1.15 As regards financial objectives the College has delivered its planned programme of training within its budget and has met its targets for delivering annual efficiency savings. Its forecast expenditure for 2001-02 is £35 million2. The College is concerned that it will be increasingly difficult for it to meet planned budget and efficiency savings targets in the future. Over 90 per cent of its costs relate to its staff and to payments to the PFI contractor, Defence Management. It considers that there is little scope for reductions in these since, for example, the fees payable to Defence Management will be increased annually in line with formulae set down in the PFI contract to cover movements in prices and earnings.
1.16 The cost to the Department of each course comprises the payments incurred under the PFI contract and the College's own costs, for example the cost of the military teaching staff, which it fully analyses. The College therefore knows the total costs of each course. In the case of the PFI payments, the cost to the Department of each individual course does not reflect the actual resources consumed by Defence Management in providing support to that course. This is because Defence Management charges the same flat-rate fee for each student day regardless of the course in question. In contrast, its actual costs on each course can vary, in the case of academic support significantly since the level of this support is higher on some courses than on others. The College has sought information from Defence Management on its actual costs for each course. Although such information would not alter what the Department actually pays, it would assist management decision-making. For example, the College intends to identify financial performance indicators, such as the cost per student, for each course and thus be better able to identify the cost of the changes arising from the Defence Training Review (paragraph 1.10). This information will also enable the College's customers to take more informed decisions when setting objectives for courses and when assessing an acceptable balance between military and academic content.
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2 This excludes VAT and is net of forecast receipts of £3 million.