Remarkably better housekeeping by college managers, guided by a firm of Nottingham-based consultants, is helping to reinvest more than pound;20 million in Scottish further education. Colleges are saving at least 5 per cent of their budget by comparing spending on detailed items against that of similar-sized institutions.

With funds squeezed beyond breaking point, the savings in the 30 Scottish colleges now taking part in the system of “total benchmarking” are seen as essential to their survival. The line-by-line budget scrutiny involved goes into far greater depth than any previous system and was devised by Ben Johnson-Hill Associates. Over half the colleges in Britain - 240 - have signed up. Only around 100 colleges will not be taking part.

Ben Johnson-Hill began his college operation in Scotland five years ago after working with the hotel sector. An invitation to present his findings from Forth Valley Enterprise led to a pilot project with seven colleges.

“Within a year, it spread like wildfire,” Gordon McVie of Scottish Enterprise says. It led to cost savings, changes in management strategies and a business culture that was previously absent. “The initial reaction from college heads was that they were not hotels, but within a year they had accepted it. Given that funding is always going to be tight they would be mad not to take it on. If you are saving 5 per cent of a pound;10 million budget, that is pound;500,000 that can be redirected to teaching and learning.”

Colleges have saved 5-8 per cent across budgets and many more have saved well over that. One was spending pound;160,000 more on photocopying than the college nearest to its spending level. On another heading, telephone costs ranged from pound;7 to pound;29 per 1,000 student contact hours. Energy costs ranged from pound;300 to more than pound;1,100 per 100 square metres, even allowing for a range of differing buildings and heating systems.

The system of best practice devised by Mr Johnson-Hill allows an easy comparison against others in a confidential service. Mr McVie says: “It looks at strengths and weaknesses against objective measurements, takes a slice through the college and can look at slack in the system. You have got to be smarter in the public sector these days and make much better use of existing resources.”

Mr Johnson-Hill comments: “With a few exceptions, colleges ask us to report annually or biannually because we help them to inform and modify their forward strategies. We help to tell them where they are now, where they need to be and how to get there. We are great enthusiasts and we are on a bit of a crusade. We believe we can do something quite big for the UK.”

His system uses 750 comparative measurements. “We have some clever software but the principle could work without the software. It is really an approach and that is where we are different from other consultants,” Mr Johnson-Hill says.

Falkirk became interested because of Scottish Office cuts in funding and the college’s “huge budget problems”, Maxwell Sharp, the deputy principal, says. “We wanted to know how we compared with the rest of the sector and if costs were out of line.”

Falkirk turned out to be overspending in several key areas. “The college has significantly more staff employed as technicians, including computer staff, than the sector average and its catering gross profit level was deemed below best practice. At the first opportunity the college’s cleaning contract was retendered. This resulted in a saving of about pound;100,000,” Dr Sharp said. “Through voluntary redundancy and natural wastage, the college has systematically reduced the number of technicians employed and now believes it has achieved parity with the FE sector and a commensurate reduction in cost.”

“In relation to catering the level of direct subsidy of about pound;40,000 has, over a period of years, been almost eliminated. In the most recent study, the college was identified as the best practice college.”

Fiona Baikie, principal of Telford College in Edinburgh, says benchmarking has trimmed pound;1 million from its pound;24 million budget. The college has run up a heavy deficit and aims to be back on an even keel this year. Around 75 per cent of costs are staffing and most of the savings are through voluntary redundancy, early retirement, part-time contracts and sabbaticals, Mrs Baikie says.

Benchmarking showed the college to be higher spenders in areas like catering, janitorial services and information technology, although it was a deliberate policy to invest in open learning.

Mrs Baikie says: “From one year to the next we have got average class size up from 14.1 to 14.8 and they reckon we can push that up further. Our average course length was high compared to best practice and we have brought that down. Last year, we were at 38-39 weeks but best practice was in the region of 36-37. It means less face-to-face work with students.”

The cost of running a 40-hour teaching unit in 1995-96 was pound;163.60 but this was down to pound;157.24 in 1996-97.

Mrs Baikie found that the system kept pace with changes in Scottish Office funding methodology and the various weighting factors, including colleges’ commercial activities. The exercise has made Telford “much more sophisticated internally, not as sophisticated as Ben Johnson-Hill, but we are getting there”, she says.

But Bruce Heil, branch secretary of the College Lecturers’ Association at Telford, says: “Benchmarking compares crude efficiency indicators and does not recognise where colleges are inadequately funded.

There is nothing wrong with this sort of exercise but it does not give any real indication of the impact of the financial climate or the impact of the quality of student experience at the college.”

There is, however, no questioning the savings. Figures speak for themselves, as Mr Johnson-Hill might say. Meanwhile, the concept that began with hotels is branching out to schools and universities. It may not be pennies from heaven, but at least Nottingham.