Consultation 00/02

Higher education in further education colleges

Draft code of practice for consortia

Executive summary

Purpose

1. This document invites comments on a draft code of practice for consortia entered into by clusters of further education sector colleges (FECs) and higher education institutions (HEIs).

Key points

2. The code of practice provides guidance on the principles that should be reflected in consortia agreements.

3. The consultation seeks comments from colleges and universities on the draft code, and in particular on the six principles, and their application, and on any additional or different principles that should be included.

Action required

4. Please send comments to Christine Fraser at the address given in paragraph 27 by Tuesday 29 February 2000.

Background

5. In November 1998 we issued a consultation paper (HEFCE 98/59 'Funding higher education in further education colleges') seeking views on our proposals for funding higher education (HE) provision in FECs. We also held a series of regional seminars for all HEFCE-funded FECs in October 1998, and a seminar with those HEIs that have most indirectly funded provision. Responses to the consultation and views expressed at the seminars informed two further publications: our guidance to FECs on the options for receiving funding for their HE programmes (HEFCE 99/36), and a draft code of practice on indirectly funded partnerships (HEFCE 99/37). Subsequently, we issued the final version of that code of practice, which takes into account responses to the draft, in November 1999 (HEFCE 99/63).

6. In the guidance to colleges on funding options (HEFCE 99/36), one of the funding routes we proposed was through consortia arrangements. In choosing their options, a number of institutions stated either that they definitely wished to be funded through a consortium, or that they were exploring the possibility of developing a consortium arrangement. Therefore we have decided to issue a draft code of practice for consortia funding arrangements, similar to that we issued for indirectly funded (franchise) partnerships. We hope that the draft code will help to provide a framework for institutions engaged in drawing up consortium agreements.

7. At the same time we are seeking views on the draft code. We want the final version of the code to be relevant to the variety of arrangements that institutions develop, so we especially welcome comments from institutions that are already preparing consortium agreements.

8. In addition, in March 2000 we intend to hold seminars on consortia. These will provide an opportunity for institutions to learn about consortia arrangements that are already well developed and also to contribute to our developing thinking about the nature and operation of consortia.

9. As we identify examples of consortia which appear to us to represent good or interesting practice, we intend to mount them on our web-site, as we have done for examples of partnership agreements for franchising relationships (see http://www.hefce.ac.uk under 'Good Practice'). For this purpose, we would welcome any examples which institutions wish to offer, now or at a later stage.

Principles

10. The draft code attached offers guidance to FECs and HEIs on the principles which they should reflect in consortia agreements, with a view to ensuring that the agreements are well understood, transparent and able to command the confidence of all members of the consortium. These principles provide a framework for promoting good practice in consortium arrangements. The best test of such an arrangement is whether all parties believe that it helps them deliver high quality, accessible and cost-effective HE programmes, taking account of their individual circumstances and needs. Therefore, the principles are not intended to be exhaustive or prescriptive, and consortium members will want to determine the specific arrangements that suit their circumstances.

11. There are good reasons for encouraging consortia arrangements. They can offer advantages to students by providing a wider network of HE experience among the member institutions. They can simplify and allow flexibility in administration, and promote collaboration between HE providers in planning particularly the local and sub-regional pattern of HE. Consortia also fulfil an important role in widening access for students. They can provide good opportunities for student progression, and they help to support diversity in the sector.

12. We seek comments generally on the draft code, and in particular on:

1. Whether the six principles adequately describe the main features that would be common to effective consortia.
2. Whether the principles require any further explanation.
3. Whether there are any other generic characteristics that we should include in the code.

Features of a consortium

13. The response to our previous publications has shown that there remains some uncertainty about the difference between a consortium and a traditional franchise arrangement. The primary difference relates to the respective responsibilities of the institutions concerned. In a franchise partnership, the franchiser which receives HEFCE funds is, so far as we are concerned, fully responsible for the students, and accountable for all aspects of finance, administration and quality relating to those students. That necessarily implies a hierarchical relationship between the franchiser and the franchisee. We see a consortium, by contrast, as being primarily a partnership of peers, in which each institution retains more responsibility for its own students. There will always be a lead institution for the consortium, but that is primarily an administrative device through which funding, student numbers, and lines of financial accountability can flow.

