DIAGRAM 1

Source: Rumble, 1997

1.2 Which Factors Affect The Cost Of Distance Education?
In order for us to understand the factors affecting cost of distance education, it is necessary to have some knowledge of educational cost and the way it behaves.

For decision-makers to understand the “behaviour pattern” of costs and to take informed decisions, we have to appreciate the ways in which efficiencies can be achieved. The following section focuses on 10 of the most pertinent factors which affect cost. It is however not an exhaustive list.

1.2.1 Student numbers
Literature reveals that the selling point for distance education is the fact that you can reap economies of scale through distance education. But what does this really mean? And are distance education providers taking advantage of this strength of distance education? Economies of scale occur when the unit cost of production of goods or services does not rise in direct proportion to the increase in output of the goods or services (Rumble 1997).

Student numbers influence different costs differently. For example, the cost of marking assignments will go up with every additional student, while the costs of face-to-face teaching will only go up when a threshold is crossed and an additional class group is formed. In NAMCOL’s case, a class group is formed for every 50 students, so when 10 more students are added, it does not influence the cost of providing face-to-face teaching or its administration, but it does influence the cost of marking the additional 10 assignments.

Student numbers do not influence the development cost of materials since this is a fixed cost, but the increase in numbers will spread the development cost over the increased numbers and bring down the unit cost for developing materials. What is important to note is that when the student number is low, the cost of developing materials will be spread over a lower number of students and it will then have a higher unit cost, while with greater numbers the unit cost will be lower. The printing of materials is a variable cost and it is influenced by the fluctuation of student numbers. The higher the number the lower the printing cost and vice versa.

One way of dealing with this dilemma is forward planning with regard to printing, since greater volumes allow economies of scale. Not many institutions take advantage of this due to financial constraints or/and indifference by management.

1.2.2 The Size of the Curriculum
In our excitement to broaden access, we do not always realise that the curriculum is a cost driver. The broader the curriculum, the higher the cost of developing, printing, administering, providing student support, etc. It is critical to ensure that student numbers grow with the enlargement of the curriculum. In other words, courses should not be developed when there is no market. It is only through scale that we can hope to recover costs.

In order to be sustainable, the distance education institution will have to review the offering of a broad curriculum. Programmes with low student numbers will render the institution inefficient, because it is high output at a high cost and one should also ask: At whose cost? When the prevailing socio-economic circumstances do not allow students to take responsibility for increased fees, the institution will have to take responsibility for the cost itself. Under such circumstances, the institution will defeat the purpose of economies of scale and efficiency.

1.2.3 Number of Years Over Which Courses are Offered Without Change
This can be a major advantage to an institution if materials for courses with a long lifespan can be reused. In such a case, the cost of materials is not only spread over years but also over greater volumes of students. There are however drawbacks.

If there is a need to make changes to the materials, after the initial launch, which is quite possible, the format of the materials should allow for such changes. There is however evidence from practice that this is not always possible and in such an event it will mean additional investment which will make the venture more costly. UNESCO, in a study, advises that to prevent such an occurrence, the materials should be developmentally tested before producing in bulk. The concern is whether this is practically possible at all (UNESCO, 2002). Furthermore, before decisions are made on volumes to be printed, proper consultation with the concerned authorities should inform distance education providers on the course of action.

When consideration is given for materials to be used over a long period, it is critical to recognise the fact that the materials should be relevant and current. Changes in the syllabi lead to materials becoming outdated, e.g., computing, social sciences. According to UNESCO, modularization and the use of electronic formats will allow easy revision without too much cost. One advantage of online formats is that development is not regarded as a pre-presentation stage, like with the use of print, but it is regarded as a continuous and major process at all stages (UNESCO, 2002). Within the SADC region where access to ICTs remains a major challenge, it might be difficult to follow this advice. However, if the institution has the capacity to ‘store’ the materials electronically, it will be helpful to incorporate sudden and unexpected changes to the curriculum.

1.2.4Containment of Course Development
The current trend in open and distance learning (ODL) is to add value to services by developing a wide range of optional materials to be used by learners in order for them to receive a quality package. This might be very costly for any institution. Therefore, consideration should be given to the range of materials to be developed in order to reduce the cost by not providing too many different course materials. Inflating the volume of the package does not necessarily guarantee a successful outcome, a wraparound with a textbook might be sufficient for one group of students but may be not be for others. It is critical that institutions investigate the appropriateness of the volume of the package with the different groups of students. Another issue that should be investigated is: what leads to students’ success in distance education? Is it the volume of the package or does the volume of the package not overwhelm students? Another issue that should be considered when developing materials is the student hours. More student hours inflate the budget, and institutions should therefore strive to put the course content in not too many hours.

