Education CommitteeWritten evidence submitted by Ofqual (Annex E)

Competition and Regulation of Awarding Organisations

When Amanda Spielman and Glenys Stacey appeared before the Select Committee on 21 March 2012, they offered to provide you with information Ofqual has on both competition and how pricing works in practice in relation to GCSEs and A levels,

The attached note sets out average and individual qualification fees for selected GCSE subjects for the last six years and for selected A level subjects for the last four years. It provides some information on what has been driving the increase in examination expenditure in schools including re-sitting behaviours and increases in volumes of qualifications sat.

Summary

1. Average GCSE fees have risen over the past six years in line with inflation. The difference between the most and least expensive awarding organisation for the same subject is at most 13% and often much less.

2. Fee increases for A levels have also generally mirrored the RPI. The gap between the dearest and cheapest awarding organisation is higher, at about 30%.

3. Most awarding organisations have flat fee structures, suggesting cross-subsidy in pricing between subjects as delivery costs are very different: for example, music technology is very expensive to deliver (we have been told over £300), maths is cheap.

4. There is little, if any, evidence that schools switch providers of GCSEs and A level qualifications on cost grounds. Specification content and the range and quality of exam board support are more important.

5. We are doing more analysis of the reasons that schools and colleges decide on an initial choice of qualification and when and why they might switch to a different awarding organisation’s specification. Our initial analysis shows GCSE switching is most likely to occur when new specifications are introduced.

6. Few schools and colleges are negotiating fee discounts. The development of purchasing consortia in the FE sector may put pressure on awarding bodies to offer greater discounts.

7. Expenditure on exam fees in schools in England has increased from £154 million in 2002–03 to £259 million in 2010–11. Several factors are at work here: an increase in the number of GCSEs and A levels sat; the impact of modular exams and the associated re-sitting behaviour; and the growth in uptake in vocational qualifications are the most significant factors behind the growing examination bill in schools. Schools are showing more control over late entries for exams, which is producing some savings in their overall examination bill.

8. Awarding organisations are obliged to have clear pricing structures and to publish a list of standard fees.

9. We have a programme of work that will enable us to present more detailed evidence on the purchasing behaviours by schools and colleges. This will inform our regulatory framework going forward. We will be happy to share the outcomes of this work with the Select Committee in the Autumn.

I hope this gives some flavour of the work which we are doing at Ofquai in this area. If you would like to discuss it further, please do call.

Tim Leslie
Director of Risk and Markets

GCSE and GCE A Level Fees

We do not publish data on fees for GCSEs or A levels. Awarding organisations publish this data and we have drawn on this information in the following analysis. We report the average1 qualification fee for selected subjects in our Annual Market Report. We have chosen these subjects to present a mix of subjects, including compulsory and most popular, and to cover a range of assessment methods. We have selected the most commonly used specification from each awarding organisation. We have excluded optional additional fees, for example for external examiner visits, and also exclude fees for late entry. This is the lowest possible fee that a school would have to pay for the provision and marking of exam scripts and associated awarding. There are differences in the way some subjects are assessed as they have performance related assessment, such as oral assessments for modern foreign languages. We have captured this in the selection of the subjects in the sample.

Table 1

MEAN BASE GCSE FEE OVER TIME

Average GCSE fee over time							Increase over last 6 years
	2006–7	2007–8	2008–9	2009–10	2010–11	2011–12
English	£23.64	£24.46	£25.28	£26.30	£27.41	£27.78	17.5%
Maths	£23.64	£24.46	£25.28	£26.30	£27.45	£27.78	17.5%
Science	£23.79	£24.60	£26.14	£27.18	£28.23	£28.53	19.9%
French	£24.04	£24.88	£25.72	£26.74	£27.89	£28.24	17.5%
History	£24.04	£24.88	£25.72	£26.74	£27.93	£28.27	17.6%
Art& Design	£23.64	£24.46	£25.28	£26.30	£27.43	£27.78	17.5%
RPI	100.0	103.9	109.1	107.6	112.6	118.9	18.9%

Notes

1. Awarding organisation fee lists, averaged over time.

2. RPI data based on September index for each year.

Table 1 illustrates the close alignment of average GCSE fees for the chosen subjects. The average fees for each of the subjects have risen by around the rate of inflation,2 with five of the six below and one above. It should be noted that there have been changes with associated costs for modular3 options of GCSE subjects becoming available.

Similarly the table below presents the average A level qualification fee for the chosen subjects; the time series is different, to reflect the structural changes that were introduced to A levels in 2008. The awarding organisations charge a fee for each unit and the fee shown is the combination of the unit fees required to complete the A level (AS and A2). If a candidate only completes an AS level then the they would only pay for the units they have been entered for, which for most AS qualifications would be half of the total A level fee.

