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Topic: No-Bid MOOCs
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Jerry P. Becker

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Registered: 12/3/04
No-Bid MOOCs
Posted: Jul 17, 2013 5:17 PM
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From INSIDE HIGHER ED, Wednesday, July 17, 2013. See
No-Bid MOOCs

By Ry Rivard

The providers of massive open online courses have rapidly expanded in
the past year, aided in part by a series of potentially lucrative
no-bid deals with public colleges and universities, including for
services that may extend beyond the MOOC model.

At least 21 universities and higher education systems in 16 states
have signed agreements with Coursera, Udacity or edX without going
through a competitive bidding process, according to interviews and
open records requests by Inside Higher Ed.

The deals include contractual language that could be used to divert
untold amounts of taxpayer or student tuition money to outside

Representatives of the state-run institutions cite a variety of
reasons for why they signed the deals without seeking formal
proposals from competing vendors: Almost all of the agreements have
little or no upfront costs for universities. They are also
non-exclusive, meaning universities can take their business
elsewhere. And MOOC providers, new to the higher ed scene, are said
to offer unique products.

Some university officials said they were simply experimenting
with MOOC technology or said they had no plans to make money from the
arrangements - two positions that suggest they are unsure
if MOOCs can ever be profitable. Universities have talked about using
the MOOC providers not just to offer MOOCs, but to serve as a
platform for other online education, to deliver remedial education,
and to provide services similar to those of learning management
systems -- in other words, all functions provided by various
companies and nonprofits, with contracts typically awarded through
some sort of procurement system.

While MOOC providers have been able to escape competitive bidding and
sign major deals at large and prestigious institutions in a
relatively short period of time, traditional technology deals by
state-run institutions can require lengthy evaluations, said Phil
Hill, a technology consultant who has advised higher ed institutions
on learning management system procurements.

"We're in this situation that is sort of nonsensical," Hill said. "So
you have very strict procurement processes for pretty easy decisions,
like a $30,000 piece of software. Yet at the same time you have a
multimillion-dollar decision that is completely going outside of the
procurement process."

A New Business

MOOCs are the subject of much hype and an increasing amount of scrutiny.

The MOOC providers paint a vision of the world in broad and visionary
terms - free or cheap education for everyone that is as good as or
better than traditional on-campus courses.

But Coursera and Udacity are both companies funded by venture
capitalists seeking to turn a profit. Even edX, which touts its
nonprofit status, has made clear it needs to make money.

Though MOOCs gained attention as free classes for the masses, the
providers each have nascent business models that demand outright
payments (the University of Texas System paid $5 million in a no-bid
agreement to join edX) or seek to share in tuition revenues
(Udacity expects to make $2 million from a three-year partnership
with the Georgia Institute of Technology that was also not
competitively bid). In contracts with elite
institutions, Coursera offers to host courses for free but then
requires up to 94 percent of any revenue generated. In contracts with
non-elite institutions, the company can generate revenue by asking
universities to pick from a menu of different fees depending on how
they want to use the courses.

At times, the MOOC providers claim to be offering what no other
companies can, including software that can support a large number of
users or gather data on students. Or they have other unique
attributes that no company can match: Coursera, in particular, now
has a one-of-a-kind catalog of several hundred courses from dozens of
its partner universities, including universities who partnered with
the company as a result of no-bid agreements.

But, at other times, universities may be planning to use
the MOOC software much as they use a traditional learning management
systems, or LMS: to offer an online class to a relatively small
number of students.

LMS makers, including Blackboard and Canvas, have rolled out features
designed to let universities offer MOOCs. Last week, Blackboard
said it would host MOOCs for existing customers for free and called
some MOOC providers' revenue-sharing terms "onerous." Blackboard
charges universities a per-student fee to use its LMS. Without
competitive bidding, it's unclear how universities will be able to
tell which product -- a traditional LMS or a new MOOC platform --
would be cheaper.

In what for now seems like the largest of the revenue-sharing deals,
Georgia Tech is working with Udacity to offer a low-cost online
computer science master's degrees to perhaps 10,000 students over the
next three years. They estimate the program will draw $19 million in
revenue in the third year of the deal, which could become a model for
future ventures.

