PARCC exams: Following the money behind N.J.'s costliest test

Question: How much will New Jersey taxpayers spend to implement the new PARCC standardized tests in the state's public schools?

(A) $25 per student
(B) $22 million
(C) $108 million
(D) No one knows

The answer, according to state officials, is all of the above. New Jersey is spending about $25.50 per student, or about $22 million on the new exam this year. Within four years, the price tag could go as high as $108 million.

But, as New Jersey school children sit this month for the new exams, there are still big questions about how much the controversial tests will eventually cost.

The debut of PARCC - short for the Partnership for Assessment of Readiness for College and Careers - ushers in a new era for New Jersey's public schools. For the first time, the state is using computers to test all students in grades 3 through 11 with an exam that is also being used by nearly a dozen other states.

PARCC has also ushered in a new level of vitriol in the state's schools. Some parents are waging war on standardized testing by refusing to let their kids take the exams with the open support of the state's largest teachers union.

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PARCC exams: How Pearson landed the deal to produce N.J.'s biggest test

Behind all of the strife is an unprecedented and unusual deal with Pearson Education, a for-profit testing company that landed the contract to provide the exams in New Jersey without a traditional competitive bidding process.

NJ Advance Media examined thousands of pages of contracts, pricing agreements and legal documents to track how taxpayer funds are being spent on PARCC. The documents show a complex deal with more than 60 price variables that make it almost impossible to determine how much New Jersey will eventually spend on PARCC testing over the next few years.

New Jersey education officials say they got a good deal. Their early estimates indicate the PARCC tests will cost $25.50 per student this year, about $3 less than previous standardized tests used in New Jersey.

However, the overall bill will be about $3 million higher than last year because more New Jersey students are required to take the PARCC compared to previous exams.

"This is a higher quality assessment and we'll get much deeper information out of it, I think that for me is a huge selling point," said David Hespe, New Jersey's education commissioner. "We're basically getting a better assessment at just about the same amount of money we're spending per pupil as we are now. I think that really is a value."

Critics question whether New Jersey is spending too much time and money on standardized testing. They also question whether New Jersey's agreement with Pearson, the world's largest testing company, is in the best interest of the state's taxpayers and school children.

"I don't want to paint a picture of a sinister corporate giant out there. They are looking after their interests," said Daniel Katz, director of secondary and secondary-special education at Seton Hall University. "I am concerned that PARCC did not go through sufficient bidding before they landed that contract."

PARCC did not respond to questions about the bidding process.

Pearson declined to comment for the story.

The New Mexico deal

Standardized tests are nothing new in New Jersey, which began using annual statewide exams in the 1970s to gauge what students were learning.

Over the last few years, New Jersey has been using the NJ ASK and HSPA tests to measure students. Measurement Inc., a North Carolina testing company, has the contract to produce both tests.

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PARCC exams: Read N.J.'s contract with Pearson to produce the tests

In 2010, New Jersey and other states signed on to the Common Core, a set of skills and goals that students across the country were expected to achieve.

For the first time, states had a common list of reading and math skills that students were expected to learn. So, some of the states decided to get together to develop one standardized test to measure whether students were meeting the Common Core.

New Mexico took the lead and began a bidding process looking for a testing company to develop what could be the biggest and costliest K-12 standardized test ever developed.

Pearson, a company that had worked with New Mexico in the past, was the lone bidder. New Mexico officials finalized a contract and pricing agreement. The other PARCC states, including New Jersey, eventually adopted the same contract framework for their states.

The American Institutes for Research, a Washington-based non-profit with its own testing company, was among those who cried foul. AIR filed a lawsuit last year claiming the New Mexico PARCC bidding was rigged so Pearson would get the contract.

The lawsuit alleges New Mexico officials crafted the bidding guidelines so only Pearson's online test delivery system would be equipped to land the massive deal.

"The New Mexico RFP and resulting contract is an attempt to sidestep state contracting law in more than a dozen states. By forgoing a real competition, PARCC member states lose the ability get the best price, to negotiate for better services for all students, and to spur innovation," Jon Cohen, president of AIR Assessment, said in a statement.

A judge has begun hearing AIR's lawsuit in New Mexico.

