A COLLEGE failed to pay a training company Pounds 3.2 million after a funding council rule change, the High Court heard this week.
The company, Link, is suing North Derbyshire Tertiary College, the principal and two of its staff. Lawyers for Link claim it successfully delivered courses for 7,000 students and was entitled to be paid by the college for its work.
The Further Education Funding Council changed its payment guidelines, so the college was unable to claim for the work delivered by Link under a franchise agreement.
The funding body was criticised by barristers representing a national company which delivers vocational training at North Derbyshire Tertiary College.
Peter Smith QC, for the company, told the High Court in Manchester that the NVQ courses in 700 work placements had been delivered by Link using its supervisors and workplace mentors.
He said: "On any view the performance has been substantially successful. The award of 3,522 NVQs cannot be ignored. It would be very strange if that notwithstanding that Link is not entitled to anything."
Philip Raynor QC, for the college, said: "The FEFC had a funding crisis on its hands which it didn't realise. The alarm bells should have started ringing. "
He added that the college was unable to make a claim against the FEFC and receive payment from it because it changed the rules so that work-based mentoring no longer counted towards the training hours that triggered funding for each student.
Mr Raynor said Link had been paid Pounds 663,000 by the college for the valuable service it had done. The college argued that was all the company was owed.
Mr Smith said the college's supervisory staff could have raised questions about the mentoring system or individual mentors but did not do so.
Under the franchise agreement between Link and the college the company was to receive Pounds 600 for each full-time student.
This case is widely held to have ramifications for the entire FE sector and particularly for those colleges that invested heavily in franchising.
The case will hinge on whether the 450 guided learning hours that each full-time student had to receive to trigger the funding were delivered and whether workplace mentors' contribution can be counted towards those study hours.
Mr Smith said that the college had been facing a budget shortfall on its previous year's performance and regarded the franchising agreement "as a business enterprise enabling it to obtain a large sum of money for very little effort".
He added it was Link's argument that the delivery of NVQs required a different approach from that to be found in a more traditional classroom-based method of delivery. This included work placements and the use of mentors.
He said that the college had been happy with Link's performance and its attitude only changed when the FEFC began to take an interest in the contract. It was at this point that questions were raised and the amount of supervision done by college staff increased greatly.
However, he said, at a quality control meeting Link obtained a rating of three out of five and there was no serious criticism of course delivery.
He added that the action against college principal David Bunch, his assistant, Duncan Heywood, and franchise manager, Keith Pattinson, came in response to the college's claim that the contract with Link was unlawful.
He said the FEFC definition of guided learning hours did not intend "that an organisation would be able to secure funding units by having the guided learning hours delivered by somebody who is not one of their employees".
The case continues and is expected to last seven weeks.