Only one other college, Plymouth, won a similar contract in the same national tendering scheme. Nothing like it had happened before. But as the reality of the enormous task sank in, staff realised what the deal signified. It is not just about competitive tendering; on this contract hangs the hopes of many colleges looking to expand into the Government's own vast civil service and agency training market.
The college also has contracts with the Prison Service; the Employment Service has since looked to contract-out to colleges as well as private providers. But this is the first real market test of whether colleges are up to it.
Sandra Simmonds, contracts training manager for the Benefits Agency, makes it clear that she is watching the college's performance like a hawk. "It is a five-year contract maximum. I have to make the decision after three years whether to extend their life or retender."
After the first year of operations, things look promising and the college appears to have achieved what is probably the main task. "We are trying to foster a learning culture in the agency, to make people see that the need for training and development is not a weakness."
Agency staff themselves agree that this is a difficult hurdle. As in so many areas of work, rapidly changing employment patterns are bringing insecurity and uncertainty over future job prospects.
Monica Box, the college's contracts manager, says things are "shifting from a culture where there has been a job for life, where people would stay for a very long time. Now they need to be trained for change."
College principal Dave Gibson is looking for new ways to bring training into the workplace and that, in turn, has demanded a culture change for the institution. "We bring all sorts of things like open and distance learning schemes. We try to get them to look at the wider things the college has to offer. Stuff is new, off-the-shelf - written for the Benefits Agency." And for this, the college is developing a state-of-the-art print and production shop which can already compete with any medium-sized publishing house.
The agency has always had a lot of skills training, but now can focus on broader issues of management development, information technology, equal opportunities and new developments in customer services training. Dave Gibson has his eyes on a bigger prize which could come with making the staff receptive to the idea of lifetime learning.
Agency employee Rita Taylor says although staff have always been responsive to training, it is now different with more on offer. "Because it is the City College prospectus, you pick it up and look at it more closely. You also hear what other people have done on courses that you might want or need."
Dave Gibson's hopes for wider changes are also becoming reality. One woman is thinking of progressing to an Open University degree course through the college; one man wants broader training in information technology than his job requires. Several staff are looking at management training for the long term.
"Management is management wherever", says another Agency staff member, Ray Rawlinson. "They all have similar sorts of problems." The rest in his training group agree that what they want are "transferable skills" because they may not be in the same job, or even the agency, a few years from now.
The college approach to training is to carry out a "skills audit" - an induction course for staff identifies training needs. As initial training is met, other needs are identified resulting, hopefully, in a constant upgrading of skills. Many staff are already a long way to reaching their goals; it may be that they only need a final polish or short course in one area of IT or management.
The advantage of having a huge college with its lecturers and resources is that staff can achieve a full qualification which confirms their talents and skills when seeking a move or promotion. It may be that a short course is needed to complete a high-level national vocational qualification.
Staff agree that in the perilously uncertain job market, it is a valuable piece of evidence to show a prospective employer. Monica Box says this work is in its early stages. "We are starting to look at the accreditation of prior learning (APL). It gives a strong boost to their confidence if we accredit what they can do before going back to identify and deal with what they need. "
Dave Gibson says that apart from the prospect of attracting staff to other college courses, "we are now deluged with requests for customised training". He also gets wide support from the agency staff who see the college, "the outsiders", having a wider view of their need - one agency employee commented: "It makes you think about your future when you see what is available, particularly in information technology."
Sandra Simmonds must decide whether this all fits in with what the Benefits Agency also needs, and whether the Government training mould is broken, when she reviews the contract two years from now.