some impact on student achievement. More than 60 percent said that alignment has “a lot” of impact, and another 9 percent said it has “more impact than any other factor.”
Roughly half the respondents to that survey said that aligning finance decisions with instructional goals results in instructional priorities receiving sufficient funding, and the same percentage said teacher recruitment and retention improve as well.
But only 26 percent of respondents said that those spending and instructional priorities are completely aligned in their schools and districts to the point where sufficient resources are invested. Another 65 percent said those priorities are partially aligned. Eight percent said they’re either somewhat unaligned, or not aligned at all.
The nationally representative survey included responses from 270 educators—a combination of school and district leaders—and was administered June 28-Aug. 2.
Outcomes-based contracting offers an alternative path for those who see room for improvement on this front, its proponents say. A growing number of school districts and companies are entering into agreements, often with the help of nonprofit consultants, that require each participant to commit to certain outcomes.
Districts might be required to maintain a certain staffing level and ensure a certain number of students attend a tutoring program from an external provider. And that provider might be required to demonstrate that its tutoring program helped raise average test scores by a certain percentage.
If either side falls short, the consequences are tangible. A typical outcomes-based contract arrangement makes anywhere from 20 to 60 percent of the total cost of the product or service contingent on both sides honoring those commitments.
If the company’s product or service falls short of its promises, the school district gets a discount. If the school district doesn’t live up to its end of the bargain, it has to pay the full value of the contract even if the provider doesn’t fulfill its responsibilities.
Districts and vendors both see benefits from the new approach
These negotiations often prompt companies to create more detailed reports, and collect more detailed data, than they might have done under a standard contract agreement, Miller said.
The center also used insights from the first round of contracts to refine the second round—for instance, students in the first round of districts performed better when they had the same tutor throughout the semester, so the second round of contracts included a metric for the frequency with which students work with the same tutors.
On the other side, school administrators have an easier time getting the attention of top district leaders when they can say that there are financial stakes attached to the success of a new product or service, Miller said.
Perhaps the biggest shift districts make when they use outcomes-based contracting is that they begin to think of spending money on outcomes rather than items. Finance administrators go from viewing contracts in terms of lump-sum payments to seeing them in terms of specific investments per pupil.
“It is a pretty substantive shift. In most cases we don’t think about the per-pupil cost of services we’re purchasing for products we have, even though that’s how all the funding works,” Miller said.
Districts are still jumping on board, slowly
Making payments to vendors contingent on performance isn’t entirely new.
It’s become fairly common in the health care sector. And school districts have historically used similar approaches to ensure that construction projects wrap up on time and according to plan, said Rick Gay, a longtime school district procurement officer who currently serves as executive director of business services for the Fort Bend school district in Texas.
Outcomes-based, or performance-based, contracting is an especially good fit, Gay said, when districts are making large investments, dabbling in new technology for which they lack in-house expertise, and embarking on projects that could be unsuccessful if they aren’t handled with care.
The model does come with some hurdles, Gay said. It’s not always easy for school districts to collect data that’s granular enough to determine precisely what effect a particular technology tool or other vendor product is having. And unlike adjusting a new HVAC system or other piece of building equipment, school district officials can’t so easily control whether students are learning or not.
Still, the model appears to be slowly catching on, even apart from work that’s directly tied to Miller’s organization. Miller said she’s heard of at least a handful of districts in Mississippi, Texas, and elsewhere that have been dabbling with outcomes-based contracts, using her group’s templates as a guide. Several state education departments have expressed interest in the model as well.
The Bernalillo district in New Mexico earlier this year put out a request for proposals for tutoring providers, and had hoped to craft an outcomes-based contract with the chosen vendor. But the district ended up not having enough ESSER funds available to cover the costs, said Eric W. James, the district’s deputy superintendent of business services.
Still, his team plans to pursue more outcomes-based contracts this fall and beyond, he said.
“We buy products and get terrible support and implementation, and the vendor doesn’t care because they have their money and lots of attorneys to make it hard to fight them,” James said. “Outcomes put students in the center of every contract.”
It’s not just districts who are favorably inclined. Even some service providers are pushing their clients to consider contracts along these lines, according to Miller.
It all points to the model growing in the years to come.
“The degree to which it’s having a meaningful impact on students is yet to be realized,” Miller said.
