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On the verge of signing a contract to help design assessments for the common standards, ACT Inc. has withdrawn from the project amid conflict-of-interest questions sparked by its own development of a similar suite of tests.

Even though it involves only a small subcontract, the move by the Iowa-based test-maker, and the questions from the state assessment consortium that propelled it, have set off ripples of reaction and reflection in the insular educational testing industry. That industry is reshaping itself in response to the unprecedented project by two big groups of states to create new tests for the , using $360 million in federal Race to the Top money.

The discussions offer a glimpse into some of the thorny issues that crop up as the two gargantuan assessment projects move forward. How does each group manage intellectual-property concerns and potentially competing interests when 20-plus states and hundreds of players are involved? Even as those questions elude easy answers, the stakes are bigger than ever.

鈥淭his work has really changed the game,鈥� said Douglas J. McRae, who spent 40 years in the testing industry before retiring, including overseeing K-12 test development at the McGraw Hill Cos. in the 1990s. 鈥淚n the past, when vendors have done [test] work for individual states, those products haven鈥檛 generally been marketable to other states. Now there is a bigger market, with much more money hanging on it.鈥�

Success and Failure

The contract from which withdrew earlier this month was the biggest that the Partnership for Assessment of Readiness for Colleges and Careers, or , has awarded so far in designing tests for its 24 member states. and the won contracts totaling $23 million to design the first 18,000 items in the consortium鈥檚 test bank.

Those two prime contractors brought 10 subcontractors aboard to do pieces of the work; Pearson chose ACT to review test items, a subcontract valued at $113,000.

As the contracts were being finalized in late June, PARCC officials heard rumors that one or more of the vendors planned to announce a suite of computer-based formative and summative tests spanning grades 3-11 and designed to measure college and career readiness鈥攕imilar to what PARCC planned.

The nine state schools chiefs on PARCC鈥檚 executive committee sent a letter July 2 to all the vendors, saying that the success of such a suite of tests 鈥渄epends on or benefits from the failure鈥� of PARCC and the other testing group, the , so it creates 鈥渁n inevitable conflict between the firm鈥檚 dedication to PARCC鈥� and to its own project.

The chiefs asked each vendor to respond by detailing any plans to make such tests, describing how the two projects could be kept sufficiently separate, and assuring them that the vendor鈥檚 鈥渢op personnel鈥� would be devoted to the PARCC work, to avoid 鈥渦ndermining PARCC鈥檚 objectives.鈥�

In a July 6 response, Jon L. Erickson, the president of ACT鈥檚 education division, said its forthcoming , announced publicly only four days earlier, was a 鈥渘atural evolution鈥� of its college and career testing that had been in the planning stages for several years. It was 鈥渘ot created as a result of, nor designed to directly compete against鈥� the PARCC or SBAC systems, Mr. Erickson wrote.

The ACT system, which employs existing company products such as the widely used EXPLORE, PLAN, and ACT tests, as anchors and expands into earlier grades, will include science as well as literacy and math assessments and is expected to gauge a range of student behaviors seen as pivotal to future success, such as career goals.

Because of its long history contracting with multiple states simultaneously, Mr. Erickson鈥檚 letter said, ACT has established strict procedures that prevent any conflicts of interest and protect its clients鈥� intellectual property. ACT鈥檚 subcontract, Mr. Erickson pointed out, involved item review, not item development. But 鈥済iven the spirit鈥� of PARCC鈥檚 letter, he said, ACT consulted with Pearson and decided to withdraw to 鈥渁void any perceived conflict of interest or action detrimental to PARCC or its member states.鈥�

Pearson, in a July 4 letter, detailed the state assessment contracts that 鈥渃ould be considered, by some, as alternatives to, or indirectly 鈥榗ompeting鈥� with PARCC,鈥� such as its tests for grades 3-8 in New York and Illinois. The company also described its extensive work for other entities, including contracted and proposed work for Smarter Balanced and online test delivery, scoring, and reporting for the new ACT assessments that had prompted concerns within PARCC.

None of those projects interferes with its item-development work for PARCC, Douglas G. Kubach, Pearson鈥檚 president and chief executive officer, said in the letter, since the publishing giant is accustomed to 鈥渕anaging multiple large-scale assessment programs and successfully protecting our customers鈥� confidentiality and intellectual property.鈥� Out of an 鈥渁bundance of caution,鈥� however, and to avoid 鈥渆ven the appearance of a conflict of interest,鈥� Pearson had decided to release ACT from its role as a subcontractor, Mr. Kubach wrote.

Michael Cohen, the president of Achieve, a Washington-based group that is PARCC鈥檚 project manager, said that with the exception of ACT鈥檚 work, nothing in the vendors鈥� letters 鈥渞ose to the level of concern that shakes our confidence鈥� that those companies would 鈥済ive us their best effort.鈥�

He said the contracts did not include clauses barring vendors from doing competing work. And given the nature of the testing business, PARCC accepted that such companies often work simultaneously as partners with鈥攁nd competitors to鈥攐ne another, he said. But having one of its own vendors engage in a high-profile effort to make a similar suite of tests that 鈥渟eemed to depend on the failure of the consortia鈥� elicited concern in the consortium, he said.

