Contracting with an Online Program Management Company

Was this forwarded to you by a friend? Sign up, and get your own copy of the news that matters sent to your inbox every week. Sign up for the On EdTech newsletter. Interested in additional analysis? Try with our 30-day free trial and Upgrade to the On EdTech+ newsletter.

This week, Jeffrey Sun and Heather Turner, in collaboration with the University of Louisville Skills Collaborative, UPCEA, and the Education Law Association, published a guide titled “Which OPM Contract Terms Should Concern Campus Leaders and Why?” for universities looking to contract with Online Program Management (OPM) companies. The report is based on interviews with Chief Online Learning Officers (COLOs) who have experience negotiating OPM contracts.

Even though university deals with OPMs are currently at low levels, this is a valuable, high-quality, and much-needed resource. Over the past ten years, I have worked with many universities at various stages of engaging with OPMs—whether considering a contract, finalizing an agreement, or struggling with the terms of an existing one. I only wish this resource had been available to share with those clients.

That said, I think the report jumps into the details of contracts too quickly and misses a few important issues. This is a complex topic, and I will first attempt to augment the report to help it be of greater value for institutions.

The big picture

Sun & Turner argue that contracts are key and that in the case of university-OPM partnerships, getting them right is essential. They are absolutely correct in this. They also argue that contracts are more than just the term contained within.

The report, however, jumps right into analyzing contract terms. Before getting to terms, I would encourage higher education leaders take a step-back to lay the groundwork internally: to establish their own expectations and goals before beginning negotiations with an OPM.

Before institutions jump into negotiating the contract itself they need to gain some internal understanding of what they are doing and why they are doing it, of why they are engaging with an OPM in the first place.

• What do they hope to achieve, and what does success look like?

• Why are they choosing to work with an OPM? Have they conducted a cost-benefit analysis comparing in-house development versus outsourcing?

• What is their long-term strategy for working with an OPM? Is it a stepping stone toward building internal capabilities, or is it an end in itself?

Based on ten years of experience working with nearly a hundred schools on OPM deals, I believe that unless these bigger questions are addressed upfront and before hammering out contract terms, expectations will be misaligned, and misunderstandings will inevitably arise.

The authors themselves wrote a guide titled “In-House or Outsource?” to doing just that just over two years years ago.

The two reports really should be read as companion pieces, and I wish that the authors had not buried references to the 2022 one in the footnotes and one paragraph in the introduction. To get a good contract, it is more useful read both reports.

Thinking through the assumptions and goals behind the decision to work with an OPM is a crucial step—yet it’s often overlooked or skipped entirely. Recognizing this, and again in the sprit of augmentation, I collaborated with a colleague to develop a tabletop exercise designed to help institutions navigate this process. I also led a workshop on the topic at OEB 2024 in Berlin.

The devils in the financial details

The report rightly emphasizes the importance of leadership understanding the financial details of an OPM contract: what is included, what is excluded, and the implications of those terms. While I believe there is much more that could be added to this section, some of the advice provided needs some clarification.

The authors call for greater financial transparency from OPMs.

However, the examples they provide for achieving financial transparency focus only on high-level revenue flows, rather than offering the detailed breakdown of spending that they seem to be advocating.

I think it’s unreasonable to expect an OPM to fully open its books to the client and provide a detailed breakdown of exactly how funds are allocated. It is also unlikely that most OPMs would actually provide such transparency. Even if they did, most clients wouldn’t be equipped to make informed judgments about appropriate spending levels.

I’ve seen contracts where the OPM provided detailed spreadsheets outlining costs and revenue flows, often across three scenarios: a fee-for-service model, a partial revenue share, and a hypothetical cost for the university to handle it in-house. In every case, these overwhelmed clients rather than improving decision-making.

What truly matters to the client is the overall fees or revenue share, the absolute revenue flows, and satisfaction with the service. The first two are addressed through the high-level financial arrangements recommended by the authors, while the third is best managed through Service Level Agreements (SLAs).

Additional SLA Uses

There are several critical topics that the authors do not cover but that must be clearly defined in any successful agreement between a university and an OPM. Many of these issues and expectations should be addressed in Service Level Agreements (SLAs), while others warrant dedicated contract sections.

Student Services and Success

What types of services will be provided to students, and at what level? For example, many OPM contracts include retention support for enrolled students, but what this entails can vary significantly. Some OPMs have traditionally defined retention as a monthly phone call to each student, while others employ sophisticated data collection methods to identify at-risk students and provide counseling and coaching. Student services are often among the first areas where costs are cut—whether by a cost-conscious OPM or by a university hesitant to commit to a fee-for-service model—making this a key area to monitor.

Marketing

Recruitment and marketing receive surprisingly little attention in the report, despite the significant role OPMs play in both. There are several essential issues that should be discussed and agreed upon in advance, with clear time-frames and processes outlined.

• Approval of marketing materials

• Ensuring the institution’s voice is maintained in all student communications

• Defining the circumstances under which an OPM can challenge a university’s decision to deny a student admission

These concerns are becoming increasingly important as state regulations focus on marketing transparency, such as the recent law in Minnesota and the audit report in California.

Design

Many institutions experience friction with OPMs over the course and program design process and need additional clarity.

• Does the OPM have a structured design process and cycle?

• What does it look like, and what are the expected time-frames?

• Will it align with your institution’s needs?

• What flexibility exists in the process, and how is quality assurance managed?

Technology

Several key questions must be addressed regarding technology.

• What systems, for example SIS, LMS, email, will OPM staff need access to?

• Who will have access, and how will it be reviewed or updated?

• Does this align with university policies, and is it feasible to implement?

• What is the process for decommissioning access as OPM staff leave or as programs conclude?

• Is the OPM assuming the presence of certain IT staff? If so, which roles?

• Are there expectations for additional staff hires to support OPM-related technology needs?

• What third-party services will the OPM contract with and is there a process in place for you to review and approve those arrangements?

These are just a few of the essential issues that should be addressed in OPM contracts.

Taking responsibility

In many respects, the report is critical of OPMs and operates under the implicit assumption that OPMs hold the upper hand. This perspective is established early in the report.

This perspective carries through the body of the report as well. For example, in the section on Service Assessment, the authors argue that a specific example of contract language is:

There have certainly been some well-publicized examples of bad contracts and poor outcomes—such as the agreements between Concordia and HotChalk or between 2U and the University of Southern California’s College of Social Work.

However, a closer look at these contracts, as well as others, reveals that some of the responsibility for unfavorable outcomes lies with institutions themselves. Many enter into agreements with overblown expectations and without fully considering their goals, without a clear understanding of what they are trying to achieve, and without thoroughly reviewing or researching contract terms.

Parting thoughts

This new report is a valuable addition to the community, and I hope institutions take the time to read it carefully. But I also hope that institutions read both reports and make a concerted effort to deal with some of the up-front strategic issues.

The premium On EdTech+ newsletter is intended for a single recipient with occasional forwarding allowed.