Of the estimated $4.7 million in profits that year, Udacity will take
40 percent, or $1.9 million.
In Georgia, state laws generally require competitive bids for all
goods or services that cost more than $25,000.

But a Georgia Tech spokesman said the university's research arm - the
Georgia Tech Research Corp. - was not required to use a competitive
bidding process before it signed the deal with Udacity.

"Georgia Tech is not purchasing any goods or services under the
agreement," said university spokesman Jason Maderer. "The
collaboration was established to provide an educational opportunity
that previously didn't exist." (Georgia Tech currently uses Sakai, a
traditional LMS, to offer a traditionally priced online computer
science masters degrees to fewer than a 100 students.)

Udacity declined to comment for this story. The Georgia Department of
Administration, which oversees public purchasing in the state, did
not respond to repeated requests for comment about the Udacity deal.

Likewise, when the University System of Georgia decided to partner
with Coursera, it did not bid out the deal, a spokesman for the
Georgia Board of Regents said. That's because the board does not
consider itself to be purchasing any goods or services "nor is it
obligated to pay Coursera any sum under the agreement," the system
said in a statement.

However, the agreement says the state system will pay $3,000 per
course if it decides to develop courses with Coursera and pay fees of
up to $66 per student to use Coursera. If the system developed just
nine courses, the costs would be greater than the $25,000, the
general threshold for competitive bidding in Georgia.

The terms in the Georgia system contract are identical to a series of
recent agreements Coursera announced with public universities and
higher ed systems in nine states.

Those deals, which were much-touted by Coursera as a vast expansion
of the company's reach, appear to be largely if not entirely the
product of no-bid agreements.

A spokesman for the State University of New York - one of the largest
systems in the world - said the system sought approval from the state
comptroller and the attorney general to enter into a no-bid "single
source" deal with Coursera. The request was submitted for approval a
few weeks after SUNY announced its partnership with Coursera. It has
not yet been approved, SUNY spokesman David Doyle said Tuesday.

SUNY is in the midst of an ambitious effort to enroll 100,000 new
students over the next several years. SUNY Chancellor Nancy
Zimpher has said the system could allow up to a third of the credits
for certain SUNY degree programs to come from outside institutions,
including MOOCs.

Some faculty members, including SUNY faculty representatives, have
complained that university officials across the country quietly
executed agreements with Coursera and left professors in the dark.

In a recent telephone interview, Coursera co-founder Andrew Ng said
"in the past" the company had wanted administrators to keep things
under wraps and "once you announce it to all your faculty, word will
get out very quickly."

Ng also issued this statement in response to a summary of this story
and a request for comment: "We did not ask any of our partners for
exclusivity, but instead plan to make sure they have such a good
experience working with us that they choose to stay with us."

Due Diligence

Some institutions said they did not have to bid the MOOC agreements
and they did due diligence even though the agreements were not
competitively bid.

In October 2012, the University of Texas System decided to
join edX at the cost of $5 million. The deal was not bid but a task
force "fully evaluated competing models and providers," said Texas
Chancellor Francisco Cigarroa in a statement. The university system's
Board of Regents also approved the deal in October 2012.

"The decision to select edX was based on several key factors
including edX's not-for-profit status; the commitment to excellence
of the founders; the opportunity to collaborate with peer
institutions; and edX's commitment to both online and blended
(hybrid) education and learning research," he said in a statement.
"The $5 million investment in the platform was determined to be a
better value than the costs associated with developing our own
platform, and because the implementation will include input from us,
it will result in a product superior to a 'purchased' platform from a
private vendor."

EdX said in a statement that it is "happy to take part in whatever
review process each institution deems appropriate."

"We have made presentations, alongside other MOOC providers, to many
institutions," edX said. "We seek to provide a thorough outline of
the benefits of edX's open source, non-profit, campus- and
research-focused platform and allow each institution to make an
informed decision."

The University of California, Irvine did not go through a competitive
bidding process before it partnered with Coursera, but spokeswoman
Cathy Lawhon said the university's decision to enter into a contract
is "always a formal process" even if there aren't public bids. She
said the university's director of material and risk management is
delegated to do such deals and he signed off on
the Coursera agreement.

