The learning and Skills Improvement Service (LSIS) has set itself the aim of giving 80 per cent of its pound;97 million budget next year direct to colleges and training providers.
Its move pre-empts the Government's response to recommendations from the UK Commission for Employment and Skills (UKCES) that further education's quality agencies should be phased out over three years.
Dr David Collins, chief executive of LSIS since August, admitted that the organisation had to provide better value for money.
"I'm expecting us to be able to do more next year for the sector with pound;50 million less," he said.
The UKCES had called for the skills improvement service to be abolished, along with other bodies such as the technology agency Becta, Lifelong Learning UK's quality role and Standards Verification UK in order to divert cash direct to providers.
But it said that for the next three years, FE was still likely to need one agency in charge of quality. LSIS hopes it can put together a strong bid to win that role, possibly for longer than three years.
Dr Collins said: "The danger, of course, is that if the money were to be taken away from LSIS, there is no guarantee that it would stay in the sector."
He wants to offer institutions LSIS accounts from next year with money to spend on programmes and services, which could later be expanded to all LSIS-approved programmes. The sums of money are small, however: providers might expect pound;500 to pound;5,000, depending on their size. Of more value is the opportunity for colleges and training providers to win work from LSIS.
Instead of commissioning huge national contracts, LSIS will break its work down into smaller regional programmes that can more easily be delivered by expert providers.
The Improvement Adviser Service, currently run at a cost of pound;7.8 million by the consultancy Tribal, will instead involve any provider with an outstanding rating putting themselves forward as a mentor for failing institutions and being paid for the work.
Dr Collins said some money would have to be kept for outside expertise in areas where FE was weak. Even so, he estimates his proposed 8020 split is a complete reversal of the balance of spending within FE and to outside consultants.
Critics of LSIS had questioned the awarding of contracts to non- specialists in education such as management consultants KPMG or Deloitte, which then sometimes had to sub-contract.
Dr Collins said of KPMG's contract for the World Class Skills programme: "It's a good programme, but is it worth pound;21 million? All these contracts come to an end next March."
He conceded that much of his efforts so far have gone into reorganising LSIS as a unified whole, a process that had also allowed him to save pound;1.5 million in administration costs, with a further pound;2 million planned next year.
Staff said that the first year of merger had been badly damaged by internal, factional quarrels. One member of staff characterised the merger as "two tribes go to war".
Another compared staff from the former Quality Improvement Agency to "battery hens", churning out contracts, while former Centre for Excellence in Leadership staff roamed "free range", sometimes developing good programmes, sometimes offering poor value for money.
LSIS will also be preparing a suite of short courses for FE middle managers for September next year. Dr Collins likened these to the provision at Coombe Lodge - the former residential college training facility in Somerset - without the visits to the local pub.
The FE principals' qualification is also to face a revamp. It will focus more on practical problem-solving than the sometimes controversial abstract musings on leadership.