Caveat Emptor


The New York Times has a prominent story today about an NEC subsidiary (among other companies) paying a $21 mil settlement after defrauding schools out of funds disbursed through E-Rate, a federal program designed to help schools get on that wonderful Information Superhighway we've been hearing so much about. (Regular H&R readers will scarcely be surprised.) Some companies are charged with unambiguously criminal behavior—bribing officials to circumvent competitive bidding, for example. But the bill of particulars against the NEC subsidiary includes this:

According to the complaint, several computer companies, including the NEC subsidiary, persuaded the district to purchase more equipment than it needed, charging rates that yielded twice their normal profit margins…. They sold the district stuff it didn't need, didn't want or didn't know what to do with.

In context, NEC's behavior looks pretty sleazy. But it sure seems like the real story here is: Feds throw millions of dollars at school administrators who haven't got the first clue what kind of setup they need or how much they ought to be paying for it, and waste a lot of other people's money on overpriced systems several orders of magnitude more powerful than they needed anyway.

NEXT: Power Corrupts, Chapter XXVIII in a Continuing Series

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  1. It grieves me that someone has not been able to use computers better in the education process. Perhaps an annual competition for the best classroom use of a computer?
    When teachers get suspended because students accessed the beheading video, more computers will be turned off to gather dust.

  2. Damn, I wish my HS had “powerful servers”. All we had were classrooms full of Mac Classics & Apple IIs. And that was 1992-1996. Yeah, that really prepared the kids for the future….

  3. “Damn, I wish my HS had “powerful servers”. All we had were classrooms full of Mac Classics & Apple IIs. And that was 1992-1996. Yeah, that really prepared the kids for the future….”

    I graduated HS in ’91. We had Commodores. I distinctly remember my first computer in the classroom experience. Sixth grade music class. Commodore VIC-20 with “music” software. It was my job to put the tapes into the data deck and load the program. I was cool, for I knew that L (shift)O worked just as well as “LOAD”.

    As the symphony of beep and honk that PC speakers could support began to play, Angie Whats-her-name, the dreamiest of the dreamy, came to class a bit late. She was, in her cruel coolness, the first chick in school with parachute pants …

  4. I know where to find my next bargain on a second hand computer or two.

  5. Maddog: {Damn, I wish my HS had “powerful servers”. }

    In 1960 my family moved, and I started eighth grade a little late. The only class available to complete my schedule was “Junior Business Training,” of which one semester was typing.

    The counselor apologized to my parents and me. Obviously, being college bound, I would always have a secretary and thus would never need to know how to type.

    At least the typewriters were electric.

    S.M.: {You mean governments don’t have detailed budgets?}

    I hate to think how deep a particular grant to a particular school district would be buried in the Federal budget.

    {And that school boards, for instance, aren’t subject to city and county budgetary control?}

    Not where I live. Hence the term “Independent School District.” They don’t even have their elections on the same day as the city and the county, and the property taxes supporting them (in Texas) are completely separate, based on a different valuation, and are levied under different rules. They aren’t even paid in the same office.

    {And that school boards can’t be replaced through periodic votes by the stakeholders?}

    True. But the funds misspent here are Federal grant monies, which everyone knows is free money because it doesn’t come out of local taxes or appear on the local budget. So who cares? ;^)

  6. It sure seems like the real story, but it’s not the one that’ll be reported.

  7. All this seems to show, Julian, is that given a budget, a significant percentage of managers can be counted on to make stupid buying decisions and compromise competitive bidding procedures. The public sector has no monopoly on this, regardless of what they told you at Cato.

    Let me see if I can say this without laughing:

    As the 1990s Internet Gold Rush sh-sh– HAHAHAH!

    As the 1990s Internet Gold Rush showed, p-p-private companies n-never oversp– HAHAHAHAHA!

    As the 1990s Internet Gold Rush showed, private companies never overspend on inappropriate or unnecesssary IT.

    There. Just don’t make me try to say it with a straight face.

  8. “The public sector has no monopoly on this, regardless of what they told you at Cato.”

    While this may be true, at least the private sector has a mechanism for reallocating resources when bad investments are made, unlike governmental agencies.