Lawhon said the work with Coursera is an extension of the
university's work with open educational resources, which involves the
distribution of course materials through other online venues,
including YouTube, iTunes U, Merlot and Connexions.

"UC Irvine is knowledgeable in this area," Lawhon said in a
statement. "The campus has been a leader in the Open Educational
Resources (OER) and OpenCourseWare (OCW) movements for more than 10
years and the Coursera agreement is just one among many ways we use
the newest technologies to make our top-level curriculum and teaching
available worldwide."

Free Trial?

Other universities said they signed the deals with MOOC providers
just to get a taste of the MOOC software or for other reasons that
are unlikely to generate money.

The Tennessee Board of Regents and the University of Tennessee System
signed a deal with Coursera to try an 18-month pilot project to
evaluate the company's software.

"This agreement will helps us evaluate the technology and analytical
ability of the platform without committing a large amount of funds
before knowing if it has the ability to enhance what we are already
doing," said Monica Greppin-Watts, a spokeswoman for the Tennessee

She said the state plans to consider other platforms besides Coursera as well.

Some universities have no intention of making money or claim to be
using the MOOC providers for their own ends - two approaches that
could suggest the MOOC providers may stand to see little revenue
despite their numerous high-profile partnerships with major

The University of New Mexico, which uses Blackboard as its
traditional LMS, signed an agreement with Coursera on May 29. But
despite revenue-sharing terms spelled out in that agreement,
Provost Chaouki Abdallah said he does not think the university and
the company have an agreed-upon monetization strategy.

"There is no financial contract where money would change hands -
yet," Abdallah said in a telephone interview.

He said the university could eventually go with another company.

The University of Colorado system is in a similar boat. Spokesman
Jeremy Hueth said the Colorado system signed an agreement
with Coursera. But before the system decides to produce courses or
license material from Coursera it will need to negotiate another
agreement with terms that may deviate from the fees Coursera states
in its standard contract.

The University of Washington has signed agreements
with Coursera and edX. In a statement, vice provost
David Szatmary said the agreements were merely a "marketing
agreement" to allow the university to promote itself on the two
platforms. He said no money has changed hands.

"While there is some language in the agreements that state that there
may be some revenue-sharing in the future, at this point that
revenue-sharing is moot, since no revenue is coming in for the
foreseeable future," he said. Szatmary said
"neither Coursera nor edX has developed a viable revenue model to
monetize these free courses." If they did, he said the university
would need to approve any future efforts by the two to make money
using his university's content.

On the other hand, some universities are beginning to see small
amounts of money flowing to them. The University of Illinois at
Urbana-Champaigna had received about $1,500 from Coursera by early
June, according to the university. Illinois decided to partner
with Coursera because, among other things, it felt the company was
"working toward development of a sound business model or models,"
said university spokeswoman Robin Kaler.

Pennsylvania State University, the University of North Carolina at
Chapel Hill and the University of Virginia have all signed agreements
with Coursera but have no immediate plans to make money from the
deal, according to university officials from each institution.

San Jose State University, a high-profile hotbed of experimentation
with MOOC providers, has a revenue-sharing agreement with Udacity to
offer for-credit online classes. That arrangement was not publicly
bid, San Jose spokeswoman Pat Harris said. The university signed
a contract addendum in April. The university expects to receive $40
per student, though students paid $150 per class.

Wayne Brown, the founder of the Center for Higher Education Chief
Information Officer Studies, said he found it a "little troubling"
that public institutions were not competitively bidding projects of
such scope as their partnerships with the MOOC providers. He said the
initial low-cost or no-cost terms may be the rationale for avoiding a
public bidding process.

"But I would think any time you are selecting from a number of
different providers and institutional resources are going into it --
I would think you would do an RFP or something," Brown said.
Jerry P. Becker
Dept. of Curriculum & Instruction
Southern Illinois University
625 Wham Drive
Mail Code 4610
Carbondale, IL 62901-4610
Phone: (618) 453-4241 [O]
(618) 457-8903 [H]
Fax: (618) 453-4244

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