*Scroll to the end of this story for a response from the NC Department of Public Instruction

Politico’s Stephanie Simon published an investigative report today looking into the business dealings of British education giant Pearson, finding that the company’s success is due in part to negotiating lucrative no-bid contracts with public education agencies around the country — including one with North Carolina.

The investigation found that public officials often commit to buying from Pearson because it’s familiar, even when there’s little proof its products and services are effective.

The North Carolina Department of Public Instruction, for instance, declined to seek competitive bids for a new student data system on the grounds that it would be “in the best interest of the public” to simply hire Pearson, which had done similar work for the state in the past. The data system was such a disaster, the department had to pay Pearson millions extra to fix it.

The data system Simon refers to is PowerSchool, which the News and Observer reported last year “has so many problems that the accuracy of transcripts, athletic eligibility and the number of students enrolled in schools is uncertain.”

Many of those problems were fixed, and the state sought a discount from Pearson to reduce the $7.1 million price tag for the PowerSchool. It’s not clear if any money was refunded, however, nor is it clear whether the state or local districts will be responsible for the $6 million owed to Pearson next year for PowerSchool.

Simon’s investigation also found that in many cases, Pearson was never held to performance targets outlined in the contracts—if they didn’t meet the standards, they weren’t penalized.

In addition to PowerSchool, Pearson also backs one of North Carolina’s new online virtual charter schools, N.C. Connections Academy. The State Board of Education approved N.C. Connections academy just last week for a four year pilot program, alongside K12, Inc.’s N.C. Virtual Academy.

The state legislature required the State Board of Education to approve two virtual charter schools for the pilot program, and only two non-profit organizations applied — one backed by Pearson, the other by K12, Inc.

The approval came in spite of serious reservations on the part of some board members as well as education advocates who feared that North Carolina’s students could experience the same negative academic outcomes that have been experienced by virtual charter school students in other states, or that poor students would have a hard time accessing the technology and infrastructure necessary for online learning.

Read Stephanie Simon’s full investigation of Pearson here.

2/18/2015 UPDATE: NC Department of Public Instruction’s CFO, Philip Price, reached out to N.C. Policy Watch to respond to the Politico investigation of North Carolina’s contractual relationship with Pearson for its new student data system, PowerSchool.

Price said DPI took 16 months to work with the NC Attorney General’s office and other key state-level education stakeholders to gain a waiver for bidding out the adoption and implementation of a new student data system. The impetus for continuing to contract with Pearson, said Price, was that the education behemoth also owned the state’s old data system, NC WISE. A significant costs savings would occur if Pearson also undertook the construction and implementation of PowerSchool.

“NC WISE cost $168 million to implement. Pearson charged us just $3.7 million to convert to PowerSchool,” said Price.

That figure doesn’t include additional monies ($1.25 million) that the state had to pony up for more training and help with migrating data from NC WISE to Power School. Even so, Price says, the state saved a lot of money going with Pearson.

Politico’s story also makes the allegation that Pearson is typically not penalized when it fails to live up to contractual obligations. But Price says at least in North Carolina, that’s not the case.

“We’ve gotten credits back since we established a service learning agreement,” explained Price, who says that if Pearson doesn’t meet certain agreed upon elements of the contract, they refund the state money. “$437,000 in September 2014, and we’re still receiving credits.”

Pearson also gave North Carolina a year of free content, worth $6 million, for its SchoolNet application, which allows teachers to build lesson plans and formative assessments.


BMO Capital downgraded K12, Inc.’s stock (NYSE: LRN) yesterday, on account of slowing enrollments. Shares of the stock tumbled on the news, down 25 percent at the start of trading this morning and down 35 percent as this story was posted 40 minutes after the market opened.

K12, Inc. is a Virginia-based for-profit company that runs online schools in 32 states and attributes nearly 85 percent of its income to public dollars.

The company has been trying to break into the North Carolina market by opening a virtual charter school, but their bid thus far has been unsuccessful.

K12 has run into numerous problems recently, with school districts dropping their partnerships with the company, news of teachers lacking certification, and instances of very low graduation rates.

Just last week, news surfaced of a K12 school outsourcing the grading of student essays to workers in Bangalore, India.

In a press release, K12 explained the slowed enrollment growth:

We believe the increase in Managed Public School enrollments fell short of internal expectations due to several factors, which include, among others:

–The Companys inability to convert the increased volume of student applications into enrollments at a level achieved during previous years due to performance in its enrollment centers and, to a lesser extent;

–The delayed start of the open enrollment period for certain schools.

Managed Public School first quarter enrollments were 5.7 percent over enrollment numbers this time last year, short of expectations.

Revenue is projected to come in between $905 million and $925 million, below the anticipated target of $988.5 million.


The massive open online course (MOOC) provider, Coursera, announced today that 29 universities including UNC-Chapel Hill have signed on as partners to offer free classes to the public through their websites, doubling the company’s size.

Coursera began operating just last year, and in that short amount of time has registered 2.8 million users. While courses are currently noncredit and free, it appears Coursera’s business model will evolve as the company does have future plans to charge students interested in earning “certificates of completion.”

Duke University, which joined Coursera in 2012, plans to take part in their pilot program for fee-based courses. Many universities, however, may not be so quick to accept these certificates for credit. As David Szatmary, University of Washington’s vice provost for educational outreach, tells Inside Higher Ed, “Most of our peers probably wouldn’t take a free Coursera course certificate for credit.”  He also said that the University of Washington would not sign certificates for their own free Coursera courses. “We obviously don’t want to compete with ourselves.”