How should I handle over-demanding assignment providers?

Question

Due to the coronavirus crisis, internships became hard to come by, due to companies not being able to house any students. So local colleges/companies made an arrangement in which one company would set up a organization (where I am part of) that pools projects from several companies and redistributes them to the students who work in a location provided by the schools.
Now the company that is doing the redistribution is actually getting paid for the assignments the students are doing and have strict deadlines. And we are nearing the final weeks of the first round of this system and he has become rather critical of the outcome of the projects.
He thinks the projects could have been done better, comparing the results of the students (the youngest student is 17, and the eldest is 24 with the majority being between 18/20. Who just completed their first year (just below bachelor level) which was poked full with holes due to coronavirus) with professionally-made similar sites from major companies (that most likely had more time, resources and knowledge going in).
I argued that when doing the projects we should keep the educational level of the student in mind, and can't expect high end stuff from them seeing they just got started (especially seeing that on paper they don't have any time to learn, but have to be "productive"). I have tried teaching them, but there are several wildly different projects and in the limited time I got with them I am not able to go by every project to give a proper in-depth course on how to best do it.
How could I convince my employer to ease up on the students, because in my opinion it was unwise to take on paid projects when you only got a bunch of first year college students to it in a rather limited time? And how could I advise him to simply say not take on so much work or such high demanding work when he knows that the skill level and time frame of the "employees" are so limited (because the next group is scheduled to start in February).
Background:
My employer has a small IT company, and the students are sort of his interns. My current job (three days a week at least) is to manage the students (although I have contact with the school/teachers, I am on the commercial side of the story). My job includes giving them their projects, and guide, advise, and supply them. But due to the coronavirus crisis they missed a lot of classes, so I spend most of my time (especially in the first weeks) tutoring them than anything else.

Dima Tisnek · Answer

My business view on this arrangement is:
students ↔ middle man ↔ customers
Where students are dodgy (unreliable by nature), but cheap (receive study credit and no compensation), while the middle man organisation promised the customers results at some price.
If this arrangement works, the middle man gets rich, although then, the ethics are out of the door.
In a way, the arrangement is not very different from any outsourcing company, and perhaps lessons can be learnt from those.
A couple of ideas:

let several students for on each task, independently. Submit the best work to the customer, and discard the rest.
refund unsatisfied customers, and proceed with more tasks from customers whose expectation was more reasonable (and are thus satisfied).

Ben I. · Answer

We run projects with real-world clients from within our school building.
I would add to Buffy's beautiful answer one idea that we've communicated to the clients that our students will be working with:

As gifted and wonderful as our students are, recognize that they are still students, and the primary purpose here is educational.  The work that your group does should not be mission-critical.  An ideal project is in the nice-to-have category.
If you have discussed doing something more significant with your group, and they understand the challenges and are willing to undertake the project, then we will not stand in the way.  Such projects can be valuable learning experiences!  While we do provide support and oversight to the project groups, our ultimate target is learning.  Please be prepared to provide extra support as needed if you are relying on the outcome.

I think this nicely captures an important aspect of internship projects.  They can be useful.  Heck, ideally, they should be useful.  That's part of what makes a good internship so motivating!  But students are still developing their skills, and the results can be uneven.  I wouldn't rely on it for mission-critical pieces of my work.

Buffy · Answer

Let me point you to the Google Summer of Code site. Look at the characteristics of the problems and the relationship to the project providers.
It is explicitly an educational project  site, and project providers (companies) make no claim that they will use any of the code that students write.
I haven't been involved with it, but assume that some process vets the projects for level and appropriateness to the educational mission.
Perhaps you need to institute a similar set of rules and expectations. You could serve as a filter. Or you could set up a small group of educators to assist. The only change required is to make it known that "suggested" projects might need to be filtered out for various reasons. Hopefully that is a safe position for you to take.
I'm also a bit concerned that people are using unpaid labor for commercial projects. The students can gain something if the projects are appropriate, but it can cost them greatly otherwise, as you note.
Just make it known that not all projects are appropriate and that they will be filtered.
And note that each project needs clear and explicit educational objectives. These probably need to be supplied by educators. They will help people decide on the appropriateness of any project for their classroom use.

How should I handle over-demanding assignment providers?

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