14. This has an important consequence for quality assurance. In a franchise, the HEI that is the franchiser is responsible for quality. The QAA reviews the franchiser's provision, and if weaknesses are identified the franchiser is responsible for putting them right. We would not expect that to be the case in a consortium, because each institution remains responsible for the quality of the experience which it provides for its students. It may well be that a consortium chooses to collaborate in practice in matters relating to quality assurance, and we hope that in many cases the HEI member of a consortium will be able to contribute particularly in that area. However, for all formal purposes, the responsibility and accountability would lie with the individual consortium member. If significant weaknesses are identified during routine QAA reviews, it will be for the relevant university or college to put them right; and any requirement for an action plan or ultimate withdrawal of funding will be pursued with that university or college.

15. Where HE in FECs is to be funded through consortia arrangements, we would normally expect the consortia to be composed of clusters of colleges and HEIs in the same geographical area. We do not rule out consortia being formed on other bases – for example, consortia of specialist institutions in the same subject. FECs and HEIs are, of course, entirely free to form whatever consortia they choose for non-funding purposes. For funding purposes, we would not wish to further complicate the funding and administrative arrangements for HE in FECs, so normally we would not expect to allocate any HEFCE funding in respect of a college which is a member of more than one consortium.

16. We would expect each consortium to involve an HEI, unless it was unable to identify an HEI able and willing to benefit the consortium. The nature of that involvement could vary: the HEI could be the lead institution for the consortium; it could be a member of a consortium in which a college was the lead institution; or it could collaborate in providing, for example, progression routes, credit recognition for students, and quality assurance support. The objective in all cases would be to help link the consortium with the wider HE academic community.

17. The main features of a consortium arrangement are:

1. Each consortium would be composed of a cluster of colleges and generally an HEI.
2. Responsibility for assuring quality and standards remains with the individual institution providing the programme.
3. The student numbers included in the consortium continue to belong to the individual institution, but the consortium contract provides for the redeployment of numbers by agreement between all the consortium members.
4. Each consortium must have a lead institution, which may be an HEI or an FEC.
5. The lead institution must already receive direct funding from the HEFCE.
6. Funding for the consortium flows through the lead institution.
7. The lead institution is responsible for co-ordinating, and accounting for, the allocation and use of funds. This includes data collection, financial memoranda, audit, and information returns.
8. The tolerance band for funding and the control on full-time student numbers apply to the consortium overall, and not to individual members (see the HEFCE guide 'Funding higher education in England' for an explanation of the funding methodology).

Establishing a consortium funding arrangement

18. We will be prepared to allocate HEFCE funds to a consortium only where we are confident that there are robust arrangements for dispensing and accounting for those funds. In all cases there must be a contract between the members of the consortium setting out their respective obligations, responsibilities and understandings. We expect that contract to reflect the principles of the attached code, varying only for good and explained reasons. Beyond that, it is for each consortium to determine its own contract, taking whatever legal advice is necessary. We will not offer legal advice in that respect. We may refuse to fund consortia if the contract appears to us to be unsatisfactory.

19. It may be necessary to distinguish between HEIs and FECs within a consortium in terms of reporting and accountability, because of the different scale of HEFCE-funded programmes involved. Where an HEI is also the lead institution for the consortium, we shall be willing to aggregate the HEFCE-funded programmes of the FEC members with those of the HEI. For data collection purposes, we will want to know the distribution of student places between the consortium members, just as we currently ask for information about the distribution of franchised places. In all other respects we expect to treat the consortium as a single entity for funding purposes.

20. Where an HEI is not the lead institution, the position is different. Under the terms of our financial memorandum, we will still require a direct line of funding accountability to the HEI. We will therefore continue to assign funding and student numbers, and require data and returns, direct from that HEI, and the HEI will be expected to meet individually all the standard requirements of the funding method.

