Privatization and the Core Mission of Education

The research recounted above indicates that in many cases, a significant minority — and occasionally a majority — of a state’s school districts contract with private firms for the provision of food, bus or custodial services. In Michigan, such privatization has been on the rise.

This finding is not surprising. In every area of life, resources are necessarily limited. Privatization, according to the Mackinac Center school privatization survey, is yielding savings in most districts that contract for bus, food or custodial services. These savings, in turn, free the districts’ resources for other goals, including classroom instruction, the districts’ core function.

In “Doing More With Less: Competitive Contracting for School Support Services,” a 1994 publication of the Mackinac Center and the Reason Foundation, Janet R. Beales neatly sums up why many district officials turn to privatization:

“In the area of support services, [school] administrators are finding some budgetary relief by turning to the efficiencies of the private sector for help. By contracting with private companies for busing, maintenance, and food service, schools can do more with less. Reducing costs, increasing revenues, and tapping new reserves of capital investment and expertise can help school administrators focus on their core responsibility: educating children.”[68]

James Quinn and Frederick Hilmer, writing in the Sloan Management Review in the summer of 1994, argued that an institution needs to focus on what it does best, emphasizing the areas where it has competitive advantages. Doing so, Quinn and Hilmer argued, improves a company’s success rate, and they observed that this idea has “been well supported by research extending over a twenty year period.”[69]

Focusing on “core competency strategies”[70] makes sense even for public school institutions not driven by private-sector profit imperatives. Former U.S. Secretary of Education Rod Paige, while superintendent of the Houston Independent School District, instituted a number of reforms to focus the district on its core function of educating children. In a paper for The Case Program at Harvard University’s John F. Kennedy School of Government, author Kirsten Lundberg described Paige’s approach:

“One of Paige’s stratagems for making schools deliver a better educational product was to concentrate on what should be educators’ chief expertise — teaching. To do so, he aimed to free the school system from jobs for which it was not especially qualified, such as maintaining buildings, running a bus service and feeding children. Privatization, or outsourcing, such services to private sector contractors would not only save HISD money — in itself a worthwhile goal — but allow HISD administrators and principals to concentrate on educational issues. Paige’s leading candidate for privatization was Food Services.”[71]

Despite rancorous opposition, Houston managed to privatize. In the summer of 1997, HISD announced that it was awarding Aramark Corp., a professional services company, the contract to manage the district’s food service program using the district’s approximately 2,200 existing food service employees.[72] In the 1997-1998 school year, the privatization was a considerable financial success, but the food services program experienced losses in its second and third years. “Many of these losses,” writes Lundberg, “occurred outside the scope of the contract,” including bearing the cost of a district-mandated pay raise for food services staff and the cost of implementing “HISD’s new, and expensive, computerized business infrastructure system.”[73] In the fourth year, following the implementation of a number of new business practices in coordination with the district, the HISD’s privatized food services management was once again saving money. As of 2007, Aramark continued to hold the contract with the HISD.

As the Houston experience suggests, privatization can indeed benefit a district, but monitoring the district’s and the contractor’s own performance continues to require care. Regardless, districts typically find that managing a contract is less distracting to their educational mission than supervising the production of in-house services. As one Michigan district official said in an early response to the Mackinac Center’s 2007 privatization survey, “The more we can get rid of noninstructionally focused services, the more we can focus on instructional services.”