At a court hearing earlier this month, attorneys for the state of New Mexico denied any irregularities in the bidding process.

If the court throws out the New Mexico-Pearson contract, it is unclear how the case would affect PARCC testing in other states, including New Jersey.

AIR's appeal is not asking the court to block the current PARCC exams. But the testing company wants to reopen the contract to allow competitive bidding for future years of the deal, which AIR says could be worth $1 billion or more nationwide.

"We understand that PARCC has critical timelines. We don't want to slow them down. We just want them to obey contracting law and have a legitimate competition," Cohen said.

Pearson responded to AIR's initial complaints last year with a 17-page letter from its attorney that said the allegations of bid rigging were baseless.

"AIR has not shown, and cannot show, that the RFP is in violation of the law," said John Kennedy, Pearson's attorney in New Mexico.

In New Jersey, state officials bypassed the traditional bidding process and used the framework for New Mexico's deal to create Pearson's contract with the state. The other states in the PARCC consortium also waived bidding and adopted New Mexico's deal.

Though the bid-waiving process on a large contract is unusual, it is not unheard of in New Jersey or other states. In situations where states are in a consortium with a common goal, it would be impossible for each state to go through an individual bidding process, state officials said.

For PARCC — which was designed to be a single test offered to students in nearly a dozen states — all of the states needed to stick with one test provider and one pricing structure to make the exam work, state officials said.

Hespe, the state's education commissioner, said he is confident Pearson's contract is fair. Though New Mexico handled the initial bidding process, New Jersey officials independently reviewed the PARCC contract before signing off on the deal, Hespe said.

"This was an independently arrived at contract — but based on the format and the elements in the New Mexico deal. But it was an independently derived agreement," Hespe said. "I'm comfortable."

'68 price lines'

Pearson's original bid to win the PARCC contract in New Mexico runs nearly than 800 pages. The company's contract with New Jersey includes nearly 100 more pages along with purchasing forms and several addendums.

The documents, which were obtained by NJ Advance Media through the state's Open Public Record Act, outline a complex formula that will determine exactly how much New Jersey will pay each year for the PARCC test.

"There are 68 price lines," said David Joye, director of administration and budget for the state Department of Education. "It's a different purchase order each year."

The contract reads like a menu in which state officials choose the number of exams they need each year in addition to a long list of other options.

Does New Jersey want Pearson staffers to visit school districts to see if they are ready for the PARCC test? That's $33,160 a year up to 12 visits. Does New Jersey want Pearson to store students' old tests? That's $17,283 for a two-year period. How about some regional training workshops for teachers and administrators to get ready for the test? That is $60,900 for six sessions.

Starting next year, the state will also have to pay an additional $100 every time parents challenge the score their child received on the PARCC and request to see a copy of the student's test answers, according to the contract. If a problem is found, it will cost the state another $400 for Pearson to re-score each exam.

Because of all the variables in the contract, New Jersey officials need to check in with Pearson every few months to "true up" and recalculate the bill.

The state's education department originally estimated New Jersey would spend $108 million on PARCC over the next few years, including $26 million to $27 million this year.

State officials announced earlier this week that their latest "true up" with Pearson indicated New Jersey will pay about $22 million for the PARCC exam this year once all of the state's options are added. The total breaks down to about $25.50 per student for the test for 896,000 New Jersey students, in addition to administrative fees.

That is about $4 million less than the state was expecting to spend this year, largely because 98 percent of students are taking the PARCC exam on computer instead of the costlier pencil-and-paper version, Joye said.

New Jersey is also still paying for a scaled-back order of NJ ASK and HSPA tests this year. Though the state is phasing out the standardized tests and replacing them with PARCC, New Jersey still needs to use the NJ ASK exams to test 4th and 8th graders on science, which is not included in the PARCC tests. Some high school seniors are also re-taking the HSPA this year to determine if they can graduate.

Once the costs of all of the standardized tests are added up, New Jersey expects to spend more than $28 million on exams this year, state officials estimated.

However, it will be difficult to predict the cost of the PARCC exam in future years. Under the terms of the deal, the price per test could rise or fall based on the number of states using the exam.

"The biggest drivers of the contract are the number of students in the consortium," said Jeff Hauger, the state Department of Education's director of assessments.