1.2.5 Sharing of Course Development/Transforming Existing Materials/Buying in Materials
A significant part of a distance education institution’s budget goes towards the cost of course development. This is a fixed cost and institutions can introduce different strategies to cut down on this cost. One such strategy is to share the development cost with other institutions or to collaborate with commercial publishers. The advantage of a partnership with a commercial publisher is the revenue that can be generated from the sales, which could be used to offset the cost of developing materials. Income earned from royalties and/or discounts, although very small, can also contribute to lowering development costs. Collaborating in developing materials with other institutions as well as buying in materials produced by another institution might also be cheaper than developing materials in house. This is not always true and for this reason a proper cost analysis should always precede a decision in this regard. It is however a very viable option to investigate when setting up small institutions or when setting up distance education institutions without a core group of trained course developers.

1.2.6 Technology Choices
Each technology has its own cost structure and the choice of the technology has an impact on the cost of the system. Literature has revealed that it takes a teacher more time to write a text that will occupy a student for an hour than what it takes for a teacher to prepare for a one-hour lecture. Institutions should therefore take an informed decision where access and cost should be the determining factors. They should also take cognizance of the equivalency theory which postulates that any media can lead to successful learning.

1.2.7 The Level of Student Support
The level of student support can increase the cost of providing a course drastically. Cost of student support is driven by student numbers. Unlike printing where economics of scale is achieved with higher numbers, the cost of student support increases with higher numbers. Due to the fact that more investment in student support increases the cost of distance education, it is found to be one of the factors that dismisses the myth that distance education is cheaper than conventional education. Distance education can only be cheaper when student support is minimised. Support through online services does not necessarily prove cheaper. Literature reveals that it takes more time to support students online (Rumble, 1997).

Student support has two dimensions, the pedagogic and the administrative dimensions. It is important that institutions know just how much of both should be provided to students. Furthermore, cost is context specific and proper consideration should be given to the cost of both dimensions. Apart from the tutoring aspect, one area of student support which is sometimes disregarded is adequate provision of study facility and equipment. Setting up and maintaining learning centres can prove to be very costly to institutions. Sharing of these facilities amongst institutions will allow cost-sharing. In Namibia, the NOLNet Trust has been set up as a mechanism to support cost-sharing of different distance education activities. It is my considered opinion that much more can be done to improve student support at a much lower cost to all concerned institutions.

1.2.8 Working Practices
Costs can be affected significantly by the working practice of an institution and they can go either upward or downward. Some institutions make use of course teams to develop materials. This practice produces a high quality product at a high cost and institutions can reduce the cost of teams by having independent authors as well as reducing the size of the course modules, which would require fewer people to produce. Preparing courses where students have to spend many hours to study will increase the range of materials to be developed, and will therefore demand more hours of development.

The following options are suggested by Rumble to save money on working practices: multi-specialist team approach, multi-specialist assembly line model and one person models (Rumble, 1997).

1.2.9 Labour Market Practices
Cost can be reduced significantly when staff is employed on a short-term contract basis. The following groups: course developers, course writers, producers and designers can be appointed on short-term contracts and savings can be made on overheads like medical aid, transport, pension, etc. The difference between distance education and traditional education lies in the fact that distance education is capital intensive while traditional education is labour intensive. However, a snapshot of distance education institutions in the region indicates the opposite. It is therefore critical for distance education institutions to review their staff establishments in order for them to ensure that the institution operates on a cost-effective basis.

1.2.10 Structural Practices
The range of activities that need to be executed by a distance education institution does not need to be done in isolation. If it is possible to outsource some activities at a lower cost, it should be considered. Partnerships with other distance education providers with regard to any of the operations that can be shared, will assist in lowering costs for distance education institutions.

2. Cost Efficiency
“Efficiency is the ratio of output to input” (Rumble, 1987). According to Rumble, a system increases its cost efficiency when it maintains output with a less than proportional increase in inputs.

