July 25, 2017

Capital Expenditure

Capital Expenditure Control in FE CollegesFE Spends Huge Sums Annually on Capital Projects .. Is it Necessary?

Ask this question of most CEOs and they are surprised at the question. FE needs premises and equipment and that means capital expenditure that is planned and budgeted for well in advance they explain.

But is that true?

Not necessarily is the answer. There are providers out there that have an array of impressive, state of the art equipment and haven’t paid a penny for it. Others don’t own any buildings .. and so don’t have the capital and interest repayments associated this to worry about. In some cases they have cut back on the use of classrooms and gone online (one of my colleagues launched a course that netted $2.5m in its first month and everything is done online).

Some schools have also gone down the same route. Inter High School in Wales has 300 pupils; all are taught online. Inter High School is an exception to the rule at present but we are likely to see more of this in future. Currently over 12,000 young people in the UK are home schooled.

 

How To Control Capital Expenditure in Schools, Colleges and Training Providers

 

Capital Expenditure Tip: Build Smaller Colleges

Of course we will still need buildings in future. Some courses demand a high level of workshop input and classrooms aren’t going to disappear overnight. But will the incredibly expensive buildings we now erect become a thing of the past? If we increase occupancy rates (these are very low in FE) we can mange with smaller buildings and that means less capital expenditure. There are many challenges inherent in increasing occupancy rates and I cover some of these in the posts on Curriculum,  Estates and our booklets on Underfunding.

 

Capital Expenditure Tip: Share Facilities

One way to decrease costs and increase occupancy is to share buildings with other organisations. Some providers have already done this and more I predict will follow in the next few years. In some cases this will be via a conventional lettings contract. In other cases it will be via a joint venture build project.

 

Capital Expenditure Tip: Share Equipment

My first experience of this goes back over 15 years when I worked on a project where a major manufacturer supplied a provider with very expensive pieces of equipment at nil cost  for short periods of time. This is ideal where the equipment is vital but might only be used for a few hours or days each year.

At the same time we worked with a provider that cancelled a £1m project in favour of working closer with local businesses. They agreed to provide commercial facility access instead of the provider building a vanity project.

 

Capital Expenditure Tip: Rethinking Capital Costs

Capital costs are where the biggest savings can be made. It isn’t easy but pays huge dividends. But success is only assured when the unthinkable is approached with an open mind and the desire to do things differently.

 

Action Required

Book an Appointment to Discuss Rethinking Education Expenditure

or

Request our Cutting Capital Expenditure in Education booklet.

 

There’s more reading on FE Underfunding and Rleated Issues at ProviderMasterMind.com