For-Profits Get Subcontractor Role in Federal Grants

By Mary Ann Zehr — February 27, 2007 7 min read
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For-profit companies are receiving substantial earnings as subcontractors to four public-broadcasting organizations that were awarded federal grants to develop online educational materials for public schools. At least one industry observer sees these business partnerships as another sign of a trend toward greater involvement of profit-making subcontractors in education grant programs.

The four grants range from $4.8 million to $25 million and last for three or five years. They are part of a second round of “Ready to Teach” grants given out by the U.S. Department of Education’s office of innovation and improvement. That round of grants began in 2005.

So far, the federal dollars have paid for the expansion of an online math curriculum for middle school English-language learners, in addition to new online courses for teachers of all subjects and the linking of video lessons addressing specific academic skills to students’ electronic report cards of their scores on standardized tests.

The online HELP program, above, uses interactive tools to deliver a math curriculum for English-language learners. Rocky Mountain PBS hired Digital Directions International Inc. as a subcontractor to develop the curriculum.

It’s unclear yet how effective the new technology products are for teaching and learning, because the research studies required by the federal government to assess their effectiveness have just started.

The survival of the program, which began in 2000, is also uncertain. President Bush’s budget proposal for fiscal 2008 recommends axing it, and if that happens, the two three-year grants wouldn’t be affected, but funding for the two five-year grants could be cut short by one year, said Jane Glickman, a spokeswoman for the Education Department, in an e-mail message. In fiscal 2005, the Education Department spent $12.9 million on the grants; in fiscal 2006 it spent $10.9 million. The department could not yet provide projected spending for the current fiscal year.

One of the largest grants—about $22 million over five years given to Alabama Public Television—doesn’t have any for-profit companies as subcontractors. The other three do.

For example, both the nonprofit Arlington, Va.-based Public Broadcasting Service, which has a grant for $25 million, and Educational Broadcasting Corp. in New York City, which operates the PBS flagship station Channel 13 and has a grant for $4.8 million, chose the same company to evaluate the educational technology products they’ve developed.

With about 30 percent of grant budgets going to evaluation, that company—Hezel Associates of Syracuse, N.Y.—is set to earn more than $8 million, according to figures provided by the broadcasting organizations.

‘Potential Providers’

The focus on results in the standards and accountability movement in education has paved the way for more for-profit companies to participate in federal education grants as subcontractors, said Marc Dean Millot, the editor of the New Education Economy, an electronic publication about education industry trends. He said that, like the Ready to Teach grants, most grants from the Education Department require that the direct recipient be a nonprofit organization, though more and more for-profit firms are serving as subcontractors.

“What matters now is not tax status, but results,” Mr. Millot said. “If you want the specialized expertise to do what the government wants, you’re doing yourself a tremendous disservice if you aren’t looking at the capability of for-profit firms. You’re counting out about two-thirds of the potential providers.”

A Boulder, Colo.-based company, Digital Directions International Inc., stands to receive about 35 percent, or $1.75 million, of a $5 million grant as a subcontractor in a three-year Ready to Teach grant with Rocky Mountain PBS, the PBS member broadcaster in Colorado, according to estimates by Barbara Freeman, the chief operating officer of Digital Directions.

The federal grant money enabled Digital Directions to add lessons to an online math curriculum for English-language learners and develop a national market for the product. An additional 15 percent of the grant pays for another company, Ole Education, to train teachers to use the curriculum.

Before the grant money was available, Digital Directions developed the curriculum with aid from private investors, local foundations, the Colorado Department of Education, and a partnership with Roaring Fork school district, which serves three communities on the western slope of the Rocky Mountains and has 4,900 students.

The curriculum is for students in grades 6, 7, and 8 and uses the principles of “sheltered English instruction,” which means making English more accessible for children who are new to it, through online video lessons to supplement classroom instruction, according to Ms. Freeman.

Before the grant, the company created 12 modules of the math curriculum, called Helping with English-Language Proficiency, or HELP. Since it became a partner in the grant, the company has added 36 modules.

An evaluation of the HELP curriculum by the University of Colorado at Colorado Springs is under way. It involves 700 students in five states and compares English-language learners who use HELP with ones who don’t.

“The grant funds us to do research in New York, Texas, California, Colorado, and Oregon,” said Ms. Freeman. “That really gave us a national reach.”

‘Best Value’

Richard Hezel, the owner of Hezel Associates, said that while it’s relatively new for companies to be involved in the implementation of federal education grants, it’s not new for companies to be evaluators of them. His company has been evaluating Education Department grants since 1988.

One advantage when a federal-grant recipient turns to a company like his rather than a university or other nonprofit, Mr. Hezel argued, is that the company is able to be client- focused. “There is nothing more central to us than our client,” he said. “We don’t do university teaching. We’re not trying to put out graduate or doctoral students.”

When asked why PBS subcontracts work to for-profit companies, Mary B. Kadera, the vice president of education for PBS Interactive Learning, said: “Our main goal is simply to find the subcontractors who are going to deliver the best value for the investment of the federal grant monies, and whose expertise most closely matches the requirements and needs we are trying to address.”

Ms. Kadera said PBS has already been a grant recipient for a $39 million Ready to Teach grant in the first round of the program. The second Ready to Teach grant of about $25 million that PBS received is making use of about 100 graduate-level online courses—called TeacherLine—that were developed through the first grant, she said.

Now, PBS is designing professional-development programs for instructional coaches and repackaging the online courses so that coaches can use the material to train teachers at their schools. Ms. Kadera said another company, Desire2Learn, based in Ontario, Canada, will receive $200,000 to $260,000 in each of the grant’s five years to provide the technology platform for the courses.

Ronald Thorpe, the vice president and director of education for the Educational Broadcasting Corp., estimated that Hezel Associates will receive about $1.6 million of the $4.8 million Ready to Teach grant for its evaluation work.

Mr. Thorpe led a team that combed through hours’ worth of educational programming and selected video excerpts that address skills in math and language arts. The grant paid for the team to attach those video clips to report cards on individual students’ scores on tests for grades 3-8. Teachers or parents then receive a report card that spells out which areas a student tested poorly in and provides links to short video lessons.

Alabama Public Television is the lead agency for the fourth Ready to Teach grant, which doesn’t have any for-profit companies as subcontractors, according to Barbara Treacy, a managing project director of the Center for Online Professional Education at the Education Development Center, a Boston-based nonprofit organization.

With money from the grant, the Education Development Center has created a series of 12 online courses for teachers and trained facilitators in eight states to deliver the courses and also develop their own online courses aligned to state standards. Boston College is the evaluator for the grant’s technology product.

Still, when evaluating these types of partnerships with subcontractors, the question is not whether the subcontractor is a for-profit company or a nonprofit, said Henry Levin, the director of the National Center for the Study of Privatization in Education at Teachers College, Columbia University. Rather, he said, it is a question of the quality of the materials produced.

“Is it a good investment of public money?” Mr. Levin said.

Editorial Administrative Assistant Katie Ash contributed to this report.
A version of this article appeared in the February 28, 2007 edition of Education Week as For-Profits Get Subcontractor Role in Federal Grants


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