Supplementary memorandum submitted by
HEFCE
RESTRUCTURING AND
COLLABORATION FUND
1. Questions 5 and 6
Funding for the eUniversity project came primarily
from the £62 million provided by the Government specifically
for the project in the HEFCE November 2000 grant letter. However,
initial funding of £1.13 million was drawn from the HEFCE
Restructuring and Collaboration Fund (R&CF) to pay for costs
until April 2001 when the £62 million programme grant became
available. This was funded from R&CF under the criterion of
supporting major collaborative projects in the higher education
(HE) sector. These funds paid for initial research studies (many
of which are presently being prepared for dissemination as part
of getting value for the higher education sector from the project),
as well as the set up of the company (since an Interim Management
Team for the Operating Company was put in place at the end of
2000).
BUSINESS MODELS
AND BUSINESS
PLANS
2. Questions 10-13 & Question 98
We agreed to provide further clarification about
the business models and plans for the project.
3. The first stage of the eUniversity project
was the development of a business model for the venture. This
was produced by PricewaterhouseCoopers (PwC) and published by
the HEFCE in October 2000. We attach the three published documents:
— eUniversity project: business model
consultation document (October 2000, HEFCE 00/43).
— Business model for the eUniversity—report
to the HEFCE by PricewaterhouseCoopers (October 2000, HEFCE 00/44a).
— Business model for the eUniversity:
annexes—report to the HEFCE by PricewaterhouseCoopers (October
2000, HEFCE 00/44b).
4. The business model presented the main
lines of how the venture would operate—ownership, funding,
and main activities. The main difference between this model and
the one originally conceived by the HEFCE was that the PwC model
proposed that the venture should involve all United Kingdom higher
education institutions, rather than a consortium as we had originally
suggested.
5. A more detailed business plan was subsequently
produced in August 2001 by the Interim Management Team for the
eUniversity (headed by an interim Chief Executive Officer), who
were supported by PwC in the detailed modelling work of the plan.
We attach a copy of this plan. The plan was one of the bases of
the legal documents that set up the eUniversity Operating Company
(OpCo) in October 2001 (for example, the plan underpinned the
share price offered at set up).
6. We understand that once the new Board
and Management were in place in the eUniversity operating company
(OpCo) they revisited this initial plan attached to the legal
documents and adopted a revised version in April 2002. The April
2002 version informed the set up of the company over the period
2002-03.
7. We were informed by OpCo that they intended
to review their business plan again in Autumn 2003 in the light
of their launch in September 2003. We agreed that our review of
the venture in Autumn 2003 should be based on the plan revised
in the light of launch, since this would be the first time that
the plan could reflect real performance in the market place. OpCo
provided us with the new plan revised in the light of launch in
November 2003, and it was this plan that was the subject of the
PA Consulting review and of the HEFCE Board decision to cease
funding against it in February 2004.
8. Question 19
We stated that the investment from Sun Microsystems
Limited was £5.5 million. We understand that the correct
figure is £5.6 million.
EUNIVERSITY
EXPENDITURE AND
RESIDUAL VALUE
Question 22
We estimated that by the time we had achieved
the wind-down of the eUniversity we would have spent around £30-£31
million. This has been calculated by estimating the overall expenditure
on the project by the HEFCE minus our estimated residual value
of this project. The details of the expenditure and residual value
are set out in the table below.
| Public Good |
Funding (£m) | Value (£m)
|
| eChina | 3 | 3
|
| e-learning research centre | 1
| 1 |
| Research studies and other publicly disseminated outputs to inform development of eLearning1
| 2 | 2 |
| Advisers (legal and business) | 1
| — |
| Commercial | |
|
| Technology Platform development | 14.5
| 1.4² |
| Learning programmes development | 10.9
| 11 |
| Sales and Marketing (includes overseas) |
4.2 | 0.4³
|
| UKeU operating costs4 | 12.9
| — |
| Total | 49.5 |
18.8 |
1 Research studies include: PricewaterhouseCoopers business
model, CHEMS study on marketing and HE aspects of eLearning, technology
studies (e-Tools, content and learning resources and disability
and technology), additional PwC work on production process in
eLearning. These studies are presently being edited into a web-publication
overseen by the HE Academy/eLearning Research Centre, and will
be disseminated to inform the strategic development of eLearning.
This also includes HEFCE contribution to the set up of the UUK
Borderless Education Observatory, which is now supporting HEIs,
and on-going programme on developing guidance for the HE sector
on IPRs in e-learning.
2 We have added an estimate of 10% of funds spent on platform
as recoverable value, to reflect ownership of IPRs (still under
negotiation) and the learning experience from platform development
which will be evaluated and disseminated to inform eLearning development
in HE sector.
3 We have added estimate of 10% of funds spent on Sales and
marketing to reflect captured value from overseas partnerships
initiated and overseas accreditation arrangements now transferred
to HEIs.
4 Payroll, Fujitsu, finance leases, premises, and other.
CHIEF EXECUTIVE
OFFICER (MR
JOHN BEAUMONT)
9. Questions 29 and 95
From the information provided in the eUniversities Worldwide
Limited Report and Financial Statements for the year ended 31
March 2003, we understand that the remuneration of John Beaumont
in 2002-03 was £226,373 inclusive of benefits and performance
related bonus.
