Should FE colleges be allowed to charge their sub-contractors “management fees”?

That is charging external education providers for passing business their way if they are unable to fulfil a contract themselves.

For instance, a business needs to train new staff members in a certain skill, and seeks their local FE college for assistance. Unfortunately the college offers no such course, but knows of another local educator – or sub-contractor – who can do the job.

Here’s the rub though: there are documented cases of colleges charging sub-contractors as much as 50 per cent of the cost of the actual training merely for passing the business their way. For many reasons this is wrong.

The fact that they even charge a “passer’s fee” is, in the Forum’s view at least, a contentious issue. If they can’t provide the training themselves, then should what is essentially a public sector organisation be allowed to indulge in such shameless profiteering at the expense of private sector business? For it is small firms who ultimately pick up the tab as naturally costs are passed on.

If colleges are greedily taking bigger, and bigger slices of the pie then that has to impact on the overall quality of the training.

Colleges would no doubt argue that it’s a justifiable revenue generator given the austere times, when no doubt they are looking at all ways to bridge gaps caused by Government cuts.

Perhaps the real focus therefore, should be on the actual prices the FE colleges are charging – or allowed to charge. With prices as high as 50 per cent, some colleges are, frankly, adopting a blatant rip-off mentality as and when they can.

So what can be done about it?

The Skills Funding Agency does not impose a maximum percentage that the colleges can charge, but suggests it should not exceed 15 per cent. Even that’s generous for merely passing on someone’s details, most right-thinking people surely would agree.

The problem lies with the power of the colleges to simply do as they please. There is nothing to govern their behaviour that allows them to lord it over sub-contractors increasingly desperate for work.

This essentially goes against the fundamental practice of sub-contracting which should be a collaboration of equals – not one bossing the other about thanks to financial clout.

Whilst this practice might happen to a degree in certain private sector industries, there really is no place for it in the public sector.

It’s time that we had guidelines that govern what the colleges can charge.

Quite simply FE colleges should not be making huge profits at the expense of sub-contractors or businesses, the latter of whom are parting with money in good faith so that their staff are trained to the best possible standard.

If colleges are greedily taking bigger, and bigger slices of the pie then that has to impact on the overall quality of the training.

We would advise businesses to clarify with training providers exactly who will be carrying out the training they are paying for.

Most businesses would naturally assume that if they pay a college for training then it will be the college who does the work, not simply passing it to a sub-contractor as a means to make a quick buck via a crude passer’s fee.

Cutting out the middle man usually tends to save money.

It could be that FE colleges are finding themselves short of money in the current climate with government reining in spending, but it is certainly not for them to be milking the system to make a quick buck at the expense of other providers and ultimately the businesses paying for the training.

It’s time that we had guidelines that govern what the colleges can charge.

Robert Downes, policy advisor for Forum of Private Business