21. Where an HEI is not the lead institution, there may well be cases where the HEI wishes to be a member of the consortium in respect of part, but not all, of its provision. For example, it may wish to be a member in respect of its programmes which overlap in subject and level the programmes offered by the FECs, or which relate directly to them in terms of student progression routes, in order to facilitate collaborative planning and administration of provision. The consortium model can accommodate that, so long as all parties are clear which programmes are within the consortium arrangement and which are outside it. Given their smaller volume of HE provision, normally we would not expect any FECs to divide up their HEFCE-funded programmes in this way. All of their HEFCE-funded programmes should be within the consortium, with the contract providing the mechanism for establishing any limitations on the redeployment of student numbers and funding between consortium members.

Funding implications of consortia

22. FECs and HEIs establishing consortia may wish to transfer existing directly funded programmes so that they become indirectly funded through the lead institution. This may be particularly appropriate for small pockets of HE provision in FECs. In some cases, the HEFCE funding attached to existing provision in FECs may be below the standard level of resource which we have calculated for each institution. Where this falls below the tolerance band of -5 per cent of the standard, we have agreed with the institutions concerned a migration plan which shows how we expect them to move within the tolerance band over a period of four years starting from 1999-2000. In such cases, for colleges whose HE provision does not exceed 200 full-time equivalent (FTE) students, we will accelerate the migration period if the provision becomes indirectly funded though a consortium. This is consistent with our approach for provision indirectly funded through a franchising agreement.

23. We will apply a sliding scale as follows:

1. For colleges with fewer than 100 FTE HE students, we will increase funding to the tolerance band of the standard rate of funding immediately the transfer takes place.
2. For colleges with between 100 and 200 FTE HE students, we will increase funding to the tolerance band of the standard rate of funding over two years from when the transfer takes place, if that is less than the remaining period previously set for migration.

Monitoring

24. We propose to adopt the same monitoring arrangements for consortia as for indirectly funded franchise partnerships. Thus there will be no formal monitoring process. Instead we invite FECs and HEIs to adopt the principles of the code when they are establishing consortia arrangements, and we shall want to see the full underpinning contract before we agree to start funding the consortium. We shall not regulate arrangements beyond that.

25. Consortia funding arrangements are not obligatory, and they work best when all members find them an effective means of securing mutual advantage. Therefore, members should have discretion to decide what suits them best. We hope that the code will help establish common expectations about the characteristics of effective consortia.

26. In the autumn of 2001 we will carry out a survey to find out how effectively the consortium agreements are working, and how far they meet the terms of the code. If the survey provides evidence of concern about the operation of consortia, we will consider at that stage what further steps would be appropriate.

Timetable

27. Please send any comments by Tuesday 29 February 2000 to:

Draft code of practice for consortia

1. Introduction

2. This document is a code of practice for consortia entered into by FE sector colleges (FECs) and higher education institutions (HEIs).
3. In a consortium, the students remain attributed to the individual institutions that are members of the consortium. However, the HEFCE funding flows through a lead institution which then takes responsibility for co-ordinating, and accounting for, the allocation and use of funds. It is for members of the consortium to agree who should lead. The lead institution is not responsible for assuring the quality of the provision within the consortium. Consortium members are each directly responsible for the quality of their HE programmes, and will be reviewed accordingly by the QAA.
4. It is for the member institutions to determine the purposes of the consortium. However, we expect it to be more than merely a funding mechanism, and to develop as a framework within which institutions can collaborate more widely.
5. Funding of consortia is a new feature of the HEFCE funding method. As consortia develop, they will need to ensure propriety, regularity and transparency in accounting for the use of public funds. In this code we have sought to address this requirement and to identify the characteristics of effective consortia. We expect FECs and HEIs to use the code as a basis for their consortia. We expect the consortia to observe the mandatory requirements of the code, summarised in the checklist at the end, and to have regard to all other parts of the code as a condition of funding. We will have regard to the code when deciding whether to fund or continue funding a consortium.

   Six principles of effective consortia

   1. Consortia should have an explicit and agreed purpose. They should be a means of securing one or more objectives both for the FECs and for the HEI, for example on widening access or regional collaboration.

