The Learning and Skills Council was accused this week of shirking its moral duty towards further education after it confirmed there would be no compensation beyond a bare minimum for colleges left out of pocket in the capital funding debacle.
Colleges have spent an estimated pound;220 million in total preparing their bids for capital funding, but Geoff Russell, chief executive of the LSC, told college leaders at a special summit on Tuesday that there would be no recompense beyond what the funding body is legally obliged to provide.
Just 13 of the 180 colleges that bid for funds to start building projects this year will get the cash to do so, the LSC announced last week. In effect, the other 167 have spent millions preparing bids, and in many cases their sites, for nothing.
Mark Dawe, principal of Oaklands College in Hertfordshire, said his institution had spent about pound;13m on a bid for pound;100m to consolidate its ageing estate. He said the project had been given approval in principle by the LSC before eventually being turned down.
"I am not happy and my governors are not happy because we feel we were given guarantees by the LSC along the way," he said. "No matter what the technical and legal position is, what the LSC has done is morally wrong. It is taking money away from staff and students."
Mr Dawe has volunteered to lead a new future funding group, which will look at ways of restarting the capital programme by exploring possibilities such as use of private sector finance. The group has its first meeting today and is expected to be composed of 10-20 principals and finance directors across the sector. It has the backing of the LSC and is expected to draw on external business and financial expertise.
West Nottinghamshire College spent Pounds 7m on its bid for a Pounds 96m capital project. Asha Khemka, the principal, said: "It is not right that colleges will not be compensated for the costs they have incurred. Why then did the LSC ask for all the information about costs?"
Martin Doel, chief executive of the Association of Colleges, said: "This is a considerable disappointment for colleges. The LSC has a clear duty to ensure - for the good of the millions of students that colleges serve - that the sector remains financially healthy and stable. As such, it must assist any colleges placed in financial difficulty as a result of preparing, in all good faith and with due diligence, for a building project."
Mr Russell said: "I know that the sector has concerns about sunk costs. The LSC will honour our commitments to colleges in line with the capital handbook. The LSC will support colleges that encounter financial difficulty. This will be in line with the LSC's usual financial intervention policy."
The LSC has agreed to tell each college next week how it scored on the criteria it applied. The following week it will publish a full table of scores for all colleges.