Many Governments, including the Namibian government has the belief that distance education is cheaper than traditional education. Although this is not the only reason why Governments are setting up Distance Education systems/institutions, it is a very important reason. It is, unfortunately, not always easy to compare costs of distance education with the cost of traditional systems. Due to the fact that previous section indicates that there are different factors which influence the cost of the two systems.

According to a SAIDE report on Costing Distance Education and Open Learning in Sub-Saharan Africa 2004: “There is no magical formula that leads to cost-effective education; rather, cost-effectiveness needs to be measured on an ongoing basis in relation to changing contextual requirements”.

I fully concur with this statement and would like to elaborate by using the case of NAMCOL.

2.1 Full Time Equivalent
A recent World Bank Study (2005) entitled, Namibia Human Capital and Knowledge Development for Economic Growth with Equity, concluded: “A comparison of the Cost per FTE at NAMCOL, with per learner operational cost in full time secondary education suggests that NAMCOL is more costly than regular schooling.” I would like to use this statement as a basis for discussing the cost efficiency of NAMCOL.

There are different ways of comparing distance education with traditional education, one of which is FTE. The FTE is “a measure indicating the proportion of full time Participation in the education system calculated by adding the FTE values of the Enrolments”. Unfortunately, there are also different FTE formulas used by different Institutions and in my view, based on the purpose of the comparison, any of these might be suitable.

In order to clarify the above statement, I would like to elaborate on the following three FTEs that can be applicable to NAMCOL:

1. Provision of courses/number: The Full-time equivalent being used by the World Bank is based on the provision of courses/number of subjects offered to a full-time student, e.g.; a Grade 10 student takes an average of nine subjects. In this case, the total subject enrolments for Grade 10 in a given year would be divided by a factor 9 to establish the FTE.
   
2. Preparation for Examination: Another example to calculate FTE is based on the preparation for Examination: A NAMCOL learner takes an average of three subjects per year and completes them during that same year which allows him/her to continue the next year with the remainder of the subjects. In this case, the total subject enrolments would be divided by a factor 3 to establish the FTE.
   
3. Funding model: Another example is based on the funding model where the full-time students are funded at a level of 1.0 (100%) and the part-time students are funded at a level of 0.60-0.65 (60-65%). This is the model that should apply to NAMCOL at this point to determine the FTE.

Through this discussion, I want to clarify that FTE might be an easy way to look at the comparative cost between distance education and traditional education, but it is not always the best way, since different formulas can be applied at the SAME institution. In my view, it is an economic model which is potentially misleading. The following table will try to illuminate three of the FTE formulas that can be applied to NAMCOL.

TABLE 2 - Three FTE Formulas that can be Applied to NAMCOL JSC
(Namibian $)

Source: NAMCOL Statistical Digest

I would like to put the observation, on NAMCOL’s efficiency, made in the World Bank study, in perspective. (Marope M.T, 2005). According to the analysis, NAMCOL is less cost-efficient when a FTE based on the factor 9 is used. It further suggested that the number of graded subjects is less than in formal education and that learners, prior to joining NAMCOL, were enrolled in formal education. I do agree with the latter part of the observation, but there are other factors which were not brought into this comparison. They are:

1. NAMCOL learners NEVER take nine subjects, they take a maximum of six, because they only need six to continue with grade 12.
2. The amount of money per FTE for a NAMCOL learner is spread over a period of three years, while the amount of money for a student in the formal school is repeated over a period of three years, thus, making the comparison on factor 9 very unreliable, and the outcome skew.
3. The cost per grade 10 learners is less than the cost per grade 12 learners.
4. Another very important benefit of distance education is the social benefit. In many instances, it is disregarded, but this is a spill-over benefit which is not easy to measure. If these learners were not enrolled in NAMCOL, they would have roamed the streets, etc. So, the whole society is benefiting.
5. The report is also referring to the amount of teaching time in full-time as compared to the amount of teaching time in distance education. This indifference to the fact that the teaching time of distance education is less than in conventional teaching is a further disregard of what distance education is all about! The teacher in distance education is a CONSTANT. The hours that were invested to develop and prepare the teacher in the distance education material, outweighs the same in conventional education.
6. There is also confusion in the use of terminology where there are no boundaries between cost-efficiency and cost-effectiveness.
7. “When making comparisons with traditional institutions, it should be remembered that the cost of traditional institutions may vary enormously within a jurisdiction (Rumble, 1997). According to a recent study which was done on the Expenditure Issues in the Ministry of Education: ”Spending in education is highly iniquitous between regions”. It is therefore very misleading to make a general statement on efficiencies while it is clearly an issue which is influenced by different factors.

