School districts across the United States are adopting a new purchasing model called outcomes-based contracting, which conditions a portion of vendor payments on whether students actually use educational services and achieve agreed-upon academic goals. The approach aims to distribute risk between schools and vendors while incentivizing both parties to monitor program effectiveness. This contracting method has been used in the healthcare industry for years and has gained momentum in education since the pandemic, particularly for tutoring and educational technology purchases. A Michigan law now requires schools to use this approach to access a $50 million fund for virtual tutoring, and districts in Florida, Texas, California and over 20 other states are piloting the strategy.
An independent evaluation conducted by WestEd, a nonprofit research organization, examined tutoring and educational technology programs in eight early-adopter districts across California, Florida, Mississippi and Texas between August 2024 and March 2026. The study found that three of the interventions produced measurable academic gains for students. Notably, an artificial intelligence-powered reading software program produced substantial improvements in second-grade reading proficiency, though the same program showed no benefits for older elementary students. However, researchers could only analyze four of ten interventions using rigorous comparison methods, as schools often deviated from program eligibility requirements by enrolling ineligible students.
The evaluation revealed that implementation practices improved under outcomes-based contracts, with schools and vendors meeting regularly to review data, monitoring student attendance at tutoring sessions and tracking progress toward established goals. However, researchers noted a significant limitation: they could not determine whether these improvements resulted from the financial incentives built into the contracts or from the roughly $80,000 in coaching and technical assistance that each district received from the Center for Outcomes Based Contracting. The center is now testing less expensive support models costing under $10,000 per district.
The study found no evidence that outcomes-based contracting reduced costs, with overall spending remaining similar to traditional contracts. Some districts absorbed costs when they failed to meet their responsibilities, such as ensuring student attendance, while some vendors reported financial losses. The evaluation highlighted that outcomes-based contracting may be difficult to implement in resource-constrained districts. Researchers suggested that while contracts can modify how districts monitor and manage purchased programs, determining whether positive academic results stem from the contracts themselves, the intensive coaching provided or both remains unclear.
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