OPCO
BONUS SCHEME
10. Question 80
We understand that the bonus scheme that operated within
OpCo provided for between 0% to 100% of a maximum 50% of an individual's
annual salary based on performance review. We attach a copy of
the UK eUniversities Worldwide Limited Report and Financial Statements
for the year ended 31 March 2003. This report provides information
about the remuneration of the directors and includes performance
related bonus payments. We have knowledge of the bonus scheme
operated by OpCo for the period 2003-04 but have not included
the data on payments to individual staff with this supplementary
evidence as this is not publicly available information.
RISK REGISTER
11. Question 107
We attach a copy of the Risk Register submitted to the Department
for Education and Skills (DfES) in July 2001 at the set up of
OpCo.[14] We had regular
review meetings with the Department to discuss progress on the
project (roughly every six months), which included consideration
by the Department of our risk register. We also had discussions
with the eUniversity about its own risk register and its plans
for delivery against milestones.
HEFCE CONSULTATION WITH
THE HIGHER
EDUCATION SECTOR
12. Question 112
We consulted with the higher education institutions at a
number of points in the eUniversity project:
(a) At the outset of the project in February 2000.
We attach a copy of the circular letter HEFCE 04/00 published
on 14 February 2000.[15]
We received 85 responses from higher education institutions, and
six from further education institutions. Around half of responses
outlined activities relevant to the e-University going on in the
institution (and a few directly expressed interest to become core
or programme partners, either individually or in partnerships).
Overall, the announcement of the project was broadly welcomed.
The main debate on the proposed model for the e-University was
the balance that should be struck between collaboration and competition.
The majority of respondents wanted to see a reasonably inclusive
model.
(b) In October 2000 (HEFCE 00/43 attached) specifically
on the PwC model (publications HEFCE 00/44a and HEFCE 00/44b attached).
We received 77 responses with 57 from higher education institutions
(although the other 20 responses included responses from consortia
of higher education institutions, many formed in 2000, such as
Worldwide Universities Network). The e-University project generally,
and the PwC Business Model specifically, attracted considerable
support. 74% of HEIs expressed their general support and commended
the main aspects of the model. In addition, a number of higher
education consortia expressed interest to work closely with the
e-University. The majority of institutions commended the change
in the model to a more inclusive approach. However, a few were
concerned that there would be branding challenges in an e-University
that worked with a wide range of higher education institutions.
(c) We invited UK higher education institutions to become
members of the Holding Company (HoldCo) in Spring 2001. All but
four UK Higher Education Institutions (HEIs) registered as members.
(d) Around 70 English higher education institutions submitted
proposals to the eUniversity to develop e-learning programmes
over the course of the project.
(e) At the start of restructuring and wind-down, OpCo
had contracts and other relationships with around 30 higher education
institutions.
HOLDCO
AND OPCO
BOARD APPOINTMENTS
13. Questions 116 to 120
The Board of the Holding Company is appointed as follows:
six Directors by Universities UK (UUK); four Directors by HEFCE
in consultation with the other UK funding bodies; and two by the
Standing Conference of Principals (SCOP). The Chairman of the
Board is appointed out of the Board membership by the Board. The
present membership of the Holding Company Board is:
Sir Brian Fender (Chairman)—Chairman BTG plc, formerly Chief
Executive HEFCE
Professor Bob Boucher—Vice-Chancellor, University of Sheffield
Sir Colin Campbell—Vice-Chancellor, University of Nottingham
(resigned 9 June 2004)
Sir Ron Cooke—formerly Vice-Chancellor, University of York
Professor Gary Crossley—Principal, Central School of Speech
and Drama
Mr Walter Greaves—Chairman of Council, Brunel University
Professor Gerry McKenna—Vice-Chancellor, University of Ulster
Mr Alfred Morris—Vice-Chancellor, University of West of
England
Professor Tim O'Shea—Principal and Vice-Chancellor, University
of Edinburgh
Professor Kevin Thompson—Principal, Dartington College of
Arts
Sir Adrian Webb—Vice-Chancellor, University of Glamorgan
Professor Geoff Whitty—Director, Institute of Education
14. Directorial appointments were confirmed by UUK, HEFCE
and SCOP in spring 2001. The Board then met in shadow form from
April 2001 prior to full incorporation in June 2001.
15. Up to February 2004, the Board of the Operating Company
was appointed:
(a) Three Directors were nominated by the Holding Company:
Professor John Bull (former Vice-Chancellor of University of Plymouth),
Professor David Wallace (Vice-Chancellor of Loughborough University)
and Professor Sir Alan Wilson (then Vice-Chancellor of University
of Leeds). Sir Alan Wilson resigned on 30 September 2003.
(b) The original legal arrangement for OpCo was that three
Directors should be appointed by the private sector partners to
the venture. OpCo did not attract private sector partners at the
outset, and therefore Directors with commercial and other private
sector expertise were appointed by the shareholders—the
Holding Company, Guillemont Trust (holding shares in respect of
Sun Microsystems Limited contributions) and Croft Nominees (escrow
agents holding shares in respect of Sun Microsystems Limited contributions
prior to milestones delivery by Sun Microsystems Limited).
