A Department for Education and Employment document leaked to The TES acknowledges a catalogue of problems hindering the effectiveness of the Competitiveness Fund.
The fund, launched following the 1994 Competitiveness White Paper, is intended to pump-prime partnerships between employers, education and training providers, training and enterprise councils and the Government in order to help meet local demand from industry for new skills and staff retraining.
However, a DFEE paper setting out arrangements for 1997-98 points to a list of obstacles which emerged in several reports on the progress of the initiative.
Among the key problems is the fact that collaborations between colleges, created in order to boost chances of a successful bid, can be undermined by "continuing rivalry" between the partners.
Employers, too, come in for criticism, amid evidence that some who promise co-funding and support when bids are made never actually come up with the goods.
Such lack of commitment can threaten the success of Competitiveness Fund projects, according to the DFEE paper, which suggests colleges need better guidance on what is expected of employer collaboration and how to weed out uncommitted potential partners.
Many colleges are already sceptical about the fund, which some regard as a mechanism permitting ministerial control of cash which should go directly to the sector.
Cash from the pot has to be matched with equal sums raised by those given the awards, who generally turn to employers for help. In the first year of the fund, Pounds 30 million of private sector and college investment was added to the Government's contribution. This year, Pounds 19 million in state cash has been distributed among almost 200 colleges.
The draft document points out that relationships between TECs and colleges - which make up the majority of successful consortia - need to be clarified to eliminate "tensions within existing positions". Colleges are wary, it notes, because TECs are involved both in college planning and in selecting bids for the fund and so are sometimes perceived as both advocate and judge in the process.
The paper also identifies a range of problems with the Competitiveness Fund bidding process. The priorities used to sort applications are not always closely linked to labour market needs, it says, and calls for greater clarity in explaining the priorities and criteria against which bids will be assessed.
A majority of unsuccessful colleges are often left dissatisfied with the feedback they are given.
Overall, the document concludes, most colleges and employers are "confused by the proliferation of national initiatives", suggesting more coherence is needed across the various cash pots put up for grabs by Government offices.
Colleges contacted by The TES acknowledged the fund provided a chance to raise some new funding through collaborative work, but complained of the number of "bureaucratic hoops" they faced in the bidding process.
One principal admitted some colleges were getting over the hurdles by submitting bids which included "a lot of things which only someone with a very creative mind would think of as match funding from the private sector". Elements such as discounts for bulk ordering of computers were being listed as employer contributions, he said.