Shepherd, J. (2011) Private university BPP launches bid to run 10 publicly funded counterparts Guardian Newspaper, June 21

BPP, a subsidiary of the Apollo Group, which owns the University of Phoenix, is negotiating with 10 British universities to manage the administrative side of their operations. BPP is the first private university to be accredited in Britain for 30 years. The aim is to cut costs on the administrative side to put more into the academic side. Thus BPP is now showing a two-pronged strategy: partnership with public funded universities; and also direct competition as a university on its own.

It is able to do this because of the government moving to the full cost of teaching being covered by tuition fees. The Conservative-Lib Dem coalition was hoping that this would lead to differential fees, with the elite universities charging the maximum (£9,000 per year – $14,500) with the others charging less. However, this has not happened with nearly all the universities charging the maximum. The government is therefore encouraging the private sector to come in to reduce costs (the government loans students money then claws it back when students are earning, and with higher tuition fees, this is costing the government more than it anticipated.).


This seems to me to be the worst kind of politics or policy for higher education. Certainly the law of unintended consequences is working well here, as with previous privatizations in Britain. It looks like that the changes brought in by the government are actually costing them much more in the short run than intended, with increased tuition fees and hence loans to students putting even more pressure on a government with huge debts. Opening up  universities and colleges to the private sector to drive down costs is likely to lead to further unintended and not always desirable consequences.

However, here’s a different question. Is it such a bad idea to privatize university administration, while leaving the academics to run the academic side? After all, many ancillary services, such as food services and the book store, are already privatized. I know many academics whose gut reaction might be delight at the administration getting its come-uppance.

The problem though is that administration costs are mainly driven by academic decisions. For instance, it is academics who demand transcripts, require students to provide lots of data about themselves, want multiple screens in classrooms, or bigger and better lecture theatres. In particular, it is academics who often determine the IT costs by their decisions about what technologies to use (or not use). Or is it? Would we spend less on IT if it was driven more by cost than academic demands? In any case it will be interesting to see what happens when academics in Britain are told to change practices because they are too costly or inefficient on the administrative side. No gain without pain.

What do you think of privatizing the administration? Good or bad?

In the meantime, the Apollo Group shares are looking better by the day (shares of Apollo Group (NASDAQ:APOLAnalyst Report) have  opened at $41.51 today. In the past 52 weeks, shares of Apollo Group have traded between a low of $33.75 and a high of $53.61. But with the British government on their side who knows where the share price could end?



  1. Hi Tony – I’m afraid my first reaction to privatizing higher ed administration had something to do with rearranging deck chairs and sinking ships. But you raise an important question. There is a world of real pain experienced during change that affects lots of people and their livelihoods.

    My second reaction was a little more measured, but maybe only a bit more hopeful. To me anyway this seems like a time when rounds of experimentation-failure-learning are essential when creeping toward an unknown tomorrow. Kind of like evolutionary change adapted by experimentation to new circumstances. When viewed that way, privatizing administration is just another effort to find something that works. I don’t think anyone knows what that will be. I guess my overall reaction then is one of softness … unlikely to work but worth a try if only for what we learn from it.

    You might be interested in a recent article by Clayton Christensen that’s pretty well buried in an alumni magazine. It’s called Colleges in Crisis. It’s basically the disruption argument again, but there’s a nice sidebar that speculates about the possibilities of disruption at the Harvard Business School.

    Thanks for another good post. … Gary


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