That means New Jersey's bill for the PARCC tests could go up if states drop out of the consortium. If the volume of students taking the tests drops nationwide, New Jersey would have to absorb more of Pearson's overhead for producing the exams.

There are currently 11 states and the District of Columbia in the PARCC consortium. Earlier this year, Mississippi announced it was pulling out of the group and dropping its Pearson contract after a political fight in which the governor and other top political leaders called for a repeal of Common Core.

Mississippi issued a new request for proposals, or RFP, last month and opened up bidding for new statewide assessment tests.

"The new RFP process will give the state the opportunity to seek competitive, multi-year bids," John Kelly, chairman of the Mississippi Board of Education, said in a statement. "Our exit from PARCC will help ensure the process is open and transparent."

Subcontracting PARCC

Pearson is not the only company profiting on New Jersey's implementation of the PARCC exams. The company's contract shows a large portion of the money the state is paying for the exams is going to nine subcontractors.

The Princeton-based Educational Testing Service, a non-profit testing giant that produces the SAT and other exams, was hired by Pearson to write some of the questions on the PARCC exam and help develop the scoring measurements.

ETS will be paid $5.75 million by Pearson, making it the largest subcontractor in the New Jersey contract, according to the documents.

WestEd, a San Francisco-based non-profit education company, will also be paid more than $842,168 to develop questions. Caveon Test Security, based in Utah, is slated to receive $96,574 for "web monitoring," which includes searching Twitter and other social media sites for students leaking test questions.

Other subcontractors hired by Pearson will handle printing the exams, providing translations, customer service work and test administration surveys, according to the contract.

Infrastructure upgrades

While most of the focus on the cost of implementing the PARCC exams has been on the money the state is paying Pearson, the bulk of the expenses may be in the local school districts.

Many of New Jersey's nearly 600 school districts had to buy new computers, upgrade their internet connections and make other infrastructure upgrades to move out of the paper-and-pencil era and offer the PARCC test entirely on computers.

In Newark, the state's largest school system, the district spent about $5 million on new laptops this school year, said spokeswoman Brittany Parmley.

Newark public schools spent an additional $9 million on technology infrastructure upgrades over the last three years and increased the district's internet capacity by 10 times compared to before the PARCC exam, Parmley added.

Wealthier districts also upgraded their technology. In Livingston, the public schools invested $1.5 million on new technology before the PARCC tests, though not all of the improvements were directly related to the exams, district officials said.

In Green Brook, the schools bought new Chromebook computers for the PARCC exam. But the district had already been planning a technology upgrade, said superintendent Kevin Carroll.

"We just accelerated the plan," Carroll said.

School districts also have to budget for other costs related to the PARCC, including money for substitutes to cover classes while teachers are overseeing exams.

In Kenilworth, the district expects to spend more than $10,000 on substitute teachers during PARCC, said Scott Taylor, superintendent at Kenilworth Public Schools.

The district also spent nearly $1,400 on cardboard dividers placed around computer monitors to prevent cheating, Taylor said. Under the terms of teachers' contracts, Kenilworth will also pay teachers for prep time they missed preparing for their classes because they were in PARCC training sessions for test administrators.

The state is offering local districts some funding to cover the cost of technology upgrades and other expenses related to the test, including $13.5 million for "PARCC readiness" in the proposed state budget Gov. Chris Christie unveiled last month. But many of the costs will likely be absorbed by local taxpayers.

State officials said they are not making any attempt to total how much local school districts are spending on technology upgrades and other expenses related to PARCC.

"Districts are constantly investing in technology," Hespe, the education commissioner, told lawmakers during an Assembly hearing earlier this month. "Being able to disaggregate that and come up with a PARCC only number, I don't think is even possible."

All of the money spent preparing for PARCC may have "side benefits," said Patricia Wright, executive director of the New Jersey Principals and Supervisors Association. Schools are being forced to quickly upgrade computers, improve internet connections and train teachers.

"All of which will help prepare students for a technology-driven world," Wright said.

NJ Advance Media staff writer Adam Clark contributed to this report.

Kelly Heyboer may be reached at kheyboer@njadvancemedia.com. Follow her on Twitter @KellyHeyboer. Find NJ.com on Facebook.