Spending on college bureaucracy could be cut by up to pound;390 million a year if managements abandoned competition for collaboration, leading accountants and consultants working in education claimed this week.

Up to 40 per cent of cash spent on the range of management services could be saved, without principals losing their autonomy, if colleges combined into federations such as those launched recently in Birmingham, Sussex and Manchester.

Consultants KPMG said areas where most could be saved included catering, cleaning and IT support. Martin Davies, national education services director, said: “Colleges working together in federations have the potential to save between 25 and 40 per cent of their facilities management costs.

“When one talks about facilities management, all colleges immediately think of catering, cleaning and grounds management, but collaboration could be taken much further than that.” Colleges could work together on everything from learning support to reprographics and multimedia resource centres, or share library expertise, he said.

Colleges receive pound;3.9 billion each year, pound;3bn of it through the Further Education Funding Council. Almost pound;500m goes on administration, pound;80m on catering and residences and pound;400m on routine maintenance. Federations of six to eight colleges would allow more funds to be channelled into teaching.

Mr Davies suggested that regulations under the 1992 Further and Higher Education Act should be changed to make the formation of such federations easier.

Dave Nolan, partner at accountants Bentley Jennison said: “Since incorporation colleges provide more value for money but there are too many colleges in particular areas.” Federation would prevent duplication of courses, he said.

The FEFC said colleges were far more efficient than at incorporation. The cost of a full-time student had fallen since 1993 from pound;3,210 to pound;2,528.

However, Tony Travers, director of the London Group at the London School of Economics, said: “It is easy to show how spending per student has fallen sufficiently but it is difficult to say whether this means it has become efficient.”