Universities: Paying vendors for student results

School districts are experimenting with a new approach to purchasing educational products and services, called outcomes-based contracting. This method involves paying vendors based on whether students meet agreed-upon academic goals, rather than just for delivering the tools.

The idea is to share risk between schools and vendors, and create incentives for both sides to pay closer attention to whether an intervention is working. Outcomes-based contracts have long been used in the healthcare industry, but have recently spread to education, particularly for tutoring and educational technology.

A new Michigan law requires schools to use this type of contract to tap into a $50 million fund for online or virtual tutoring. School districts in Florida, Texas, California, and more than 20 other states are also experimenting with the approach.

Researchers from WestEd, a San Francisco-based nonprofit research organization, studied tutoring and educational technology programs in eight early-adopter districts in California, Florida, Mississippi, and Texas between August 2024 and March 2026.

Student performance improved in three interventions covered by outcomes-based contracts

The study found that three out of four interventions that could be analyzed using a rigorous approach showed positive academic effects. The fourth intervention, an online tutoring program, was too short to expect measurable gains.

For the other six interventions, researchers couldn’t make clean comparisons between similar students because schools filled empty tutoring seats with higher achieving students who weren’t supposed to get tutoring, or they failed to get eligible students to attend after-school tutoring programs.

One of the more intriguing results involved instructional reading software powered by artificial intelligence. Second graders who used the AI tutor were substantially more likely to reach proficiency on the state’s reading assessment than similar students who did not.

“That’s a really important finding,” said Brittany Miller, executive director of the Center for Outcomes Based Contracting, which commissioned the WestEd study. “Because that tells us what’s working for whom and under what conditions.”

Most schools, Miller said, were “paying for services, and we have no idea whether or not they were working for kids, or even if kids got the services.”

The mixed results that outcomes-based contracts can produce - good, bad or neutral - are equally important, Miller argues, so that schools can more precisely target the right interventions to the right kids.

**Attending to implementation**

WestEd researchers said they observed notable changes in day-to-day implementation. Schools and vendors met regularly to review data, monitored whether students were actually attending tutoring sessions and tracked their progress toward goals. Teachers and school leaders put more energy into making sure students showed up.

But there’s a caveat. The evaluation cannot determine whether those implementation improvements stemmed from the financial incentives built into the contracts or from the extensive support the districts received from the Center for Outcomes Based Contracting.

**Cutting costs**

The center is now experimenting with less expensive models that reduce the assistance to under $10,000 per district. Researchers hope future evaluations will help determine whether districts can achieve similar results with far less outside support - and whether the contracts themselves are driving the improvements.

Researchers also observed unexpected spillover effects. Once districts built data systems to monitor tutoring attendance and student progress for outcomes-based contracts, they began using those same systems to track other interventions that weren’t covered by the contracts.

“Certain interventions are not going to work with or without an outcomes-based contract,” said Sean Tanner, a researcher at WestEd on the evaluation team. “What’s really important for continual improvement is that the districts can learn really rigorously whether something is working.”