The TEC have recently started doing what they have always said they were going to. Euphemistically entitled “cost recovery”, it means that providers have to pay back the percentage of their contracted outcomes that they didn’t meet.
For a few providers this might be a small amount of money, perhaps a few thousand dollars. And for other providers this could be much larger amounts.
Either the provider has to pay the money directly back to the TEC, or they have it deducted from the next monthly payment that they were expecting.
Larger education providers, depending on how they are structured may be able to simply take the hit, look at their delivery, tighten everything up, and carry on.
However, for smaller providers I’m picking that the results of even small cost recovery from the TEC could be potentially devastating. For example:
- Smaller education providers often run their courses and sometimes their entire operations on or around the financial break even point.
- They usually don’t have large infrastructures
- They are often niche providers who specialise in particular areas of training. This means they may not have much (or any) other training bringing in funding and revenues to act as a buffer in the even of this kind of sanction.
- Smaller providers often operate in areas where their learners are drawn from a limited pool of people (e.g. in a small town or rural area) with all of the issues associated with low levels of literacy and numeracy (e.g. unemployed and unemployable, low self esteem, transitory, not motivated, poor, and with drug and alcohol issues to name a few…).
- The outlook for major changes in the environments for these providers is… well… things will mostly look the same in 12 months at least.
As providers, we’re all aware of the rules. I mean the TEC and NZQA rules. Or at least we should be. This doesn’t mean however, that when sanctions are applied, like the current cost recovery, that it isn’t still a shock. Even with advance warning.
What I think providers, particularly small providers, need to do is to start asking the hard questions. For example:
- How do we reduce our major fixed costs like buildings and salaries?
- How could we restructure our operations to increase our outcomes with our current learners?
- How can we reinvigorate our training so that we attract new learners of a higher quality?
Probably, we should be asking these questions anyway. And of course, answering these questions begs still bigger questions as well:
- Is this work financially sustainable?
- Should we continue doing it?
- What would be the tipping point?