Table 2

MEAN BASE A LEVEL FEE OVER TIME

Average A level fee over time					Increase over last 4 years
Subject	2008–09	2009–10	2010–11	2011–12
English Language	£71.16	£73.77	£76.57	£76.59	8.9%
Maths	£76.68	£79.43	£82.37	£83.39	5.7%
Biology	£77.52	£80.33	£83.29	£84.43	8.9%
French	£85.24	£83.05	£86.17	£92.86	8.9%
History	£71.72	£74.33	£77.13	£78.07	8.9%
Art & Design	£77.64	£80.41	£83.45	£84.42	8.7%
RPI	100.0	98.6	103.2	109.0	9.0%

Notes

1. Awarding organisation fee lists, averaged over time.

2. RPI data based on September index for each year.

Table 2 shows the average fees for 6 A level subjects, after the change from six to four units in most subjects. As with GCSEs, the increase in average fees has generally mirrored RPI. When the structural change was introduced in 2008–9, although unit fees increased, as a result of the specifications changing from six to four units, the overall cost of the entire A level decreased compared with the fees in the previous years. As with GCSEs, we have shown the lowest possible fee that a school or college would have to pay for the provision and marking of exam scripts and associated awarding.

Tables 3 and 4

VARIATION IN GCSE AND A LEVEL FEES BETWEEN AWARDING ORGANISATIONS

GCSE 2011–12
	AQA	CCEA	Edexcel	OCR	WJEC	Average
English	£28.10	£28.80	£27.30	£27.80	£26.88	£27.78
Maths	£28.10	£28.80	£27.30	£28.00	£26.88	£27.82
Science	£28.15	£28.80	£31.05	£27.80	£26.88	£28.54
French	£28.10	£28.80	£29.60	£27.80	£26.88	£28.24
History	£28.10	£28.95	£29.60	£28.00	£26.88	£28.31
Art & Design	£28.10	£28.80	£27.30	£27.80	£26.88	£27.78

A level 2011–12
	AQA	CCEA	Edexcel	OCR	WJEC	Average
English Language	£75.10	−	£82.80	£73.80	£74.64	£76.59
Maths	£86.70	£81.60	£88.80	£85.20	£74.64	£83.39
Biology	£75.10	£81.60	£105.60	£85.20	£74.64	£84.43
French	£75.10	£81.20	£103.20	£102.00	£102.80	£92.86
History	£75.10	£81.20	£85.60	£73.80	£74.64	£78.07
Art & Design	£75.10	£81.20	£89.20	£73.80	£102.80	£84.42

Notes:

1. Fees taken from awarding organisation websites

2. CCEA do not offer English Language

For GCSEs most awarding organisations have a flat fee structure where each subject is charged at the same level. Others have a structure where there is some variation but this variation is not substantial. For A levels the situation is more varied. Some awarding organisations again charge a flat rate across the subjects but others have a variable fee structure. For French, the assessment includes oral assessments as well as a written examination and so the fees tend to be significantly higher.

Qualification Volumes

Ofqual’s annual market report4 provides information on the total number of achievements in regulated qualifications over time. Expenditure on exam fees in schools in England has increased in real terms from £154 million in 2002–03 to £259 million in 2010–11.5 During this period there has been an increase in the number of GCSEs and A levels sat and also a very significant uptake of vocational qualifications in schools.6 In 2003–04, 22,500 vocational qualifications were taken in schools. By 2008–09 this has risen to 540,000—mostly taken at age 16.

Impact of Late Entries on Fees Paid by Schools and Colleges

Late entry fees charged by awarding bodies for GCSE and A levels are usually double the normal entry fee and for very late entries, fees can be up to three times the normal fee.

Data on entries from DfE indicate that schools and colleges have become better at controlling late entries and this will have resulted in savings on examination expenditure.

Total entries for GCSEs and A levels increased by 38% over the period 2003–04 to 2009–10. Over the same period, total late and very late entries decreased by 52%. By 2009–10 the percentage of entries that were late or very late had fallen to 6.3% from 16.7% in 2003–04.

Impact of A Level Re-sits on Fees Paid by Schools and Colleges

Trends in re-sitting will impact exam expenditure. Re-sits are charged at the full cost of the original unit fee.

We have some information but this is for the period before the number of units in A levels was reduced from six to four and the A* grade was introduced. Data on re-sitting patterns for some selected A level subjects7 suggests that between two-thirds and three-quarters of students were re-sitting at least one unit and that around 60% re-sat between 1 and 3 times. To illustrate, if three-quarters of candidates in June 2010 re-sat a single unit in these subjects the cost would have been £6 million. This is probably a low estimate and these subjects represent only a third of all candidate entries in June 2010. Some centres pass re-sit costs on to candidates and the pattern of re-sits varies between subjects.

