It’s a controversial practice, but school districts that plan a major computer purchase can sometimes get a substantial price break by signing an exclusive long-term contract with one supplier—especially if the district is large and growing—and, as is now the case, the overall market for computers has stalled.
That’s exactly what happened in Florida last month, when the Hillsborough County district, which includes Tampa and serves 160,000 students, signed a five-year exclusive contract with Compaq Computer Corp. and several software partners that is worth an estimated $50 million.
The agreement not only gets the district rock-bottom prices on the Houston-based company’s latest computers, but by including students and their families in the deal it also breaks new ground in school purchasing, according to experts in education and the computer industry.
The Hillsborough deal with Compaq is “very exciting—it attacks some of the inequalities that are so inherent in this game” of using technology in education, said Bruce Cooper, a professor of educational policy at Fordham University in New York City. Some industry analysts said they expect computer manufacturers to seek similar deals with other large districts.
“Pretty much all the top-tier [computer] vendors are marching down in the same direction,” said Man Bui, a market analyst at the International Business Machines Corp., which competed unsuccessfully for the Hillsborough contract.
But not everyone believes signing an exclusive computer contract for such a long period is a smart move. By their very nature, such deals will exclude other companies with products that might serve a district better, some school technology experts point out. And those experts argue that to lock other companies out during a period of rapid technological change is especially risky.
Other observers—especially those who are alarmed about the spread of commercialism and corporate influence in schools—said the Florida deal is the latest wrinkle in that trend, and that it puts the school district in the position of urging its employees and the families of schoolchildren to buy a specific brand of computer.
What the Contract Says
The Hillsborough County contract, which goes into effect this month, lets families of district students buy the same computers and standard software at the same prices the district will pay. Or they can buy other Compaq models at substantial discounts. District employees, including its 19,000 teachers, also can buy computers under the plan.
The district machines are priced well under the educational discount that vendors typically offer schools. A full-featured Pentium III computer that would usually cost $1,150 will cost about $850 under the deal, said Michael Bookman, the Hillsborough district’s assistant superintendent for business and information-technology services. He added that the contract would be updated every three months for the next five years to ensure that the district—and its teachers and families—can buy the latest Compaq computers at the same negotiated discounts.
Families could also purchase used, refurbished Compaq machines for between $300 and $400, Mr. Bookman said.
Because some families will not be able to afford computers even with the discounts, the agreement supports the district’s efforts to close the “digital divide” between the haves and have-nots of computer technology.
Compaq will give the district a rebate equal to 1 percent of all computer sales from the deal—whether to the district, its employees, or families. The district plans to use that money, which officials expect will reach $85,000 annually, to pay for efforts to help poor families acquire home computers, access to the Internet, and necessary technology training.
Currently the nation’s 11th-largest school district, the Hillsborough County system is growing by 5,000 students a year and will build 19 new schools in the next three years alone.
“I wanted to capitalize on the strength of that [growth],” district Superintendent Earl Lennard said.
The Hillsborough approach might be an idea whose time has come, said Joe Kirkman, the chief technology officer of the 106,000-student Baltimore public schools. Until early this year, Mr. Kirkman was in charge of information technology in the Broward County, Fla., district, which has 249,000 students.
Three years ago, when the nation’s computer manufacturers were riding high on a robust economy, Mr. Kirkman tried to persuade them to come up with plans to let families buy computers at a discount as part of the schools’ purchase contract.
But “the suppliers wouldn’t go for it,” Mr. Kirkman said. His perception was that they didn’t want heavily discounted computers that families could buy through the district’s contract to undercut sales from the companies’ regular retail outlets.
Now, times are different. Mr. Kirkman said “suppliers are hungrier” to sell more machines because computer sales have dropped as the economy has slowed.
Mr. Kirkman added, however, that he never pursued the other main feature of Hillsborough’s deal—the exclusive contract—because he didn’t believe it was good technology policy and because it wouldn’t fly politically in his former district.
But in Hillsborough, it was the exclusivity—which brought the prospect of locking up technology sales of $10 million annually, with potentially more from families and school employees—that got the attention of computer companies.
“It’s fairly rare around the country for a school district to make a commitment of five years,” said Tom Fitzgerald of Gateway Computers Inc., which was among the dozen companies that responded to Hillsborough’s “request for proposals.” “That whetted the appetite. ... And all of us came in fairly aggressively.”
The four finalists were all heavy hitters in the education marketplace for computers: Compaq, Gateway, IBM, and Apple Computer Inc.
George Warren, Compaq’s director of K-12 education, said the Hillsborough contract goes beyond simply selling computers. “It gives us the opportunity to go into a significant school district and install a model for e- Education,” he said.
Mr. Warren would not discuss the profits that the company expected from the deal, but he said the company considered the contract “an investment.”
‘Taking a Gamble’
While corporate and district officials tout the Hillsborough deal as a model for the education market, others express concern that the arrangement, especially the 1 percent rebate, puts the district in the troubling role of promoting sales of a commercial product to the public.
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“In effect, this deal will use the schools as a marketing arm of the company product, to encourage parents to buy Compaq computers,” said Alex Molnar, an education professor at the University of Wisconsin-Milwaukee. Mr. Molnar, who directs the Center for the Analysis of Commercialism in Education, is a sharp critic of the exclusive contracts that school districts often sign with soft drink companies, although he acknowledges that such a contract for technology is a more “complicated issue” than selling Coke or Pepsi in the cafeteria.
He would prefer that the district’s part of the deal stand on its own merits, without rewards based on sales to families or employees.
On the practical side, Mr. Kirkman of the Baltimore schools adds that while exclusive contracts can be a short route to standardization of technology—the goal of many information managers—they are not always politically palatable, he said.
“The end result of what Hillsborough has done is [that] one of the big guys gets all the business,” he pointed out. “All the little guys get cut out.”
Mr. Kirkman said he would be reluctant to bind a school district to a single vendor. “The only way I could rationally justify it would be to demonstrate significant cost savings,” he said.
And Nona Ullman, a senior manager at KPMG Consulting in New York City who is one of the firm’s resident education experts, said the district runs the risk of being bound to a single company at a time when technology is diversifying rapidly.
“They are taking a gamble; our feeling is the perfect [computer] device hasn’t come out yet for schools’ use,” Ms. Ullman said.
But Melinda S. Crowley, the chief of the bureau of educational technology at the Florida Department of Education, said the Hillsborough district’s deal “was a very good move for the citizens, and in the long run, I don’t think there will be any regrets.”
Undoubtedly, the eyes of many district leaders elsewhere will be on Tampa to see how the Compaq deal works out, Gateway’s Mr. Fitzgerald said.
“If they can generate a rebate that goes into digital-divide scholarships, we’ll probably see more of these [deals],” he predicted.
