Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Companies cash in on Common Core despite controversy

Student Allison Ramirez asks for help in a fourth-grade math class at Piney Branch Elementary School in Takoma Park, Md., where teachers are training themselves to teach students in a new style of learning math to prepare them for more rigorous education standards under Common Core.
Linda Davidson | The Washington Post | Getty Images

The controversy over Common Core hasn't stopped companies from cashing in on the education standards program.

States have already awarded hundreds of millions of dollars in Common Core-related contracts to businesses including Pearson, McGraw-Hill Education CTB, Houghton Mifflin Harcourt and Apple since 2012. And, despite some legal challenges and boycotts, more contracts potentially worth billions of dollars for testing, instructional materials and teacher training are on the way.

"Common Core has clearly been an important market for the large education companies," said Paul Irby, a market analyst with business intelligence firm Onvia.

Common Core's contract winners

Rank Vendor Project awards 2010-2014
2Houghton Mifflin Harcourt20
3Staff Development Workshops16
4Scholastic 14
5Catapult Learning11
7Pivot Learning Partners9
8AP Ventures8
9Action Learning Systems7
10Solution Tree7

Source: Source: Onvia database of awards, based on key words related to "common core"

A uncontroversial start

Until a few years ago, the educational effort known formally as Common Core State Standards seemed like a benign push to make sure American public school students were competitive in English and math. Shaped by bipartisan governors and education leaders, the benchmarks were adopted voluntarily in 45 states.

But Common Core has fast become controversial as school districts started awarding large contracts to companies and testing students on the standards. Students have boycotted initial exams this year in New Mexico and New Jersey, claiming the tests weren't a good measure of their knowledge.

The standards have become a political issue, forcing likely presidential candidates Jeb Bush and Chris Christie to defend previous support for what some conservatives call government overreach. Large teachers unions that once backed the effort have now reversed their position.

And more drama is all but certain as additional schools attempt to implement Common Core using taxpayer-funded education budgets.

Read MoreParents, legislators push back against Common Core

Despite the squabbling, significant cash has already been spent.

An important chunk of early funding—$360 million—came from the U.S. Department of Education through a program called Race to the Top. The initiative is a competitive grant program designed to "encourage and reward states that are creating the conditions for education innovation and reform," according to its materials.

That federal funding went to two large groups of states that banded together to save money: the Smarter Balanced Assessment Consortium and Partnership for Assessment of Readiness for College and Careers, or PARCC.

Those groups in turn shelled out the money to vendors to develop Common Core testing and related materials for their members. The most money went to Apollo Global Management-owned McGraw-Hill ($72.5 million from Smarter Balanced), U.K.-based Pearson ($63 million from PARCC) and nonprofit Educational Testing Services ($42 million combined from both groups), according to numbers compiled by Education Week

Precise figures combining related contracts from all states are difficult to tabulate as the contracts have variable costs. But it's likely that there will be billions of dollars in additional money being spent in coming years as Common Core is fully implemented.

The Thomas B. Fordham Institute estimated in May 2012 that Common Core implementation could cost schools between $3 billion and $12.1 billion nationally depending on various implantation approaches, not including technology improvements. Those numbers represent budget increases of between 1 and 3 percent for kindergarten through 12th grade.

Some 72 percent of school districts planned to buy new Common Core-related instructional materials for 2014 and 2015, according to April 2014 research conducted by educational market research firm MDR. That's higher than creating new materials from internal resources (69 percent) or using free materials from PARCC and Smarter Balanced (62 percent).

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Common Core is seen as a major growth driver for Pearson, for example.

Philip Gorham, a senior equity analyst at Morningstar, estimates that Common Core-related business will be one of two reasons for more than 3 percent growth for the U.K.-based company over 2015.

Pearson did not respond to a request for comment. But a company website notes its deep involvement: "Pearson's close association with key authors and architects of the Common Core State Standards ensures that the spirit and pedagogical approach of the initiative is embodied in our professional development."

Other key multiyear testing contracts Pearson has signed related to Common Core include up to $108 million from New Jersey and $59 million from Maryland.

Sample large Common Core contracts

Purchaser Company Amount (millions, rounded) Description
FloridaAmerican Institutes for Research (non-profit)$220 Testing services
New JerseyPearson$108 Testing services
TennesseeMeasurement Inc.$108 Testing services
MarylandPearson$60 Testing services
Smarter Balanced consortiumMcGraw-Hill Education CTB$54 Testing services
Los AngelesApple$30 Technology (iPads)
PARCC consortiumPearson$26 Testing services

Source: Source: Public information, Onvia, Education Week

More controversy ahead

Pearson's largest Common Core contract shows the potential trouble around securing such business.

New Mexico, acting as a bidder on behalf of PARCC, gave a contract to Pearson last year that could be worth up to $1 billion given the potential for other states in the consortium to copy it. But the deal is being challenged in court by a competitor, nonprofit American Institutes for Research, which said the bidding process was rigged by state officials for Pearson. A spokesman for New Mexico's education department has called AIR's allegations "frivolous," according to The Wall Street Journal. A ruling is expected in several weeks.

Pearson also has run into problems in Mississippi. The state was part of the PARCC consortium and was set to use Pearson tests along with others, but Mississippi's contract review board rejected use of the contract given Pearson being the sole bidder. The state pulled out of the PARCC consortium but its education board was still able to approve an emergency one-year, $8 million contract to Pearson for Common Core tests.

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While educational giants like Pearson have scored the largest contracts, many are less lucrative and have gone to various smaller companies given a median value for all contracts of $35,205, according to Onvia research.

"There are considerable opportunities for small businesses," Irby wrote in a report last year on Common Core contracting opportunities. "As values rise the picture changes, and agencies increasingly favor the large or more well-known and established vendors."

Also, contractors winning some of the largest clients are nonprofits. They include Educational Testing Services, known for the GRE and TOEFL exams, and Achieve, which helped create Common Core starting in 2008 with funding from the foundations of Bill & Melinda Gates, IBM, JPMorgan, Microsoft and others.

ETS, for example, got $32 million for both item development and meeting coordination from PARCC; and two contracts worth a combined $9.1 million from Smarter Balanced for test administration and psychological measurement, according to the Education Week tally.

"As the largest and most experienced nonprofit test developer in the world, it is understandable they would utilize ETS in this effort," ETS' director of external relations, Tom Ewing, said in an email. "The hope is that the ones who really benefit from Common Core are the students, teachers and administrators."