The collapse of Sparsholt College's contract for more than 1,000 apprentices in sport should bring back some bad memories in FE (see page 1).
Franchising out courses to private businesses and community organisations became a gold rush for many colleges in the 1990s. It allowed them to expand rapidly, skimming off a portion of the funding to bolster their own balance sheets.
But for some, it ended in disaster. At Bilston College in Wolverhampton, a dispute over the decision by the then Further Education Funding Council to cut funding to franchised courses led to the fastest-growing college in the country coming under intense scrutiny by auditors.
Eventually, the FEFC decided to claw back money for courses it said were never eligible for funding, such as line dancing and judo. The clawback would have left the college with a pound;9 million deficit, which it estimated would have taken 18 years to pay off.
The result is that Bilston College is no more: the FEFC ended up closing it down, demolishing most of its buildings and transferring its remaining assets to the newly created City of Wolverhampton College. And the damage to the reputation of FE was lasting.
Today, colleges prefer the term "associates" rather than franchises for the companies which they buy training from after drawing funding from the public purse.
But once again, the growth of sub-contracting is being encouraged by the funding body, this time so that it can avoid the cost of dealing with numerous small providers. It is also attractive to colleges which have to make rapid changes to the types of student they recruit to meet new Government priorities.
Governors at Sparsholt made it clear that the latter was a factor in their decision to work with Luis Michael Training. They were anticipating investment shifting from Labour's flagship Train to Gain programme to apprenticeships, and a deal with an apprenticeship provider would help position them for the future.
Where the blame lies for the collapse of the Sparsholt deal looks like it will be a matter for the courts. But given the importance of sub- contracting it is worth considering the lessons of the past.
The Skills Funding Agency is trying to tread a fine line between its aim of giving colleges greater independence and its responsibilities as a regulator. But it will not be able to wash its hands of these deals. No doubt the SFA is mindful of its predecessor's troubles - after drawing up a model contract for colleges, the FEFC found itself drawn into legal disputes where franchising had gone bad.
If colleges end up losing substantial sums of money in failed sub- contracting deals, however, they may be plunged into a financial crisis. As a funding body which wants to work to market principles, this may be acceptable. But as a regulator, it cannot afford to stand by.
The franchising scandal was not just the end for Bilston College: it finished off the FEFC as well, which was replaced by the Learning and Skills Council. That in turn was abolished following the capital funding crisis. No doubt the SFA will want to make sure that it does not lose its grip on sub-contracting, and that it does not become its epitaph.