  9. the private sector generally didn’t rob us at gunpoint (though it’s more than happy to line up at the trough). that makes a big difference.

  10. I don’t know, dhex . . . if Al Gore hadn’t spent our money inventing the Internet, none of it would ever have happened!

  11. yeah, you got me there. sigh.

    when will i learn not to doubt THE GORE?

  12. Government agencies don’t have a mechanism for reallocating resources when bad investments are made?

    You mean governments don’t have detailed budgets? And that school boards, for instance, aren’t subject to city and county budgetary control? And that school boards can’t be preplaced through periodic votes by the stakeholders?

    To repeat: the public sector has no monopoly on bad spending decisions or inexpert managers. And companies do not necessarily respond quickly or even rationally to years or even decades of strategic investment missteps. Just ask an Oldsmobile dealer or some Xerox salespeople.


    sorry. but the difference seems pretty fucking obvious.

  14. To s.m. koppelman:

    As has been implied by previous posts (but not explicity stated) in replying to your posts:

    In the private sector, companies that do this eventually go out of business / bankrupt. This is part of the economic cycle that we learn about in Economics 101. There is no bankruptcy / out of business mechanism in the public sector to “punish” those who make these stupid decisions; thus, there is no disincentive for making these stupid decisions.

    In addition, the private sector is about private capital seeking to earn a return on capital by providing customers goods and services they desire. In the public sector, it is about political pull and amorally spending other peoples’ money.

    If you can’t recognize the difference between the two, you really need to review your basic Economics and the messages on this Board for a longer time before posting.

  15. By the way, where’s Jennifer on this post? I enjoy and appreciate hearing about her perspectives on these public education posts (although what she has to say tends to be depressing about the state of the public education system in this country).

  16. Now they’re “investments” rather than taxes.

    Nice doublespeak.

  17. I can always tell when my little brother is in his computer class at school. That’s when it’s before 2:30, his name lights up on AIM & I start getting messages come in from him while I’m at work.

    Instant messaging is one heck of a nice tool, but too much access to too many computer applications -especially internet based, really distracts from a teachers ability to focus those students on learning whatever specific program they’re working on.

    On the flipside, as many of these teachers can barely function themselves, sometimes its nice for a student to have the ability to put a retarded teacher on mute and figure out how to navigate through a program on his or her own -there are usually much better tutorials & help forums online anyways.

    Now, if America had responsible parenting, by & large (which most teachers would say we do not), then we could give the students the option of doing all their coursework online (allowing smarter kids to get ahead much quicker) and the teacher of the class would serve as an aid -helping the student to find the answers they need and assisting the student on an “as-needed” basis. Now, this may not work for all subjects, but would probably work well in history, government, some of the english coursework, and maybe even some parts of math. Here again, there would need to be software controls. A functioning AIM on every desktop would all but slow learning to a stop.

  18. Maybe some of these responsible adults should’ve asked some of the kids what they thought would be the best stuff to get.

  19. What adds injury to insult is that the “e-rate” program that funded this nonsense was birthed from FCC regulation, skirting the constitutional requirement that all taxation be authorized by the Congress, via bills originating in the House. So the bureaucrats stick their hands in our pockets without the approval of our elected officials, and pass the dough out to other levels of government, which wastes it. When accountability is destroyed in this way, is anyone surprised by the result?

    Of course, the Bushies haven’t the guts to end this nonsense:


  20. By the by, I don’t understand why anything more expensive or complex than an Apple II is necessary at all in an elementary school classroom even now. And unless you’re teaching older students how to do things like video editing, I’m at a loss as to why anything more advanced than an old 486 with a network card is necessary.

    I grudgingly accept that middle and high school students should learn how to use a word processor and do research using the web. And high schools should have some reasonably modern (say, post-1995) equipment for vocational IT sorts of things. If it weren’t for those few things, I’d be hard-pressed to see why those Apple IIs wouldn’t be just fine even in high school. Why do you need state-of-the-art anything in order to deliver math and grammar drills and teach programming concepts?

