Purdue University’s System-wide OPM Contract With Kaplan Higher Ed

Author

Phil Hill
January 13, 2020

Purdue University made its big announcement in Spring 2017 about the agreement to acquire Kaplan University and turn it into what is now known as Purdue University Global. Purdue further made news one year ago by announcing a centralized office to coordinate all online activities of the system – Purdue Online. What has not been made public is that Purdue also signed a Master Services Agreement one year ago with Kaplan Higher Education (KHE) to make it effectively a system-wide Online Program Management (OPM) vendor for online programs across all four campuses.

Historically OPM partnerships were program-specific, made with little oversight in a period that has been called “deans gone wild”. As online opportunities expanded and the OPM market grew, there were cases of multiple OPM contracts within the same institution, either a mix of OPM providers, multiple programs using the same OPM provider, or a mix. This trend towards centralization, or coordination, is now leading to institution-wide OPM contracts. This Purdue – Kaplan agreement represents perhaps the most significant case, while 2U’s recent agreement with the University of North Carolina represents another. Thanks to a public records request, we can get a much better understanding of this new OPM model.

Continuation of a Vision

While this institution-wide OPM contract has not been made public before today, there have been hints that this move might happen, including Purdue president Mitch Daniels’ presentation of the Purdue Global case to state officials in 2017.

The deal, Daniels contends, puts Purdue in line to get access to Kaplan’s online infrastructure, allowing the university to leapfrog its virtual campus efforts much more quickly than if it had tried to develop one on its own.

If we jump forward to December 2018, Purdue officials received approval from the Purdue Board of Trustees to establish Purdue Online as a new organization. As described by Inside Higher Ed a year ago:

“It’s a shift from a college-level strategy to a Purdue-level strategy,” said Frank Dooley, Purdue’s senior vice provost for teaching and learning. “We’ve kind of been drinking from a fire hose in the last year.”

Purdue’s vision for its online programs, according to administrators, preserves distinctions between traditional Purdue and its former for-profit extension while taking advantage of overlapping goals and complementary offerings. Online education observers will be tracking Purdue as a potential new collaborative model settles in. And Purdue’s faculty — portions of which bristled at Purdue’s handling of the Kaplan acquisition — will be watching closely and warily.

Not mentioned with the announcement of Purdue Online, however, was that the university signed a Master Services Agreement – dated January 1, 2019 – with Kaplan Higher Education. This contract gives Kaplan essentially the right of first refusal to be the OPM partner for online programs across the system.

The Services

The services to be provided are separated into basic and enhanced (pp 2-3), where basic is the minimum set of services to be provided and enhanced are optional services.

2.1.1 Basic Services. In general, at a minimum, KHE shall provide the services set forth on Exhibit A uniformly to each Purdue online Program that is the subject of a SOW hereunder (the “Basic Services”).

2.1.2 Enhanced Services. In addition, for a given Program covered by a SOW, KHE may also provide: (a) any of the additional services set forth on Exhibit B hereto that are selected by Purdue and the relevant Purdue Unit, to apply to that Program, by mutual agreement, and (b) any other support services not specifically described on Exhibit B that the Parties may mutually agree to include with respect to that Program (collectively, the “Enhanced Services”).

The Basic Services and the Enhanced Services are referred to herein collectively as the “KHE Managed Services”.

Exhibits A shows the basic services that include program and portfolio strategy, student recruitment, and reporting and analytics.

Basic services description

Exhibit B shows the enhanced services that can include, well, almost anything to be done in an online program. Including teaching and delivery. Everything except application decision and admissions policy.

Enhanced services

Kaplan is now the limited exclusive provider of program services for Purdue’s online initiatives (p 5):

During the Term of this Agreement, KHE shall be the “limited exclusive provider” of Basic Services for all new online Programs developed and launched by Purdue Units during the Term, other than with respect to Program Exceptions.

This contract has reversed the dynamic of an OPM being selected for a program. KHE is now the provider for all online programs unless they are listed as an exception in the contract, or in the case that Purdue and Kaplan mutually agree to not work together on a program.

Exclusivity and Non-Competition

In section 6.2.1 on p 6, the contract specifies that for any new statement of work (SOW) governing a specific online program, Purdue may not use another vendor for similar services.

. . . KHE shall be deemed, in addition to its status described in Section 6.1, the “exclusive and sole provider” of the KHE Managed Services described in the SOW with respect to that Program, such that Purdue shall not enter into any agreement or arrangement with a third party to provide services similar to those covered by such SOW for the purpose of supporting the same Program offered by the same Purdue Unit via an alternative online channel or platform, unless KHE has elected to waive exclusivity in writing in such SOW.

Furthermore, Purdue has agreed to not allow programs to compete with each other (section 6.2.2 on p 6).

6.2.2 Additionally, once a SOW is entered into hereunder and remains in effect for a given Program, Purdue shall not do either of the following, unless, in either case, KHE has elected to waive the relevant restriction in writing in such SOW:

6.2.2.1 Enter into any agreement or arrangement with a third party to provide services similar to those covered by such SOW for a Purdue Unit’s proposed offering of an online program that is the same as or Substantially Similar to the Program covered by such SOW, or

6.2.2.2 Directly undertake the development, launch or promotion of any online program that is the same as or Substantially Similar to the Program covered by such SOW.

For purposes of this Agreement, Program(s) are considered “Substantially Similar” if they (i) compete for the same student population, (ii) result in the same credential level or degree (e.g., AS, BS, MS, PhD or other), and (iii) have the same six digits of their CIP Codes (as defined in Exhibit D).

Redactions

What is almost as interesting as what the contract says is what Purdue University chose to redact as part of the public records request.

One example is section 4.1.1 (p. 4), which describes Purdue’s obligations on which programs that Kaplan has the exclusive right to bid upon and the mechanics of how this limited exclusive provider works out in practice. I am not sure how this is considered a trade secret or confidential information.

Redacted section 4.1.1

Another example of redactions is the mechanics of payments. It is perhaps not surprising, however, that Purdue chose to redact the entirety of Exhibit F, which describes the “distribution waterfall” of how Kaplan gets paid. In the case of Purdue Global, the waterfall is mix of fee-for-service and revenue sharing provisions, with defined priorities of which party gets paid first, second, etc based on program revenue. None of this information was shared in the response to the public records request. I could see redacting specific revenue sharing percentages, but the basics of the distribution waterfall should be a public Purdue issue, not a proprietary Kaplan issue.

Net Effect

The net effect is that Kaplan has an institution-wide OPM contract for almost all of the system’s online offerings moving forward, with Kaplan provided exclusivity and non-competition status. I do not believe that any of this information has been competitively bid or shared with the university community, and it certainly has not been described publicly.

I have requests out to both Purdue University official channels and with several faculty member on the following. When I get answers from Purdue I will share an update.

  • The Kaplan agreement (the one for OPM services outside of PG) is significant. Can you describe how Kaplan was selected as your institution-wide partner? In other words, was there a competitive process, or was this tied to PG contract, or some other decision process?

  • Which university groups have been briefed on the agreement and its implications?

  • I was surprised that the entire section on distribution waterfall was redacted. Can you describe how the mechanics are different than PG waterfall (don’t need specific numbers like rates or rev share percentages)?

  • How many programs outside of PG are using Kaplan for OPM services now that the contract is a year old?

The Master Services Agreement

I have further thoughts on this agreement, what it means for Purdue, and what it means for the OPM market. But I will leave this commentary for a future post while waiting to see if I can get answers on some of the questions above.

I appreciate Purdue University’s timely response to the public records request. You can download the MSA here or view below.