Competition Wary

ACT officials don鈥檛 see it that way.

鈥淐ertainly that鈥檚 not our message, and that鈥檚 not how we would ever talk about anything we do,鈥� Mr. Erickson said in an interview. 鈥淭his was a logical extension of ACT鈥檚 history. I would hope that people wouldn鈥檛 feel threatened but would feel that innovation and free enterprise would keep the common standards alive and active.鈥� He noted that ACT鈥檚 system is modular, so states can choose only the pieces that suit their needs.

In its letter to all the contractors and subcontractors, PARCC鈥檚 executive committee expressed concern about 鈥渃ritical remarks鈥� rumored to have been made by one or more vendors about the consortium鈥檚 work, which could promote a vendor鈥檚 own tests at the expense of PARCC鈥檚.

Responding by letter, all the vendors denied any such comments, and 91制片厂视频 Week was unable to confirm that any were made. But one state assessment director said he attended a meeting at which ACT presenters said their new system would cost less and be ready a year earlier than PARCC鈥檚 anticipated 2014-15 completion. Another told 91制片厂视频 Week that several colleagues had shared similar stories.

In a measure of the sensitivity of the topic, few people in state assessment divisions or private testing companies were willing to discuss the matter unless their identities were withheld, to avoid causing rifts with vendors or customers.

鈥淎CT is marketing its product aggressively,鈥� said one assessment chief from a PARCC state who attended an ACT meeting about its new tests. 鈥淗ow would you feel about giving money to someone who could turn around and use products you pay for to take states away from the consortium?鈥�

Maintaining robust consortium size must be a key concern for the consortia after 2014-15, many assessment sources said. Both consortia currently have task forces looking into future sustainability.

Because federal funding covers only test development, the two groups of states will have to find other ways of supporting themselves to procure services like new item development, test administration, and score reporting in the future. Assuming that such a model depends heavily on states鈥� own contributions to those services, membership size is crucial.

鈥淭he threat is that if a system like ACT鈥檚 is attractive and peels states off the consortia, the consortia get smaller and, at some point, are no longer sustainable financially,鈥� said one senior assessment official who closely follows the work of both consortia. 鈥淭hat puts a question mark over all of their long-term goals.鈥�

Others in the assessment community said that competition, while valuable for offering states additional options, also runs the risk of eliminating a chance to compare student achievement across all states. The consortia are aiming for 鈥渃ross-consortium comparability,鈥� meaning that test results from any one state could be compared with those from any other.

鈥淕etting comparability within a consortium is going to be hard enough, and getting it across consortia will be a bear,鈥� said Scott Marion, the associate director of the National Center for the Improvement of 91制片厂视频al Assessment in Dover, N.H., which works with both consortia鈥檚 technical-advisory committees. 鈥淚f states start leaving the consortia, and they鈥檙e using other tests, you鈥檙e killing any hopes of comparability.鈥�

The timing of ACT鈥檚 new product line is particularly sensitive, some said.

鈥淎CT is making a genius marketing pitch at exactly the right time, because it hits [schools] chiefs at a time that they鈥檙e uncomfortable,鈥� said one assessment director from a state in the Smarter Balanced consortium. 鈥淭hey鈥檙e waiting to see how [the assessments] will come out, and they鈥檙e worried about the cost. And along comes this company with a known product line saying they鈥檒l build out a system around those products that will be ready sooner and cost less.鈥�

The newness of the consortia adds to the picture, said Pat Roschewski, who recently retired as the assessment chief in Nebraska, which does not belong to either consortium. 鈥淚 have no doubt the consortia will build good products,鈥� she said. 鈥淭hey have good heads working on this. But the fact is, they鈥檙e not built yet. They have yet to prove themselves. It can feel easier to just go for a known quantity.鈥�

Kentucky is a state that is weighing its options. It belongs to the PARCC consortium. But Commissioner Terry Holliday said the state hasn鈥檛 decided whether it will keep its current system, which uses new tests designed by Pearson in grades 3-8 and ACT鈥檚 assessments in high school; adopt some or all of PARCC鈥檚; or use some or all of the new system ACT presented to Mr. Holliday in June. He said he views those new tests as 鈥渒ind of an extension of what we鈥檙e already doing here.鈥�

鈥淚 have confidence in PARCC,鈥� he said. 鈥淏ut it鈥檚 a legitimate question for chiefs: Can they deliver, and at a cost we can afford? And via a technology we can handle? At the end of the day, somebody has to show me they鈥檝e got a better product at the same price or less. Otherwise, we鈥檒l just keep what we鈥檝e got now.鈥�

Some noted that other testing companies are already offering assessments 鈥渁ligned to the common core鈥� and predicted more will follow with comprehensive products like those being built by the two state consortia.

鈥淚f one does it, they鈥檒l all do it,鈥� said Mr. Marion. 鈥淗ow long are the other big ones going to sit on the sidelines?鈥