Re-sitting patterns for A levels were expected to fall following the introduction of the structural changes in 2010 and we will be publishing the results of research on this shortly.8

Information Available to Buyers to Compare Prices

In 2009, we published a report by the consultancy firm Reckon,9 which considered options to increase the transparency of awarding organisations’ fees for all regulated qualifications, potentially making it easier for buyers to compare prices. Options included a requirement for awarding organisations to publish complete price lists for all regulated qualifications, a requirement to publish an “average price per qualification” (similar to the concept of an APR associated with financial products) and the development of an online interactive price comparison tool. The second and third options were considered to be expensive options in terms of regulatory burden for awarding organisations.

Ofqual’s recognition conditions require awarding organisations to have clear pricing structures, to produce a list of standard fees, and to make this available to purchasers either on the internet or by providing them with a copy of the list. These requirements will be monitored from May 2012 onwards, from when all recognised awarding organisations must comply with the recognition conditions.

Buying Behaviours

We have started to build our evidence base about why schools and colleges switch between qualifications. Our initial analysis suggests that the largest movements between GCSEs have occurred when new specifications were introduced for that subject. For example, more schools switched when the new GCSE specifications were introduced in 2009 for first award in 2010–11.

Table 7

PERCENTAGE OF CENTRES SWITCHING BETWEEN GCSE AWARDING ORGANISATIONS

	2006–07	2007–08	2008–09	2009–10	2010–11
Geography	4.3	4.8	2.8	2.1	33.4
Maths	5.8	9.3	7.9	8.0	9.2
Biology	1.1	25.3	4.8	5.3	3.5
French	3.8	3.9	3.4	3.5	17.6
History	3.7	4.2	3.9	3.0	15.5
Art& Design	2.5	2.2	3.0	2.8	5.9

Biology also saw a large number of centres switching in 2007–08 which coincided with the introduction of the separate sciences. We are continuing to investigate the factors that influence a school’s initial choice of specification and why they may also decide to switch to another awarding organisation. On the basis of current information, the GCSE and A level market does not appear to be particularly price sensitive. There is little, if any, evidence that schools are driven to change qualifications because of individual variation in fees. Other factors such as specification content and the range and quality of exam board support provided may be more important.

Discounting Activity

Two previously published studies10 ^, 11 commissioned by Ofqual have provided some evidence that, although fee discounting does take place, such practice is not widespread in schools and colleges. Schools and colleges reported that they did not negotiate discounts with awarding organisations nor did they think they would be able to do so. In the FE sector there is interest in the development of purchasing consortia. For example, Crescent Purchasing Consortium (CPC), which is owned by and run on behalf of the FE sector, has over 1,000 FE institutions (including academies) in its membership. CPC offers a procurement service to its members for a wide range of supplies and services. It is considering setting up a national negotiating body to represent the FE sector in negotiations with awarding organisations on fees for qualification products and services. CPC is also looking at commissioning plans to improve how the FE sector buys from awarding organisations. Commissioning plans involve the development and agreement, across stakeholders, of common payment methodologies, the setting of discounts and rebates, and other service and product improvements.

Ofqual’s Future Work

We are doing more work to understand the nature of price competition in qualifications markets. This work includes:

1.Working with DfE (and others such as the Association of Colleges) to identify the drivers of school and college spending on exam fees, including GCSEs and A levels, and how this spending might be reduced. This work will include gathering evidence to understand drivers such as increases in fees, late fees, and switching. It will also consider other procurement issues including fees transparency and information that awarding organisations provide on their invoices.

2.Establishing links with individual schools and colleges to develop case studies on exam spend in order to identify opportunities for efficiency savings. We will use case studies to illustrate good practice.

3.Further analysis of the specific reasons for schools’ initial choice of qualifications and why decisions are taken to switch between awarding organisations, including switching incentives and the role of price in procurement decisions.

4.Research on how awarding organisations package (bundle) their qualifications with other products and services. This includes our current work to investigate how textbooks and study aids are made available to students to support them in examinations including GCSEs and A levels.

5.Implementing an approach to monitor awarding organisations’ fees over time. In 2010–11, 10,300 regulated qualifications recorded at least one certification.12 We are developing our approach to monitoring fees, concentrating effort on those which have the most impact on market efficiency,

6.Developing our understanding of competition and the role of market forces in delivering standards and efficiency in the qualifications sector. We will consider the incentives created by market structures on the supply and demand sides and broader systemic factors that impact on qualifications markets. This broader market analysis work is aimed at assessing the health of qualifications markets and for which qualifications there is the highest risk of market failure.