6. The purpose should be defined in relation to all consortium members’ missions and strategic plans.
7. All members should be clear why they have entered into the consortium arrangement.
8. It should be possible for each member to assess whether in practice it is achieving the purpose, which implies that each member should have considered what success criteria or performance indicators it would use.

   2. All members of the consortium should agree between them, and publish, a written statement of expectations, responsibilities and obligations of members individually and collectively.

9. The statement should be a formal written contract. It should be drawn up by means of an agreed and explicit procedure that involves all those in the member institutions who will have a significant part to play in implementing it. The contract should be approved by the senior academic body of the lead institution and signed by the accounting officer (that is, the vice-chancellor or principal of each member of the consortium).
10. It should be:
    1. Comprehensive.
    2. Cross-referenced to other related documents.
    3. Available to staff, students and anyone else with an interest. There may be elements which all members agree should be kept confidential (notably anything which would risk prejudicing commercial or management interests); these should be very much the exception.

    3. The arrangements described in the agreement should: be transparent provide stability for students and institutions specify the arrangements for managing the consortium agreement specify the respective responsibilities of the lead institution and the other members specify the financial basis of the agreement specify the student numbers that each member contributes to the agreement specify the action to be taken if the consortium breaches the funding contract or the overall control on student numbers.

11. The contract should state:
    1. The duration of the agreement. The consortium agreement can be of any duration, though the presumption is that it will be a long-term association between member institutions, covering a range of activities. The duration will depend on the purpose and circumstances.
    2. Action to be taken if any member of the consortium is not meeting the terms of the contract, and procedures for resolving disputes.
    3. How, within individual member institutions, the operation of the agreement will be managed. A central unit in the lead institution to ensure effective and consistent management is likely to be essential.
    4. Where responsibilities are delegated to departments of the lead institution, the contract should state what those responsibilities are, and how the lead institution will monitor its effectiveness in discharging the agreement.
12. In all cases, the contract should explicitly assign to the lead institution a right to withhold funding from any consortium member who defaults on their obligations and responsibilities under the contract. The standard terms of the Financial Memorandum between the HEFCE and the institutions it funds would apply to the grant paid to the lead institution of the consortium. That includes the right of the HEFCE Chief Executive to suspend payment of grant where appropriate to safeguard public funds; the right to attach terms and conditions to the payment of grant after appropriate consultation; and the requirements to provide information (see HEFCE circular 15/97, particularly paragraphs 11,15 and 24).
13. In the circumstances of a consortium, the HEFCE would reserve the right to apply those standard powers under the Financial Memorandum to the grant paid to the lead institution if it considers that there are grounds for concluding that one or more members of the consortium is in default of its obligations or responsibilities, such that public funds are at risk. (This applies whether or not the lead institution is itself one of the members in default.) The consortium contract will then need to ensure that the lead institution can secure an appropriate response on the part of the consortium members concerned.
14. The agreement should cover the following:
    • designated responsibilities
    • finances
    • student numbers.

    Designated responsibilities

15. Each consortium member should be clear about its respective responsibilities. This includes each member's contribution to:
    1. The areas of co-operation covered by the consortium.
    2. The administrative base of the consortium.
16. Each member of the consortium is directly responsible for assuring the quality of its own HE programmes, and will be subject to review by the QAA. The consortium agreement should state what happens if provision at any member institution is judged by the QAA to be of unacceptable quality, particularly in the event of funding being withdrawn. It remains open to consortia to act collaboratively in relation to quality assurance and quality development if they wish. But that does not detract from the formal responsibility of each member for the quality of its own programmes.

