Princeton Review wins big in bid for contracts

The company, formerly known for test prep, now does a $7.6 million annual business in Philadelphia

by Ron Whitehorne

What the New York Yankees are to baseball, Princeton Review is to Philadelphia School District contractors. The New York-based company, known for its SAT preparation program, has scored at least $24.5 million in contracts here since 2002, making it one of the largest contractors for educational services in the District.

This year, with beefed-up summer school and extended-day contracts that are the heart of its business in Philadelphia, the company will realize revenues of over $7.6 million from the School District.

Founded in 1981 by John Katzman, the company launched its K-12 division, which contracts with Philadelphia, in 1999. The company had total revenues of over $130 million last year, but is operating at a loss.

“Strong growth” in the K-12 division is one of the company's bright spots, according to analyst Rich Smith, writing for “The Motley Fool” column in August.

Philadelphia appears to have made a significant contribution to this growth, accounting for almost 20 percent of the K-12 division's reported revenue. The company also has major contracts in New York and Chicago.

The bulk of Princeton Review's contracts with the District (see chart) have been for consumable materials for summer school and for the extended day program (initiated under CEO Paul Vallas), which provides after-school remediation in math and reading.

Princeton Review is also a major subcontractor for SchoolNet, providing benchmark assessments for elementary school grades (see "Mining the data").

In the past year, the company has been hired to run a Saturday program, to provide test preparation for teachers taking the Praxis exam, and to serve as a “transition manager” for four small high schools (see "Transition project").

The growth of the company's business in Philadelphia illustrates how the rules of the contracting process under the School Reform Commission and CEO Paul Vallas have often been informal, falling somewhere between a no-bid process and a formal, competitive one.

The company's most recent $3 million contract authorization for extended-day materials was awarded after a competitive bidding process that attracted seven vendors. The District is consolidating its extended-day services for both reading and math with Princeton Review and has cut the total cost of the program by $2.3 million.