Firm will get about $186 million to manage UF Online
Published: Thursday, March 27, 2014 at 7:35 p.m.
Last Modified: Thursday, March 27, 2014 at 7:35 p.m.
The University of Florida will pay Pearson Embanet an estimated $186 million over the life of its 11-year contract — a combination of direct payments and a share of tuition revenue — to help launch and manage the state's first fully online, four-year degree program.
How UF evaluates how well Pearson does its job is unknown — the standards by which the contractor is measured are still being withheld from the public, such as minimum enrollment figures and total tuition levels.
UF officials maintained that those criteria are "trade secrets" exempt from state public records law.
"Per the General Counsel's Office, the redacted information is confidential as a trade secret of Pearson, deriving independent economic value from not being generally known to, or readily ascertainable by, other persons who can obtain economic value from its disclosure or use," Janine Sikes, the UF assistant vice president for media relations, said in an email to The Sun.
The Gainesville Sun pieced together what UF could wind up paying Pearson based on a business plan presented to the Florida Board of Governors in September, two months before UF Provost Joe Glover and Chief Financial Officer Matt Fajack signed a contract with Pearson Embanet CEO and President David Daniels.
The Sun asked UF last week for a copy of that contract, and received a heavily redacted copy that omitted UF's contributions to the company, the company's portion of tuition revenue, and any instructional fees the company was going to charge.
The Sun ran a story reporting that officials were withholding that information. After repeated requests, UF officials directed The Sun to a report of the proposed business plan for UF Online that had been presented to the Florida Board of Governors two months before UF signed its contract with Pearson Embanet, saying that the business plan contained the same information The Sun requested.
Two days later, on March 20, UF sent The Sun an unredacted copy of the pages of the contract containing some of the payment information, saying it was the same as the information in the board presentation. Other information remained redacted.
On March 21, Associate Provost Andy McDonough met with a Sun reporter to show where the business plan matched up with the Pearson contract. McCollough pointed out that Pearson is being paid $9.5 million over the first five years of the contract because typically the company is paid according to the number of students enrolled.
"The rationale is we were starting from scratch," McCollough said.
Gov. Rick Scott signed a bill last year tapping UF to create an online university that would offer a full, four-year degree program at 75 percent of the tuition that residential students pay. The Legislature gave UF $35 million in startup funds for the first five years, and also gave the university six months to get the program up and running.
UF hired Pearson to launch a nationwide marketing campaign and to recruit students for the fledgling program. UF Online began with 583 students, all of them transfer students.
The next step is getting enough first-year students to sign up for the fall to meet the goal of 1,000 students by then, McCollough said.
Zina Evans, UF's vice president for enrollment management, is working with Pearson to recruit the next class of students. Evans said 91 freshman have applied for the fall.
How many students sign up will depend largely on Pearson's marketing efforts in building a national campaign on UF's academic reputation and status among its peer institutions, McCollough said.
"Pearson has the experience and expertise to do that," McCollough said.
Pearson Learning is part of an international publishing and media conglomerate that includes The Financial Times and Penguin Publishing. It entered the e-learning support field for public universities in 2010, starting with Arizona State University and the California State University System, according to Inside Higher Education.
It bought Embanet Compass in 2012 for $650 million — leapfrogging from fifth to first in providing online learning support for public colleges and universities, according to Inside Higher Education. UF had a prior relationship with Embanet supporting eight online graduate programs.
Under its new contract with UF, Pearson is responsible for creating "proprietary digital content," providing admission and enrollment support, generating leads and signing new students, tracking retention rates, engaging in joint research and development, and providing on-demand student support.
The company is motivated, McCollough said. Recruiting and retaining students is key to Pearson's ability to recoup its investment over the long term, McCollough said.
The legislative subsidies end in 2019, at which point the program is supposed to be self-sufficient, McCollough said.
After 2018, UF will also stop paying Pearson directly and Pearson's income will come entirely from its share of tuition revenue and any fees it charges. UF projects it will have over 13,000 students in UF Online generating $43 million in tuition revenue by 2019 — of which Pearson will get close to $19 million.
By 2024, with 24,000 students anticipated, revenues generated will be about $76 million, with $28 million going to Pearson, McCullough said.
What UF gets in return is Pearson's marketing expertise and experience, McCollough said.
McCollough said the business model — developed with the help of outside consultants and talks with officials at Arizona State Online and Penn State World Campus — is a sound plan.
"We are running UF Online according to the business plan, and we have not had any missteps," Provost Glover told the board of trustees Thursday.
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