    Finances

17. For the duration of the agreement, the HEFCE will fund the student numbers at the standard rate for the relevant price band. Those students may also attract funding premiums (for example, the widening access weightings). The amount of money from within that income stream which the lead institution retains to cover its contribution to the arrangements will differ in each consortium. The HEFCE will not prescribe a set proportion which must apply, but in all cases all the consortium members should be clear:
    1. What is the total HEFCE funding, including premiums, being allocated to the lead institution in respect of those students, and how that has been calculated for each consortium member.
    2. What part of that funding the lead institution will retain.
    3. What that retained funding is intended to pay for, in terms of the lead institution's overheads and services contributed to the consortium, with an indication of how the amount retained has been calculated.
18. It is not feasible to cost every aspect of a consortium agreement. Particularly in a long-term and wide-ranging association between member institutions, there will be intangible and unquantifiable benefits. Nonetheless, all members should be clear about how the total funding available to the consortium is being used. One of the advantages of consortia is to secure economies of scale in undertaking activities which would cost the individual member institution more to do on its own. For example, individual institutions within the consortium would not have to meet all HEFCE administrative requirements in relation to data collection, financial memoranda, audit, and information returns.
19. Agreements could operate by the lead institution transferring to the consortium members a net amount of funds, after deducting the amount it retains for the services it provides. An alternative model for clarifying how the funding flows is a service level agreement, whereby all the allocated funds flow through from the lead institution to each consortium member, which then buys back agreed support services from the lead institution.
20. There should be agreement on:
    1. How and when payments will be made, and the recording of transactions.
    2. What happens to funding when students fail to complete a course.
    3. What happens if there are changes in public funding.
21. Individual colleges within the consortium would not each have to stay within the HEFCE's standard +/-5 per cent tolerance band. The tolerance band would apply to the aggregate of the HE provision offered through the consortium, allowing colleges to balance under- and over-recruitment to individual programmes so as to stay within the tolerance band. There should be agreement between all the consortium members on how they will make adjustments if their aggregate provision falls outside the tolerance band, and how any consequential reductions in HEFCE funding or student numbers will be apportioned between members.

    Student numbers

22. Each consortium member will have its own allocated student numbers, and will have flexibility to transfer them between member institutions. However, the aggregate student numbers of all the consortium members will be used to determine over- or under-recruitment for the purpose of meeting the control on full-time student numbers. One of the advantages of consortia is that they give flexibility to re-deploy numbers within a larger student total, so as to reflect fluctuations in recruitment.
23. The contractual agreement between members of the consortium will need to determine how student numbers will be distributed, and adjusted as necessary over time, between member institutions. The contract should state:
    1. What HEFCE-funded student numbers each member contributes to the consortium.
    2. The arrangements for re-deploying those numbers if one or more members does not recruit or retain its targeted number of students in a given year; and whether that redeployment is temporary or permanent.
    3. What happens if one or more members over-recruits, without offsetting under-recruitment or retention in other members.
    4. If the contract is time-limited, the basis on which numbers will be apportioned between members at the end of the contract, including arrangements for ensuring that existing students are able to complete their courses.
    5. If one or more members of the consortium withdraws unilaterally before any agreed termination date for the whole consortium, there is no presumption that the HEFCE will agree to fund that college separately from the consortium.
24. For the provision covered by the consortium agreement, individual institutions will not be able to bid on their own for additional student numbers from the HEFCE, nor for any other special HEFCE funding programmes which are applicable. Instead, the lead institution will be able to bid on behalf of the consortium. As with direct funding for FECs, consortia will be eligible to bid for those HEFCE special funding programmes which, in broad terms, support developments related to programmes and students, rather than to the whole institution.

    4. The agreement should state how the members of the consortium will work together, and in particular state any arrangements: for students to progress on to higher level provision for staff to work together for students to have access to resources and facilities of the consortium members.

