The Further Education Funding Council and the Association of Colleges are jointly to review their roles and loosen the bureaucratic ties of the council.
At the same time the AOC is to hammer on the doors of both the Further Education Development Association and the examining bodies in an attempt to widen its power base.
David Melville, chief executive of the FEFC, told delegates at the AOC conference in Cardiff: "The approaches of the AOC and FEFC work in parallel. We have a special position as a non-departmental government body.It is also important that there's a body with the ability to speak publicly on a whole range of issues. And there may be times when that body needs to be critical of the the FEFC."
It was possible for the AOC to take over some of the responsibilities previously considered to belong to the FEFC. Political lobbying was the proper responsibility of the AOC and not the FEFC, he said.
Another issue was self-regulation, an area which covered a wide range of topics, not just inspection. "The AOC might take a role here - you can design guidelines yourselves. It is possible for the council to keep a lighter touch and to put more emphasis on self-regulation, " he said.
In the absence of a single organisation to represent FE, Sir William Stubbs, the former FEFC chief executive, took upon himself the role of speaking on behalf of the sector, both in public and in Whitehall. It is clear that Professor Melville wants the new AOC to reserve that role to itself: a clear role model is the relationship between the higher education funding councils and the Committee of Vice Chancellors and Principals. The AOC will campaign for the sector and the FEFC will concentrate on allocating funds and monitoring the small number of institutions giving cause for concern.
Professor Melville and Roger Ward, chief executive of the AOC, have had informal discussions and a meeting is scheduled for next week. Mr Ward said the move was extremely positive. One of the issues he will raise next week will be the best way to consult the colleges.
"The FEFC consults on many matters. I want to talk about the whole consultation process, about taking it through the AOC. That is the main issue.
"As for self-regulation there are areas where we can improve as a sector. We are often criticised by the private sector who say we do not have the management skills to handle the vast amount of money we do. We have to accept that many of our middle and senior managers do not start out with the view they would be managers handling large budgets. It could be important that the AOC takes a major lead in upskilling the quality of staff. "
He also said he wanted to look at the role of examining boards. "Instead of the sector paying millions of pounds to the examining boards, I want to see if it is feasible to create our own national examining body. It would have to be owned in partnership with the sector. I want to start a consultation process about determining, with the regions, many of which already look at exams and qualifications, whether it is feasible."
He said that at the Cardiff conference there had been a great deal of pressure to have a debate on the AOC's future relationship with FEDA. He had resisted the pressure as he had not yet formally met the senior officials of the organisation.
But he said: "I fear the level of satisfaction is at an all-time low. There is work that FEDA does which we would like to tender for - to assist FEDA in creating a greater sense of value for money for their output.
"Staff development is a major issue. This was in FEDA's original remit. I think the AOC should be the prominent player, and we should be in a position to tender for work.
"Another vital area is curriculum research. Money that the department puts into FEDA should go up for public tender and the AOC should be allowed to bid," he said.
Stephen Crowne, FEDA chief executive, said: "I am not interested in a battle over territory. FEDA was set up after extensive consultation and it has been endorsed by the sector to lead staff development. We have an established reputation in that area. We also provide an extensive range of curriculum resources.
"Understandably the AOC needs to decide what kind of organisation it wants to be. It is important they develop a clear understanding of what they are there for. As soon as they were established we said we would discuss the terms of our collaboration."
He added that FEDA conducted an evaluation of every activity it had undertaken. All its training and consultancy was graded by the customer, using the FEFC scale of 1-5. The proportion of respondents giving top grades of 1 or 2 was more than 80 per cent.
"It is always interesting when others comment on our performance. I am delighted to give opportunities to explain what we do," added Mr Crowne.