Competition Necessary for Sustainable School Reform

Published April 1, 2000

The estimated $360 billion U.S. K-12 education market makes up almost 10 percent of GDP, the second largest sector after health care. But it’s a low-tech, inefficient industry where half the money never gets to the classroom, and where spending on R&D is less than one-tenth of 1 percent of total revenues.

At the start of the twenty-first century, there’s an increasing recognition that this education market–“the last great cottage industry”–desperately needs competition.

One promising avenue for school boards and school administrators to embrace the stimulus of competition is to develop partnerships with for-profit and not-for-profit firms that serve education providers. These alliances were the subject of a recent World Research Group conference on “Emerging Public/Private Partnerships in America’s Schools,” held on January 19-21 in Scottsdale, Arizona.

Such partnerships involve more than contracting out food service or facility maintenance, extending as far as private management of entire school systems, said conference chairperson Virginia B. Edwards, who heads both editorial and business development staff at Education Week. While critics may say partnerships cede civic and instructional responsibilities to “bean-counters,” Edwards noted that attention increasingly is being laser-focused on who gets the job done.

Getting it Done in Houston

“It is in the interests of public education to contract out almost everything you can,” declared Donald R. McAdams, a research professor and director of the Center for Reform of School Systems at the University of Houston.

Contracting out almost always is less expensive than performing the same task internally because of competition, said McAdams, adding that competition is essential for sustainable school reform. While a school district might bring the quality of a particular service up to a high level, the systemic problem is how to sustain that high level of performance over time.

A for-profit company, McAdams explained, has to fight off competition all the time; this serves to sustain ongoing levels of high performance. With no competition, public schools lack this incentive, and so their performance levels tend to slide.

McAdams currently is serving his third four-year term as a member of the Houston Independent School District Board of Education, one of a small group of activists elected to the board in 1989. His recent book from Teachers College Press, Fighting to Save Our Urban Schools . . . and Winning!, relates how the successful reform of the Houston school system–the nation’s seventh largest school district–was not so much a battle about the three Rs but a fight over power, status, and money.

In 1989, the HISD did almost everything internally. Although the district now contracts out food service, building maintenance, financial services, and even schools, the road to privatization held two major obstacles.

The first of these was the notion that it is somehow “wrong” to make a profit out of education. This became much less of a problem, McAdams noted, when a bond referendum was defeated in 1997 and the district no longer could continue with “business as usual.”

The second problem was jobs–what McAdams called “the biggest obstacle to school reform in the United States.” HISD Superintendent Rod Paige handled employee concern over jobs by phasing in the privatization over four to five years, rather than privatizing everything at once. Taxpayers didn’t save as much, or as quickly, as they could have, but concern about job loss was allayed.

Stephanie D. Nellons has also faced school employees’ fear of job loss. Her company, FirstGroup America, offers school districts an opportunity to outsource school bus service. She simply explains to the district’s current bus drivers that FirstGroup will need plenty of drivers if the company is awarded the contract.

“We do not have a warehouse of bus drivers in each town” ready to take over the jobs of existing bus drivers, explained Nellons, who is the company’s director of industry relations.