25. The core function of any consortium that the HEFCE funds will be administrative: to enable FE colleges with small volumes of HE provision to co-operate in meeting funding and operational requirements, and to secure the benefits of larger scale in managing recruitment. However, the HEFCE expects that consortia will also serve a wider purpose in the strategic planning and quality development of programmes. An objective of all consortia agreements should be to ensure good quality and high standards of provision for students, and effective partnership between the institutions. There is no single right way of achieving this: it will depend on circumstances. In all cases the arrangements should be published for the students and staff concerned.
26. Consortia arrangements can provide opportunities for members to work together to broaden and enrich the experience of students. These might include providing better student support arrangements, and giving access across the consortium to specified facilities, resources and services.
27. Consortia can also offer improved opportunities for student progression. Consortium members should agree, and students should be told, what the opportunities are, including:
    1. The range of courses they may be able to progress on to at any HEI which is a member of, or associated with, the consortium.
    2. Whether such progression is automatic for college students who reach a specified level of attainment on the course provided at the college, or whether the HEI will use a selection procedure.
    3. The basis for calculating the ‘credit’ the student will get for successful completion of the college-provided programme, in terms of the point of entry to the HEI-provided course.
28. Opportunities for collaboration between staff are another valuable feature of consortia, and may include:
    1. Shared curriculum development and programme review.
    2. Establishing common systems for managing, resourcing and ensuring the quality of the programmes.
    3. Sharing resources, expertise and good practice in the delivery of programmes.
    4. Joint staff training and development.
    5. Encouraging scholarly activity amongst staff delivering the programmes.
    6. HEI staff contributing to the teaching of college provision.
    7. Involving college staff in research and development activity undertaken by HEI staff.

    5. The consortium contract should provide for the contract, and its effectiveness, to be periodically reviewed.

29. The HEFCE expects members of the consortium to monitor its operation and effectiveness. They should hold regular reviews of the contract and performance in carrying it out.
30. The consortium members should agree how often the review will take place, and the procedure for undertaking it, including reporting of results to the governing bodies of member institutions.
31. The consortium members should have in place procedures which will allow them to assess whether and how far:
    1. The needs of the students are being met.
    2. The conditions of the agreement are being met.
    3. Where relevant, students are gaining access to the facilities of member institutions.
    4. Where relevant, students are progressing on to the HEI’s directly provided courses.
32. Any changes in the contract should be made by mutual agreement. Contracts should state the procedures for resolving disputes, by arbitration or other means.
33. Contracts must contain provisions dealing with both the termination of membership of a consortium for one member, or winding up the consortium generally. The provisions should secure the expectations of students enrolled, or who have accepted places, during the existence of the consortium, in terms of progression, recognition of courses, and the like. They should also cover the allocation of student numbers to the departing member or members.

    6. If an institution enters into more than one consortium agreement, it should state its objectives and how it will ensure coherence in that pattern of relationships.

34. Normally we would expect institutions to be members of only one consortium and that this would be formed on a regional basis. Any institution that enters into more than one agreement should be able to:
    1. Demonstrate a coherent approach to its consortia arrangements.
    2. Explain the principles it is applying in choosing partners.
35. No member of a consortium should use any HEFCE funding to engage in 'serial indirect funding', where the lead institution contracts with one institution to deliver provision, but that institution subsequently sub-contracts the work to a second institution.
36. A checklist of the mandatory requirements to cover and the terms to include in the consortium contract is attached. This is intended as an aid to drafting a contract, and not as a replacement for the code.

Checklist for consortium agreements

A consortium agreement must include:

1. A term specifying the members of the consortium, and how institutions may be admitted to membership.
2. A statement of the purposes for which the consortium is established.
3. A statement of the responsibilities of each member in the consortium including the lead institution.
4. A mechanism for making binding decisions on matters connected with the purposes of the consortium.
5. A mechanism for determining and adjusting student numbers and funding between members of the consortium.
6. A mechanism for responding to changes in funding methodologies.
7. A right to withhold funding from any consortium member defaulting on any obligation in the agreement.
8. Provisions for the termination of individual membership and/or the agreement as a whole.
9. A clause dealing with the consequences of termination of individual membership of the consortium, and termination of the consortium itself. This clause must secure the rights of all students enrolled by, or who have accepted places at, institutions in the consortium to complete their planned studies. The clause must also deal with the allocation of individual student numbers to departing institutions, and provide that such allocation shall be subject to approval by the HEFCE.
10. Mechanisms for member institutions to assess the effectiveness of the consortium in meeting their individual objectives, and to review the working agreement.
11. A procedure for general amendments to the agreement.
12. Provisions regulating the rights of members to join other consortia.
13. A dispute resolution procedure, possibly including both less formal procedures and a formal clause providing for binding arbitration in place of court action.
14. Clauses dealing with the interpretation of the agreement, force majeure, the service of notices, and so on.