  21. Julian Sanchez says, “Feds throw millions of dollars at school administrators who haven’t got the first clue what kind of setup they need or how much they ought to be paying for it, and waste a lot of other people’s money on overpriced systems several orders of magnitude more powerful than they needed anyway.”

    Maddog says, “Damn, I wish my HS had “powerful servers”. All we had were classrooms full of Mac Classics & Apple IIs. And that was 1992-1996. Yeah, that really prepared the kids for the future….”

    Two comments: 1) Computer gear of the Mac Classic and Apple II level was already more powerful than kids “needed” or teachers knew how to handle in the 1990s. Consider other subjects: would you teach music elementary and high school music students on top-of-the-line Steinways, or would full-feature Casio keyboards be enough? By the time schools got wired for high-speed internet, and software producers became used to distributing their wares on CD-ROM, however, something more powerful and feature-laden was necessary to handle the large volume of audio-visual data and the larger, more complex software programs. The good news was that sufficient gear was at least as inexpensive in the late 90s and early 00s as Apple IIs and Mac Classics were in their day — often even less expensive. Getting the “leading edge, top-of-the-line, latest-and-greatest” computer technologyh has generally (not always, but generally) been a waste of money for schools for the last 25 years.

    2) For $400 SRP, my Tungsten T3 provides more features and processing power than all of the software engineering workstations that Apple ever provided for me when I worked there in the 80s and early 90s. Machines of that class built the modern personal computer industry; now you can carry them around in your pocket and hold them in your hand (if you don’t mind the small screen). How much does a textbook cost and weigh, by comparison? Why is it that school districts are continuing to spend millions on them, as well as millions more on overpriced high tech gear, when they might kill two birds with one stone by replacing most (not all) of their clunky desktop and laptop systems — AND as many textbooks as possible — with, say, Tungsten T3s or something similar?

    Not every kid will go on to be a high-tech guru, but EVERY kid could benefit from having a powerful handheld computer that can also be of great use in real life and in non-tech careers. At very least, even those who may never need to use their handhelds as computers or organizers, would benefit from not having to carry around backpacks full of heavy, printed textbooks.

    As long as I see greedy computer companies continuing to push bloated, overpriced hardware and software on schoolteachers and administrators who — after twenty-plus years — still don’t seem to know any better, I will know that neither the companies nor the schools are serious about helping kids get ahead in a way that also respects the taxpayer. Appropriate technology that can really help kids and improve education is available at a reasonable cost, but the drive for ever newer and more expensive technology to “keep our kids and schools competitive” is the same scam it always has been.

  22. s.m.:

    It was my understanding that it has been all the rage at the elementary level to get students involved in writing. As with the whole-language approach to reading, any emphasis on producing work that adheres to the established rules of spelling and grammar are seen as a threat to the child’s confidence. Sitting down at a Mac or PC and knocking out several paragraphs of a story, diary or an essay produces work for the old portfolio in a way that staring at a blank piece of paper, pencil in hand, somehow does not. That’s how they tell it, anyway. I suppose a sufficiently competent teacher could make sure that the students outline their work and do library research before touching the computer, and build in editing of pieces before submission into the process, but many of these writing curricula are heavy on spontaneity. Too much emphasis on following rules might hurt their pwecious widdle cweativity.

    Some are also worried that children will be so attuned to keyboarding that their handwriting skills won’t be developed. See:

    It would not surprise me if newer interactive software, not to mention web-based applications, demanded more powerful computers. The temptation to gussy up the latest version with animations and graphics is hard to resist, even if they are sometimes the programming equivalent of Detroit tailfins. Version 1.0 was all text, 2.0 made pie-charts, and 3.0 makes 3-D spinning, flaming piecharts! Got to sell those upgrades, right?

    I will agree with you if you think that not every grammar school computer should be internet capable. At the very least, the classroom teacher should be able to block the user from accessing chat, IM, e-mail, the web, or an internal network, depending on what assignment is being worked on. That’s the cyber equivalent of keeping one’s eyes on one’s own paper.


  23. Why does this story remind me of Ross Perot when he was an IBM salesman? Wasn’t there something about a University buying a top of the line model for their email system, a contract that had to be renogotiated down after Ross had left the company?

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