Opinion: Are we looking at subcontracting from the wrong end?

21st January 2016 at 15:00

The idea that colleges “make tens of millions” from subcontracting is wrong and unfair.

On the contrary, colleges should be praised for generally treating subcontractors well, even generously, and doing so in the spirit of genuine partnership. We don’t retain 20 per cent of the money – we decide to give 80 per cent of our money to our partners to help us deliver our strategic plans.

Subcontracted provision is college provision. The College takes significant financial and reputational risk. If we exceed our funding allocations we may not be paid at all, yet are likely to still pay the subcontractor.

For example, at the margin we might receive 0 per cent of the funding generated and pay out 80 per cent. Hardly the unacceptable face of capitalism.

If you look at our in-house provision and regard it as self-contracting, the sector’s accounts suggest only about 60 per cent of funding goes to our in-house delivery teams – far less generous than payments to subcontractors, despite our built-in competitive cost disadvantages like public sector pensions.

Colleges operate on tiny financial margins, with almost no exception. If we are raking in millions from subcontracting then those who do the most must be spending it somewhere. You would expect those colleges to present as having much higher average salaries, or far more staff, or far less efficient in-house provision than others.

Looking at recent accounts, there doesn’t seem to be much evidence of that. Indeed, I suspect that if you were able to compile a Rich List for the FE Sector, it would be the leaders of many of the biggest subcontractors who would feature strongly.

I have no problem at all with hard-working, entrepreneurial people running high-quality provision doing well for themselves, but it hardly suggests subcontractors are being exploited. Most of the (admittedly rare) subcontracting scandals in recent years have been about people making excessive gains at the expense of the taxpayer and students, rather than about colleges being cut-throat. 

If colleges take risk there should be some element of reward. If we oversee the quality of provision, are subject to Ofsted, do it as part of a well-considered curriculum strategy, process the data and make all the data returns, and manage the funding arrangements and the money, these things have a cost.

The overall margins achieved by colleges would indicate we are passing on all the funding we don’t use rather than playing hardball and maximising our surplus. Indeed, if our own delivery teams are delivering for a much lower proportion of the funding isn’t there a case for encouraging us to decrease the proportion given to subcontractors to the minimum consistent with high quality so that as much as possible is retained by those social assets and public charities we call colleges?      

Ian Pryce is principal and chief executive of Bedford College. He tweets at @ipryce

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