2.2 How Do You Make Valid Comparisons?
Rumble (1997) suggests that the following issues need to be considered when making comparisons between institutions with regard to cost-efficiency:

1. Comparing like with like:
   In order to arrive at a fair comparison it is critical to separate the cost of teaching from non-teaching activities. Conventional education is labour intensive and teaching is a recurrent cost driven by student numbers, while distance education is capital intensive and the development of materials (substituting the teacher) is a fixed cost, not driven by student numbers, while the production of materials are driven by student numbers. Non-teaching activities in conventional systems include hostels, advising teachers, administration, etc., while these activities do not form part of distance education.
2. Comparing student loads:
   The most common student load is the FTE which can be defined within a specific context. There is no ONE formula.
3. Comparing Outputs:
   Comparing the relative value of graduates can be problematic. The same qualification from different institutions may have a different value.
4. Using common price levels:
   When making comparisons, the data which is used should have a common price. The cost should be realistic and all the costs should be taken into account. The need to project cost with care; as was evident from NAMCOL’s original costing structure, there is an assumption that overhead costs are fixed. Furthermore, unit costs of the current year might not be a valid guide to unit costs in future.
5. Are costs realistic, and are all costs taken into account?
   Having considered the costs that impact on providing formal education the question remains; are all costs taken into account? There might be costs incurred outside the educational budget which need to be reflected in the budget to determine the real cost.

2..3 A Measure To Make Comparisons Across Jurisdictions
Rumble 87 suggests that the efficiency ratio be used when comparisons are made across jurisdictions. To establish the ratio of these costs, the average cost of distance education should be divided by the average cost of the traditional education.

An efficiency ratio of

1. 1. 0 means that the distance system is as efficient as the comparative system.
2. Of less than 1.0 means the distance system is more efficient than the comparator.
3. Greater than 1.0 means that the distance education system is less efficient than the comparator.

TABLE 3 - Efficiency Ratio: NAMCOL

Source: NAMCOL: Subsidy Calculation documents 1999 – 2004.

From the above discussion and calculations, it is clear that NAMCOL is more cost-efficient than conventional education.

3. Conclusion
This study has been very enriching, both professionally and personally. I think that if possible, each and every institutional head should be exposed to such a study. It is only when you start looking at issues from a distance that you get a new perspective. Sometimes we are to drawn into our day-to-day management activities that we rarely appreciate when our financial planners experience difficulties in making the budgets balance. On the other hand, if we do not have a handle on these issues, we may not be the right people driving our institutions.

4. References

1. Commonwealth Secretariat (1986): Costing Distance Education. Marlborough House, Pall Mall, London, UK
   
2. Rumble, G. (2004): Papers and Debates on the Economics and Costs of Distance and Online Learning. bibliotheks–und Informations system der Carl von Ossietzky Universitat Oldenburg (BIS)-Verlag-.
   
3. Perraton, H. (2004): Costs and economics of open and distance learning, Commonwealth of Learning, Vancouver, BC, Canada.
   
4. Rumble, G. (2001): Analysing costs/benefits for distance education programmes, The Commonwealth of Learning, Vancouver, BC, Canada.
   
5. Rumble, G. (1997): The costs and economics of Open and Distance Learning, London, Kogan Page.
   
6. Yecke, Cheri Pierson (2005): Efficiency and Effectiveness in Minnesota School Districts: How do districts compare? Center of the American Experiment.
   
7. Rumble, G. (1986): Activity Costing in mixed mode institutions: A Report based on a study of Deakin University. Deakin University Printery, Victoria.
   
8. Gillmore, G.M. and Hoffman P.H. (1997): The Graduation Efficiency Index: Validity and Use as an accountability and research measure. Research in Higher Education, Vol. 38, No. 6.
   
9. SAIDE (2003): Costing Distance Education and Open Learning in Sub-Saharan Africa. The Commonwealth of Learning.
   
10. Keegan, D (1996): Foundations of Distance Education. Routledge, London.
    
11. Marope, M.T. (2005): Namibia Human Capital and Knowledge Development for Economic Growth with Equity. The World Bank.
    
12. Crabb, G. (1990): Costing Open and Flexible Learning. National Council for Educational Technology.