Pricing Transparency in Education: Open Data for Institutional Purchasing

Imagine the wealth of non-personal data that sits behind every education institution in America. There are approximately 100,000 schools and 7,000 colleges nationwide, all of which collect or provide institutional purchasing information and so much more. Most of this information is kept private, mainly because that’s the way it’s been done for years.

But these individualized and private purchasing methods used by America’s schools place our education system at an economic disadvantage. The public has a right to know how its money is being spent and, according to Charles Kenny and Jonathan Karver of the Center for Global Development, transparency in contract publication can “shorten the chain of accountability – to help citizens see what they are paying for, so they are in a better position to judge if they are getting it.” Openly publishing purchasing data can help school districts better understand the product they are getting, its true cost and quality, and improve their purchasing processes for the benefit of our nation and its students.

Why Purchasing Matters

According to the National Center for Education Statistics, there are approximately 14,000 districts nationwide, spending nearly $100 billion annually on education goods and services alone. When purchasing isn’t done well, districts stand to misspend billions of dollars. Districts are rarely coordinated in their purchasing efforts, and vendors are less likely to provide price breaks to thousands of organizations spending a few million dollars than a few organizations spending several billion dollars. We owe it to our students to buy in the best way possible, for each dollar wasted in education is a dollar that could have gone toward resources to help improve student learning.

Institutional Purchasing Transparency

A focus on institutional purchasing highlights how open data can help improve American education. Across the country, each separate district has a variety of needs to keep their schools running, as well as an individual in charge of fulfilling these needs. Most items purchased throughout the school year are similar across all districts: things like desks, white boards, and computers. Although there are 14,000 purchasing districts, there are far fewer vendors who provide a particular good or service.

Vendors leverage their scale to achieve costs advantages. There may be 10 computer vendors, for example, that fulfill the needs of the large majority of districts across the US. Each vendor may put out hundreds or thousands of bids in a particular year, all of which are received by a different person purchasing for each district. These vendors are able to gain insight from previous bids, as well as recycle materials, resulting in bids that provide them with more benefit via less effort as time goes on.

District purchasers are currently unable to scale purchases, which increases price and time costs. For high-value items, each district would need to: publish selection criteria for the device, compare vendors that bid, and negotiate a final contract. A great deal of time is committed to comparing vendor bids and often involves corporate due diligence, quality of product, cost, future services, and other key factors. Across the nation, thousands of districts will make a significant purchase of computers each year, meaning thousands of separate processes for corporate due diligence, cost and quality comparisons, contract negotiations, etc. While vendors are iterating and improving, purchasers - our school districts - are reinventing the wheel.

Level the Playing Field

Purchasing transparency would provide a great tool for school districts and help level the playing field. At scale, vendors with multi-million dollar contracts have no problem spending 1 percent of their budget to find out who is buying what and to size up the competition. Having school districts publish what they buy makes this information available to all, not just those who can afford top dollar market research. Purchasing transparency would allow districts to view previous purchases of similar products all across the country and help coordinate districts looking to buy similar items at higher volume and lower costs. Additionally, districts gain greater insight into what they are actually getting, as opposed to what the bid says they are getting. Currently the system is skewed towards those who put together the best bid, not those who actually have the best offering. In fact, Congress found “187 contracts valued at $1.1 trillion that have been plagued by waste, fraud, abuse, and mismanagement.” While the education budget is much smaller than that of the US, similar processes lead to similar outcomes, and education dollars are ones we can’t afford to waste.