HEFCE Report 00/16

Costs of higher education provision in further education colleges

Report to the HEFCE by KPMG

This version of the document contains the Preface, Contents and Executive Summary only. The full Report is available in both Word (95Kb) and RTF (113Kb) formats.

Preface by the HEFCE

This study was commissioned as a follow-up to HEFCE report 98/57 'Study of the relative costs of HE provision in FE colleges and HE institutions'. This study investigates the relative costs of HNC and HND level provision in FE colleges, and includes colleges that were not previously funded by the HEFCE. The purpose was to inform funding decisions about HNC qualifications in general, and Engineering and Science subjects in particular, where the earlier report was inconclusive. The findings contributed to the HEFCE's decision that FECs would in general be funded for all provision at a level no greater than price group C, and that in order to qualify for group B level funding, colleges would be required to submit evidence to a panel of experts.

Contents

1. Executive summary

This report summarises the findings of a study undertaken by KPMG into the costs of Higher National Certificate (HNC) provision in further education (FE) colleges. The report was prepared in the context of the transfer of funding responsibility for HNC provision in FE colleges from the Further Education Funding Council (FEFC) to the Higher Education Funding Council for England (HEFCE). This study followed on from an earlier one on the comparative costs of Higher National Diplomas (HNDs) in large mixed economy FE colleges and in higher education institutions. The present study concentrated on the same three programme areas as the earlier study: Engineering, Business Studies and Art & Design.

At the outset the study identified a wide range of practice in the FE sector in the duration and mode of attendance of HNC courses. The shift away from the classical two year part-time course towards other models had been made by colleges in response to market demands and the need to reduce costs.

Activity and financial data were obtained from 12 FE colleges, which undertook HNC provision in the chosen programme areas. Using a specially developed version of the costing model used in the earlier study, the unit costs of HNC course provision in the three programme areas were calculated. The principal findings of this exercise were as follows:

• for all three HNC programme areas there are considerable variations in the cost per student and these variations cannot be explained by variation in class size;
• for all three programme areas there is a small number of outliers, and thus the median cost per student might be regarded as a better indicator than the arithmetic mean. Particularly in relation to the Business Studies and Art & Design programme areas, the median and the mean are reasonably proximate;
• with regard to the Engineering programme the wide variation in the results might be explained, to some extent, by the diversity of course provision;
• the unit costs per student of HNC courses are, as would be expected, substantially less than those of the equivalent HND courses as measured by the earlier study. In all three programme areas, the HNC courses show as wide a range of unit costs per student as did the HNDs in the earlier study;
• in the case of Business Studies and Art & Design, the relationship of mean costs per student of HNC and HND programmes, is broadly in alignment with the relative credit rating of the two programmes. This appears not to be the case in Engineering;
• limited sensitivity analysis suggested that there could be some degree of distortion, from the limitations in the data available, in the calculated cost per student.

The traditional HNC Engineering course usually involved students undertaking a certain amount of project work in their workplace. However, as noted above, many colleges have moved away from this model and thus workplace based projects may no longer be feasible in all cases. The study examined this issue and drew two broad conclusions:

• where there were workplace based projects there was no major additional cost burden associated with staff supervision of such projects;
• in the absence of workplace based projects, colleges had to make alternative provision for such project work. However, this did not involve additional provision since the required facilities were already in place for other courses.