Reinventing Universities: Out-Sourcing

By Richard Vedder

A number of years ago, David Osborne and Ted Gaebler wrote an interesting book, Reinventing Government. The most insightful thought in the book was that government had a role to see that certain functions got performed that it viewed as being socially useful, if not vital. However, that is not the same thing as government actually providing the services itself. Often, it is smart for government to contract out (out-source) the actual delivery of governmental services to private firms that are specialists in providing the desired service. This takes advantage of the efficiencies inherent in specialization, the division of labor, and the theory of comparative advantage.

The same thing can be said about universities. Their job is to certify that student X has achieved a certain level of competence, knowledge, critical learning skills, etc., to warrant the rewarding of a degree. It is relatively irrelevant WHO provides the services, as long as they are provided at an acceptable level of quality and at an affordable cost. Sometimes, this may involve online instruction, sometimes large lecture hall teaching, sometimes expensive but sometimes life-altering small group seminars. Why shouldn't universities concentrate more on seeing that high quality services get delivered at an affordable cost, and less on delivering the services themselves? The reason, of course, is that vested interests on campuses resist any attempt to break their monopoly on the provision of services.

This brings us to today's INSIDE HIGHER ED (I am indebted to our friend and for-profit educational entrepreneur Burck Smith for bringing this to my attention). We learn that students at Fort Hays College in Kansas are revolting against courses provided at a low cost online by private for-profit provider StraightLine, with credit readily transferable to Fort Hays to be applied for graduation. Students cannot have it both ways -- wanting low cost, affordable education, and at the same time insisting on traditional modes of delivery that are inherently costly.

Are there issues involved in offering out sourced courses? Of course -- but those same issues exist for courses taught internally. Is the course's quality high? Are students in fact doing the work for which they are getting credit? Is the cost of providing the services reasonable relative to the benefits? A university that allows a lot of credit to be provided by disreputable outside providers may find their reputation damaged, or even their accreditation threatened (however: have you ever known a major institution that lost accreditation for academic reasons?) There are risks for reputable universities that try to cut corners using disreputable providers, and most prudent universities will be aware of this and act accordingly.

I am not surprised this story involves Fort Hays. In my book GOING BROKE BY DEGREE, I praise Fort Hays and its veteran president Edward J. Hammond for the innovative approach he took to reducing costs during the last recession. Now in his third decade as president (itself a real novelty these days), Dr. Hammond apparently has not lost his penchant for trying new and innovative ideas. When I last talked to him several years ago, I found an unusual president --not afraid of controversy or a willingness to confront change, Dr. Hammond was very cost conscious. I liked him very much.

I am not here to hawk StraightLine or its courses, but rather to say more power to universities who embrace the position that "we want to offer quality degrees at a low cost -- no matter who does the teaching, be it a for-profit provider, the institution itself, or a series of different providers, each good at what it does."