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High franchising colleges have an unfair advantage

Further Education Funding Council chief inspector Jim Donaldson has called for a new inquiry into franchising, here Derwentside College's senior management team offers its views on the issue and the FE sector's financial crisis.

We believe that high franchising colleges have been allowed, if not even encouraged, by the funding council to obtain a financial advantage through franchising.

These colleges artificially lowered their average level of funding, allowing them an unfair advantage in the bidding process against colleges that had tried to grow by serving their local communities without franchising.

We believe that at Derwentside College we have shown real enterprise by building high-quality accommodation in partnership with our community and by employing local people directly in the delivery of training and education that meets their needs.

Some franchising colleges have developed so much such business that funding for it is embedded in their care. They attract core funding from the Further Education Funding Council at, on average, #163;17 a unit, give their franchisees #163;5.50 a unit or so, keep the rest and declare an artificially low average level of funding (ALF) to the council while their on site ALF remains high.

In doing so, these colleges discriminate routinely against their off-site students, obtain an unfair competitive advantage against other institutions, and make unpredictable demands on the public purse.

We share the concerns expressed by the Department of Education and Employment concerning additionality and quality assurance. In addition, we find it quite astonishing that these colleges should be praised and rewarded for exceeding targets through these means to such an extent that the public finances are embarrassed.

In particular, we reject three assertions made at a recent principals' conference.

The first is the FEFC's finance director's suggestion that colleges engaging in large-scale franchising are showing innovation and enterprise.

The process he admires amounts, in many cases, to no more than this: colleges either advertise, cold-call or in some way make gain to the training community and the voluntary sector that they are prepared to give them #163;6 per unit in return for the completion of an enrolment form and entry to a Schedule 2 qualification.

The college gets the money from the FEFC and passes it on to the franchisee less a handling charge. We see nothing particularly enterprising or innovative in this.

The second is the proposition that Tesco (or other public limited companies) would not train to national vocational qualification standards without franchising.

The idea that highly profitable companies would not train to such standards without franchisin g income is unsustainable. Indeed, Tesco, to take the specific example, has always been willing to invest in training. This argument may be true of some small and medium-sized enterprises but, if it is, the shifting of the burden of payment for this training from the private to the public sector should be a planned act of policy not the result of a funding methodology accident.

Third, it was said more than once that franchising increased access to education and training. We suggest that, in many cases, it simply changes the funder of it so that, for instance, community support, previously funded by voluntary organisations or local authorities, has now been adopted by the FEFC.

In any event, there is no justification for the assumption, implicitly made by some contributors, that the franchise recruits were all new and would not otherwise receive education and training.

We do not believe that it would be right to treat high franchising colleges on the same basis as colleges that have grown through direct investment. It is easy for a franchisor to manage the problem we now face: contracts for this financial year simply need not be renewed next.

It is much more difficult for a college such as ours that has invested in its community directly. We will be left having to manage in financial circumstances that, as we described above, are far more difficult.

For this reason, we propose that colleges that are significantly over target because of franchising should bear the brunt of the cuts that will have to be made.

We believe there should be an immediate review of the way in which funds are distributed. This review should deal with the issue of unsustainable growth in franchising.

Consideration should be given to the introduction of a different, lower rate of funding for all franchised provision in a college, with colleges being required to bid for such finance against a capped fund.

Whatever else is the case, qualitative criteria must be introduced into the judgments made on a college's application for funding if the unfair advantage at present enjoyed by high franchising colleges is to be ended.

These views are not only our own, but are shared by our corporation.

Derwentside College Senior Management Team

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