Between Public and Private

Yesterday saw BPP University College announced their 2012 fees are set at £5,000. This could be a game changer. It is the first announcement from the David Willetts-endorsed ‘new wave’ of private providers, putting BPP under a considerable amount of scrutiny.
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Yesterday saw BPP University College announced their 2012 fees are set at £5,000. This could be a game changer. It is the first announcement from the David Willetts-endorsed ‘new wave’ of private providers, putting BPP under a considerable amount of scrutiny.

From my own experience of working in the private HE sector, even the idea that ‘university’ title could possibly be granted to private institutions such as this one fills me with dread. However, private colleges are rarely set up by people who purposely set out to fleece students.

But for the private college I worked for, money became the prime motive for existence, but not due to greed. It was through the sheer incompetence, lack of business intelligence and a refusal to understand or adapt to the expectations of the higher education sector that revenue generation became the number one necessity. In my time I bore witness to every cliché and horror story about private HE, both in my college and others. But never at BPP. BPP always had a healthier attitude, and since a career shift, I have seen this further borne out. BPP’s Principle, Carl Lygo, does like ruffling feathers, but does so in a way which is challenging the sector to improve.

They focus on controlled processes for administration and marketing so that students are given similar consideration as traditional universities, and they don’t miss-sell or pre-market non-existent courses. Most importantly though, they may have chosen to provoke serious questions about the higher education sector with their pricing, rather than take advantage of the increased fees to drive up their own revenues like their competitors have. It is a gamble, but one that could pay-off in the long term if this price-point appeals to more students.

The questions raised by BPP’s pricing could have great ramifications not only on the longevity of the sector’s current pricing structures, but also how we look at fees. One could ask why some universities feel that it’s right to charge £9,000 for a course that BPP can charge for £5,000. In February, David Kernohan wrote an article about game theory dictating pricing. He said some universities would charge higher than they need, so they didn’t look like a lower quality institution. He exposed the greatest flaw in making higher education a ‘free’ market: markets are driven by value.

People have long-argued that you cannot charge less for the humanities and social sciences as it diminishes their value to society. But why shouldn’t universities turn the idea of the market on its head and price on cost, not perceived value? The idea of pricing for perceived value seems ludicrous. Value is the increase over time a graduate receives in salary compared to non-graduates. There is no way that under a market system you can accurately reflect this as an individual fee price; there are far too many variables between individuals.

A far more accurate method of pricing would be to charge how much these courses cost to run. If certain courses cost over the £9,000 threshold to run then fees from other courses should be used to supplement those costing the institution more to deliver. Do teaching-focussed universities really need to charge £9,000 to run a business degree on cost alone?

I cannot help but wonder if some of these universities, running courses similar to BPP’s, are diverting some of the money received from fees in to research or other activities. Furthermore, cost-based pricing can be easily justified with transparency. Make clear where the costs come from and how the fees will pay these costs and this could prevent any value-based decisions.

Some have accused BPP of charging £5,000 as part of a sell ‘em cheap, stack ‘em high strategy. But such a cynical strategy would make little sense for them right now. If BPP wants to show it is equal to universities and a legitimate, or even important part of the HE sector, then it would not be in their interests to behave in this way, particularly with the level of scrutiny on them at the moment.

Ultimately though, I am not convinced that more private providers are a good thing for the sector and from what I can see, BPP are the exception, not the rule. But, if they are challenging the fledgling ‘market’ with a competitive and risky fee structure, I wish them well.

5 responses to “Between Public and Private

  1. It is practically impossible to use price to work out value at times like these. You get situations such as the recent decision at Edinburgh to set a yearly fee of £9,000 on a four-year course. Suddenly, the total debt is £9k higher than three-year degrees at other top-whack institutions; but is that relevant or not?

    Value comes from choosing one thing over another. If a student’s main consideration is price, it will possibly take years for a student to assess whether the choice was reasonable compared to a more expensive institution’s course. In many ways, comparison would be impossible, since we cannot compare reality with ‘what if…’ stories. That’s why this isn’t a standard ‘consumer’ market.

    While we’re talking about comparisons, I wonder how people will perceive BPP’s £5k fee being in line with Open University now.

  2. In order to use cost as an ‘accurate’ guide to what price ought to be, you’d also have to have an accurate understanding of your costs. In most cases, we have anything but a clear understanding of what our costs are.
    Even if you do understand your current costs, what is to say that these are the ‘right’ costs? You could always spend more and deliver more service, or spend less and deliver less, and without some concept of what provides ‘value’ to the student how would you determine which to do?
    Finally, from the student perspective, why should I care if institution A’s fees are transparently cost-based if I prefer institution B’s offer, and I can afford it (which by definition I can if I am a FTUG home applicant in England). I don’t think BPP ‘wants to show it is equal to universities and a legitimate, or even important part of the HE sector’ so much as it wants to recruit some students and turn a profit.

  3. I am an educationalist, I have spent all my adult life teaching and managing in higher education in both the “public” and private sector. I am lucky enough to have risen from the rank of lecturer to now be the Principal and CEO of the UK’s largest private proprietary degree awarding body, BPP University College. I joined BPP in 1996 because I was impressed with the investment that was being directed to the front line of teaching and facilities directly suporting students. I believe that my colleagues and I at BPP all share the predominant goal of providing the very best education for our clients (the students and their employers). What excites my colleagues here at BPP is that we can really challenge the educational status quo, put the students at the centre of what we do, and make Higher Education in the UK even stronger. I love Higher Education and in particular career focused professional education, it is an honour to be able to contribute to the debate and help formulate a new approach to HE.

    I agree that not all “for profit” providers are the same and it sounds like Newell, you have had a bad experience. When I gave evidence to the House of Commons Select Committee on Higher Education I was very clear that there should be no room in the UK for those who are not of the highest standards. I have met very many different people and organisations in this role at BPP and I have seen some organisations that are more focused on spreadsheets and not enough on the education they produce. BPP is different, it is run by educationalists. Our priority is high quality education. Why else would 80% of the FTSE 100 use BPP for training, leading law and accountancy firms send all their postgraduate trainees to us?

    In setting our undergraduate fees for 2012 we did a lot of research with our client base. Employers encouraged us to be different and not follow the crowd to charge £9,000 per annum. Our research with students indicated that they have two major concerns, the “mountain of debt” that they will be accumulating and the need to be employable once they have graduated. The old CIPD survey from 2006 which showed that 33% of graduates wish they had choosen a different degree, one more career focused, rang true in our research. We think we can help students by providing an option of studying over 2 years at a total fee cost of £12,000 for an undergraduate degree in areas such as accountancy, law, busines, finance, management, human resources, marketing etc. A degree that is linked to a relevant professional qualification. As an alternative if a student wants to study full-time over 3 years then we think a total cost of £15,000 with an enhanced career package represents a sound investment. Our cost base will increase as a result of the enhancements we will make (and you are right, we do know our cost base). We will keep tutorial groups down to small numbers so we challenge this so called allegation of pile them high!

    So I make no apologies for fixing our fees at £12-15K. The UK has a proud tradition of freedom of choice. Students should have the right to decide if they want to attend a private provider such as BPP just as they should have the right to spend £36K studying in Scotland. Remind me again, who is the student’s friend?

    Carl Lygo, Principal BPP University College

  4. The effect of the WP proposals will be to hollow out the ‘public’ HE sector on which private providers’ business model and fee levels rely.

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