Assessing the Terms of the OPM Contract

Once the institution has evaluated the above questions about its reasons and expectations for establishing newly online programs, it is time to get down to brass tacks: assessing what contract terms are reasonable, acceptable, and prudent. This step is critical. The Century Foundation investigated the OPM contracts of more than 70 institutions and found that well over half of those with a defined end were signed for more than five years;¹ more than one in four made escaping the contract difficult, with strict terms for winding down contracts or provisions for automatic renewal; and among the more than half of contracts that utilized a revenue-share model, the OPM share ranged from 35 percent to 80 percent.² The recommendations from that report urged institutions not to purchase packaged services of recruiting, instructional design, and other services, and not to share revenue, but rather to contract for what is needed and pay for it up front.³ Those cautions are based on the examples—some egregious—found in the report; and we walk through several components below.

The institution, in weighing all of the components of the agreement, must decide whether to opt for a revenue share. Under this model, any revenue earned from the program is split between the OPM and the institution itself, often with the OPM keeping the majority of the revenue and in some cases, as much as 80 percent. Particularly in less-profitable programs, this can place a significant burden on the institution. In some models, institutions agree to use both a revenue-share component and a fee-for-service component for different aspects of the contract. While a revenue-share model reduces the up-front costs to the institution, many of the most significant problems seen with OPMs—aggressive recruiting practices, egregious contract terms, poor quality outcomes—have been seen in cases where the institution elected to use a revenue-share model. Such a financing mechanism may not be worth the risk—or the costs—unless the terms established fit well within the institution’s best practices for financial management and contract oversight. Moreover, revenue sharing makes little sense in quickly pivoting existing programs, as is the case for many institutions currently considering the rapid transition to online learning.

Institutions should consider a fee-for-service model, like the one championed by Noodle and available from other OPMs.⁴ While the up-front costs are higher, the institution retains far more control over the program, its quality, and student enrollment practices. The college also enjoys far less risk of the reputational damage or financial catastrophe of some of the revenue-share examples discussed throughout this brief.

If the institution does choose a revenue-share model, it is critical that the amount promised to the OPM be reasonable, even accounting for the increased costs the institution will face in serving students through an online format and the reasonable estimates of how many students are likely to enroll in the program. The institution should consider what the revenue-sharing level in the contract is, as well as whether it changes over time and whether any funds are guaranteed to the OPM if revenue falls below certain targets. Those are key “fine-print” questions that can undermine the financial viability of a revenue-share agreement. Additionally, the institution should take steps to ensure that current and future students are protected, and academic integrity is preserved, by retaining control over recruiting practices, admissions decisions, and curricula development.

When an institution contracts with an OPM company, particularly through a revenue-share agreement, the college should think carefully about how long it plans to implement the program before reevaluating whether or not its goals are being met. Six of the contracts reviewed in the study by The Century Foundation lasted as long as seven to 10 years; in 2018, the now-permanently shuttered Concordia University entered into a 20-year contract with its OPM.⁵ The exact length of an appropriate contract depends, of course, on the other terms of the contract and the institution’s reasonable expectations for growth of the program, but institutions should seek to avoid contracts longer than five years. The longer the contract, the more challenging it becomes for a college to find a new partner.

Institutions should also be cautious to ensure they can reasonably exit a contract. Several of the revenue-share contracts that The Century Foundation examined included severe provisions requiring, for instance, notice that the institution intended to terminate the contract years before it was set to expire; automatic renewals; and exclusivity provisions saying the college could not partner with other companies to engage in similar activities after the contract was ended.⁶ An institution should scrub the contract to ensure it will have the ability to change or leave a contract when it believes termination is appropriate. Additionally, the institution should establish clear expectations around the ownership of the course material, since OPMs often offer their programs on proprietary technology and may withhold the information after a contract expires. A transition plan will provide the institution assurances that it has the ability, both legally and practically, to exit the contract.

Ensuring student data are appropriately handled should be a high priority for institutions when considering an OPM contract. When assessing data management in an OPM contract, institutions should focus on what kind of data are collected, how the information is shared, and how it is kept safe.

Institutions should be clear on what data the OPM collects and carefully assess its privacy policies. Are the data collected essential for the OPM's services, or are non-essential data, like information on student health, discipline, or geolocation, collected? While data collection is necessary for effective OPM services, institutions should be clear on whether all data collected are necessary for the service. The institution should also understand whether student information is personally identifiable and if it is ever anonymized. Most OPMs do collect personally identifiable information but should anonymize it if shared with a third party. This can help the institution ensure that students' information is kept safe. Ideally, the institution should have someone with data privacy expertise assess how data are being anonymized, what other controls are in place, and whether the risks of re-identification are low enough.

Whether data are shared or sold to third parties is also important for institutions to consider. In fact, some contracts give third parties the ability to profit from student data but keep this information vague or unclear about who has authority over student information.⁷ It is when OPMs sell or share data to third parties that issues can arise. Institutions should work with their OPM to understand if data will be accessible or sold to third parties, who those third-party vendors are, exactly what data will be shared, and how third parties may use student data. An institution's chief information officer (CIO) or attorney can help the institution manage this aspect of the OPM relationship and ensure that appropriate checks and balances between the OPM and institution are in place, and the third party's privacy and security measures are the same or similar to the OPM's.

Finally, the institution should take the time to understand how student data are kept safe through technical, administrative, and physical protections. The college should know which OPM staff have access to institutional data and ensure that only those essential staff have data access. There should be an administrative record of who accesses the data and regular audits of these records. The OPM's data privacy and security protocols should also be clear. For instance, the institution should inquire whether OPM staff can access data remotely and what company data security protocols are. OPMs should have trained their staff on how to safely handle data digitally and physically, keeping laptops, servers, mobile devices, and accounts safe. An Institution can also ask OPMs if they have passed industry standard tests for privacy and security. Human error is a common cause for data breaches, so institutions should not take safety measures for granted.

Among the most important questions in assessing a potential OPM contract are the roles of the institution’s faculty and staff. With some OPMs, the company provides little more than a technology platform and some support in instructional design; in others, faculty are much more constrained in their curriculum-development roles and simply teach a course that has effectively been designed by the OPM.⁸ Some OPM contracts have crossed the lines of appropriateness entirely; a whistleblower lawsuit against one OPM, HotChalk, alleged that it had “recruited, hired, employed, supervised, and managed all or substantially all” of the instructors for Concordia University’s online program.⁹

Institutions should be careful to ensure that academic control resides with them. Faculty, admissions officers, and educational providers should not be employees of the OPM itself, but rather employees of the institution. Faculty should play a strong role in helping to develop the curricula for online courses and should have built-in entry points to revise curricula as needed, without undue interference. Admissions decisions should always rest with the college; this is particularly important if the institution opts for a revenue-share agreement in which the OPM is engaged in recruiting activities. This can bring a substantial risk if the OPM engages in aggressive marketing practices and lowered admissions standards, as was seen with Morthland College.¹⁰ The institution must ask these questions and hash out the gray areas of faculty roles—with faculty involvement in the discussions—prior to signing a contract.