In the last couple of days the end of Edison's contract in Chester, Pennsylvania school district has been big news. In 2001 in this policy brief, I first predicted the failure of this contract:
The Role of Interference in Failure
With each new school contract signed, it seems that Edison loses more autonomy. The company currently has a deal with the Chester Upland School District. But Education Association members there voted against an agreement that would have allowed more frequent teacher evaluations and extended the length of both school days and the school year. No, doubt these compromises impact the way future contracts are negotiated.
Unfortunately, thirty years of research demonstrates a very low rate of success in privatization efforts where contractors are unable to make decisions about their employees. A comprehensive World Bank study of 200 privatization contracts found that all but one of contracts overseeing an unsuccessful privatization effort included limitations on the contractor's freedom and authority over labor. In contrast, all of the successful contracts gave the contractor maximum autonomy over personnel decisions–including the ability to fire personnel and set wages.
From CNN's report on the end of the Chester Upland contract:
Edison Schools, a for-profit company hired four years ago to run eight of the city's nine schools, is pulling out in June, partly because it has not gotten paid about $4 million in fees.
The decision followed a tumultuous year that began poorly -- with book shortages, teacher shortages, and a riot at the high school that led to 28 arrests -- and got steadily worse, with Edison at the mercy of local officials when it came to control over the district's finances and getting the information it needed to do its job.
Among other things, it turned out that the district's poor accounting concealed a $35 million budget deficit. District officials said recently that without an immediate loan to pay teachers, the system would have just $9 left in the bank.
"We have not been able to work well together," Edison spokesman Adam Tucker said. "We knew that we were no longer going to be enough of an active agent for positive change."
In the policy brief linked above, I detail all the reasons that Edison's contracts violate classic privatization best practices that are essential elements for successful privatization contracts.
In this December 2002 Reason piece, I look further into why Edison schools should not be the litmus test for school privatization:
On top of that, Edison has a lousy business plan. Instead of working with individual customers, it has dealt only with large government bureaucracies. To win contracts, it gave up the integrity of its original pedagogical model. Edison sometimes sacrificed key pedagogical components (such as longer school days and more teacher training) to satisfy the unions and school districts.
Many other for-profit education companies have realized that the key to growth is to satisfy students and their parents rather than the bureaucrats who can sign large government contracts. According to a January report by the Commercialism in Education Research Unit at Arizona State University, there were 36 for-profit education management companies in the U.S. in 2001, operating 370 schools in 24 states. An overwhelming majority of those schools are public charter schools, which receive their funding only after attracting students to enroll in their schools. These companies have managed to grow their businesses incrementally, hoping for a small profit at each school.
Only when the funding truly follows a child will we have a market in education that is responsive to the right customers: the students and their parents. To the extent that Edison has failed that test, the company has also failed public education.