(c) The Chairman of Opco, Sir Anthony Cleaver, was appointed
by the Board. Three Executive Directors were also appointed to
the Board by the Board: Chief Executive Officer (CEO)— Mr
John Beaumont; Finance Director—Ms Elizabeth Selzer; Learning
Programmes Director—Professor John Slater, who resigned
on 27 September 2002 and was replaced by Professor Dave Unwin
from 1 October 2002.
16. After February 2004, the articles of OpCo were changed
by agreement of the shareholders and a smaller Board was formed
appointed by the shareholders. The present Board is: Mr Eddie
Newcomb (Chairman) (formerly Registrar of the University of Manchester),
Mr Bob Stubbs (Deputy Executive Chairman) (Robson Rhodes Consultants),
Sir Ron Cooke (former Vice-Chancellor of the University of York
and Chairman of the Joint Information Systems Committee of the
UK funding bodies), Professor Gerry McKenna (Vice-Chancellor of
the University of Ulster) and Professor Geoff Peters (Open University).
BOARD MEMBERS
OF HOLDCO
AND OPCO
HOLDCO BOARD
| Name | Date appointed | Date resigned
|
| Sir Brian Fender (Chair) | 25 June 2001
| |
| Professor Bob Boucher | 29 June 2001
| |
| Mrs Sandra Burslem | 29 June 2001
| 16 September 2003 |
| Professor Sir Colin Campbell | 29 June 2001
| 9 June 2004 |
| Professor Sir Ron Cooke | 29 June 2001
| |
| Professor Gary Crossley | 29 June 2001
| |
| Mr Walter Greaves | 29 June 2001
| |
| Professor Gerry McKenna | 29 June 2001
| |
| Mr Alfred Morris | 29 June 2001
| |
| Professor Sir Gareth Roberts | 29 June 2001
| 31 August 2002 |
| Professor Tim O'Shea | 29 June 2001
| |
| Mrs Dorma Urwin | 29 June 2001
| 5 December 2002 |
| Sir Adrian Webb | 24 September 2002
| |
| Professor Kevin Thompson | 1 May 2003
| |
| Professor Geoff Whitty | 16 September 2003
| |
| | |
Appointed by HEFCE
Fender, Boucher, Roberts, Greaves, Webb.
Appointed by UUK
Burslem, Campbell, Cooke, McKenna, Morris, O'Shea, Whitty
Appointed by SCOP
Crossley, Urwin, Thompson.
OPCO BOARD
| Name | Date appointed | Date resigned
|
| Sir Anthony Cleaver | 1 December 2001
| 27 February 2004 |
| Professor John Bull** | 4 October 2001
| 27 February 2004 |
| Professor David Wallace** | 4 October 2001
| 27 February 2004 |
| Professor Sir Alan Wilson** | 4 October 2001
| 30 September 2003 |
| Mr Julian Gizzi* | 19 October 2001
| 25 March 2002 |
| Mr Stephen Hocking* | 19 October 2001
| 25 January 2002 |
| Mr Laurence Markham* | 19 October 2001
| 25 January 2002 |
| Mr Richard Hooper | 25 January 2002
| 27 February 2004 |
| Ms Elizabeth Selzer | 25 January 2002
| 27 February 2004 |
| Mr Keith Bedell-Pearce | 25 January 2002
| 27 February 2004 |
| Professor John Slater | 21 February 2002
| 27 September 2002 |
| Mr John Beaumont | 4 March 2002
| 27 February 2004 |
| Mr Rob Rowley | 25 March 2002
| 27 February 2004 |
| Professor David Unwin | 1 October 2002
| 27 February 2004 |
| Mr Eddie Newcomb (Chair)** | 25 March 2004
| |
| Professor Geoff Peters** | 25 March 2004
| |
| Professor Gerry McKenna** | 25 March 2004
| |
| Sir Ron Cooke** | 25 March 2004
| |
| Mr Bob Stubbs | 25 March 2004
| |
* from Beachcroft Wansbroughs appointed for set-up period.
** appointed by HoldCo
| | |
REMUNERATION COMMITTEE
17. Question 127
We understand that the membership of the OpCo Remuneration
Committee, drawn from the Non-Executive Directors of the OpCo
Board, was until February 2004: Mr Richard Hooper (Chairman),
Sir Alan Wilson (until his resignation from the OpCo Board in
September 2003) and Mr Keith Bedell-Pearce. After February 2004,
the new OpCo Board did not delegate decisions on remuneration.
18. Question 134
There were two OpCo directors (not at OpCo Board level) responsible
for sales and marketing: Mr Nigel Bannister as director of Sales
and Marketing who we understand concentrated on the retail market;
Mr Michael Smith as director of business development who we understand
concentrated on the corporate eLearning market.
We understand that a bonus payment of 3% (based on 50% of
his salary) was made to Mr Bannister in the period 2003-04 on
the basis of his performance. We understand that no bonus payment
was made to Mr Smith who left the employment of OpCo.
6 July 2004
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