Monday, October 20, 2014

Joel Rose and School of One get new NYC contract that violates conflict of interest rules and the terms of his earlier contract

Yesterday’s NY Daily News reported that last month, the Panel for Educational Policy approved a contract for New Classrooms to teach math in city middle schools via an online program called the School of One.  The contract  charges the city nearly $200 per student for the licensing fee: “An estimated 2,220 students will be enrolled in the School of One program at a cost of $420,750 for license fees ($191.25 per student)."  This is the second contract granted New Classrooms; the original one was granted in January 2012.

Joel Rose, a former chief of staff to Deputy Chancellor Chris Cerf, created School of One while at DOE, starting in February 2009.  He developed the algorithm and the program along with Chris Rush, a consultant then working for Wireless Generation, now headed by former Chancellor Joel Klein for Rupert Murdoch’s NewsCorp.    

In March 2011, Rose spun off the program into a separate company,  renamed it New Classrooms, and became co-CEO along with Chris Rush. The company, ostensibly a non-profit, boasts an impressive list of funders, including NewSchools Venture Fund, the Gates Foundation, the Broad Foundation, New Profit Inc., and Carnegie Corporations, and its 2013 tax returns (the latest available on Guidestar) show a surplus of $4.5 million dollars. Board members include Miguel Bezos, father of Jeff Bezos, billionaire CEO of, and Gideon Stein, omnipresent corporate reformer and board member of Chalkbeat, Teach Plus, Stand for Children and a former board member of Success Charters. 

According to Rick Hess, who plugged the much-hyped program in his column, “One of my favorite things about School of One is that it's a solution that doesn't imply new costs. It's a way to optimize whatever dollars a school is spending on math instruction--to squeeze more juice from the orange--and doesn't entail new outlays. “The question becomes if it doesn’t entail new outlays, why the city has to spend more money to implement it.  

Here is an excerpt from the January 9, 2012  Conflict of Interest decision, justifying the first DOE contract with New Classrooms in 2012: 

Of course the algorithm and methodology inherent in the School of One program was developed by Rose while he worked for the DOE – and would remain fully confidential.  The city’s Conflict of interest rules also say a former employee “may never work on a particular matter or project that you were directly involved in while employed by the City.” 

Yet somehow, despite the fact that Rose is head of the company and his company would clearly benefit from the contract, the conflict of interest rules were waived. 

In any event, when Rose was granted his initial contract by the Panel for Education Policy, only nine days later on January 18, 2012, it was at no cost to the city, and the back-up documentation promised that the DOE would be granted joint ownership or a royalty-free perpetual non-exclusive license to the platform … for use in NYC schools."   (See p. 37 for this language in the  2012  PEP document.) 
Presumably, the joint ownership or royalty-free perpetual contract was pledged in recognition of the fact that the program was created by Rose while employed at the DOE.  Indeed, if anything, it might be argued that the city should also royalties each time the program is re-used in other districts, considering it was developed using city students as guinea pigs and took up much teacher and staff time.
Even so, the awarding of the contract in 2012 was quite controversial, as noted in the Daily News:
City officials defend the deal, noting Rose got the blessing of the city’s Conflicts of Interest Board because he’s promised to play no role in any of the city-related work. 

Under the agreement, the city will share with Rose’s groups the licenses for the School of One program, which uses computer-based learning to individually tailor math classes for students at three middle schools. [emphasis added] 

“This is exactly the type of thing that raises eyebrows and causes people to question” the Education Department, said Michael Loughran, a spokesman for city Controller John Liu, whose office will review the contract. 

Education Department officials note four other companies showed initial interest but did not bid because the city isn’t paying out any money during the three-year term of the contract. 
“We believe this zero-cost contract is a smart move for the city, potentially saving millions of dollars,” said spokesman Matt Mittenthal, defending the deal that aims to expand School of One to 50 schools.” 

The no-cost contract voted on in January 2012 that was to “commence on or about March 1, 2012” and was to last for three years, which means that it would only lapse in March 2015. To add insult to injury, the new contract was just granted retroactively from August 2014 --six months before the old cost-free cntract was supposed to lapse.
So what does the company say in its defense about the fact that it is now charging a per student license fee instead of allowing the city to use it for free in perpetuity? In the Daily news, a New Classroom spokesperson claimed that “the fees in the new contract cover services other than the free software license Rose promised back to the city in 2012.” But the PEP documents say otherwise: 

The DOE also claimed in the Daily News article that “no city taxpayer money was used in paying for the services” though the document says the opposite; that while the initial funding came from a federal grant, “Now that the program is fully implemented in participating schools, the DOE is responsible for the cost of supporting these schools.” 

So essentially, the company is charging the city nearly $200 per student for a program developed by Rose while a city employee, instead of for free as promised, six months before the previous contract lapsed --exactly what conflict of interest rules were designed to prevent. 

To make things worse, this is a no-bid contract.  In 2012, the DOE claimed to have bid out the contract to New Classrooms competitively, although it was apparent that the contract was designed only for Joel Rose, as at that point the DOE wasn’t willing to pay any fees:

Now, however, when the city is paying real money, the DOE hasn’t even pretended to bid it out, supposedly to prevent “a lengthy competitive bidding process” (even as the previous contract wasn't near completion):

Even so, if and when a new RFP is announced, it will likely be designed for Rose’s company to win --which despite huge hype, lacks convincing evidence of positive results.  The online data-mining program was originally designed to spread across 50 schools throughout the city, and yet it is only used in five schools at this time, compared to six schools last year Two of the three original schools dropped out because of poor results.   

When I visited one of the pilot programs at a school in lower Manhattan a few years back, I saw utter confusion, with up to 60 students in a room, switching places every 15 minutes, and many of them disengaged while answering multiple choice questions on their computers, clicking on answer A, B, C in turn until the machine told them they had  the right one.  

When the PEP was granted approval power over contracts in 2009 with the renewal of mayoral control, there was hope that some of this cronyism, corruption and waste that had been rampant would be stemmed.  The number of no-bid contracts had exploded  under Bloomberg, with no-bid contracts totaling $15 million in 2001 ballooning to $300 million by June 2008, with more than one fourth of those contracts going over the agreed upon cost.

Yet after the PEP was given the ability to vote on these contracts, every  contract but one was rubberstamped by the mayoral majority on the PEP, even when there was strong evidence of corruption --- as pointed out by independent-minded watchdogs, like Manhattan appointee Patrick Sullivan.   

The new PEP members appointed by Mayor de Blasio were supposed to be more independent; but the Panel has yet to reject any proposed contract, to my knowledge.  In some ways, the process now is LESS transparent than before, as the back-up contract documentation is not posted until the night before the PEP vote – instead of about about a week before, as happened previously.  Previously, PEP members complained that they were not allowed to see the full contracts; now no written description of what the contracts are meant for, or explanation if they have been competitively bid is available to the public until the night before the vote. It is truly disappointing to see waste and favoritism continue under a new administration which had promised otherwise.

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